Saturday, July 11, 2020

MSU makes multiple offers to E.L. to halt city income tax

August 14, 2017
<p>&nbsp;East Lansing Mayor Mark Meadows speaks during a city council meeting on Sept. 13, 2016 at East Lansing City Hall. The city council meets to take action on legislative matters on several Tuesdays of each month. &nbsp;Photo by <strong>Derek VanHorn</strong>.</p>

 East Lansing Mayor Mark Meadows speaks during a city council meeting on Sept. 13, 2016 at East Lansing City Hall. The city council meets to take action on legislative matters on several Tuesdays of each month.  Photo by Derek VanHorn.

Update 4:15 p.m.

MSU spokesperson Jason Cody responded to a request for comment, saying MSU would let the letters speak for themselves. 

He also iterated the university could not comment in a more in-depth manner. 

"Due to state campaign finance law the university or me the spokesperson for the university is very limited in what we can say about a ballot proposal," Cody said. "The law clearly states a university cannot advocate one way or the other for a local ballot proposal."

MSU President Lou Anna K. Simon made offers to the City of East Lansing of $10 million and $20 million of university funds multiple times during the course of three weeks to stave off an income tax ballot measure, which the university believes will disproportionately affect its students and employees. 

Mayor Mark Meadows, after multiple counter-proposals, refused each offer, citing their insufficiency to satisfy the city’s financial struggles during the long run. 

The State News obtained the frank correspondence between President Simon and Mayor Meadows via FOIA request early Monday, underscoring tensions between the city and the university regarding the income tax. 

The income tax, to be voted on during the Nov. 7 election, levies a 1 percent income tax on city residents and a 0.5 percent income tax on non-resident workers while simultaneously rolling back the city's property taxes in an effort to collect $5 million in additional revenue each year.

Nearly 98 percent of that $5 million in additional revenue would come from MSU employees, according to the university. 

Simon labeled the income tax as a “ill-conceived and highly detrimental taxing scheme” and wrote future proceedings in regards to the tax would be met with significant opposition from the MSU community. 

“Additionally, in the event that an income tax is implemented, MSU will work aggressively to educate its students and employees regarding the scope and nature of their potential tax liability to the City and options they may have to reduce it,” Simon wrote. 

President Simon was willing to offer East Lansing $10 million over the course of five years to prevent the tax.

“I am willing to ask the Board to authorize me to enter into a contract with the City whereby MSU would contribute $2.0 million per year for a period of five years to a joint entity created by MSU and the City of East Lansing,” Simon wrote in the letter.

Her proposal was also blunt in what the university would be funding the city for: to cover the city’s decreased state funds and help counteract rising legacy costs. Further, the city would still receive compensation for the city resources MSU employs throughout the year.

Mayor Meadows responded on July 25 to Simon’s assertions saying he found the notion of the city’s past financial mismanagement “offensive and uniformed.” He countered President Simon’s assertions that students would be disproportionally impacted by showcasing the sparse amount they would pay in taxes as residents or nonresidents, about $50-$100 a year.

“This does not seem an undue burden, especially in comparison to your recent tuition increase, which will cost the average upper division student approximately $600 per year,” Meadows wrote. 

Meadows continued as well that the payment from MSU would be inadequate and raised the amount to $5 million per year over the course of 20 years amounting to a total of $100 million and wrote East Lansing would not levy income tax during those 20 years. 

On July 27, President Simon refused the counter-offer, saying she could not recommend that proposal to the board in good conscience. 

“I cannot simply write a $5 million check for a 20-year period, committing $100 million of University’s assets,” Simon wrote. 

Simon’s next proposal offered the city $2 million per year over 10 years, under the conditions it did not levy an income tax during that time or place the idea of one on the ballot. 

Simon sent another letter dated Aug. 4 following up on a conversation between Meadows and the university in which Meadows asked for $2.9 million per year for seven years. 

Simon iterated that $2.9 million would not be supported by the Board and promptly offered $2.5 million per year over the course of 8 years. 

“Unfortunately, you told us on Thursday morning that you did not believe there were enough votes on City Council to support that proposal and that an agreement seemed beyond reach,” Simon wrote. 

One more option provided by Simon offered to front-loaded 20 million over an 8-year span, calling for $2.75 million in the first two years, $2.5 million in years three through six and $2.25 million in years seven and eight. 

As in prior potential agreements, the city would not levy an income tax during that span. 

In a letter dated Aug. 7, Meadows turned down the offer “for a number of reasons” and outlined again why the city would be pursuing an income tax. 

The money generated by the income tax, Meadows wrote, would “go towards the stabilization of our legacy cost funding and the avoidance of the fiscal cliff that the current payment program will move the City toward.”

“It will take a decade of $3 to $3.5 million dollar contributions to our pension fund to stabilize that fund, avoid the fiscal cliff and the drastic cuts to City services that will entail,” Meadows wrote. 

Meadows proposed going back to the 20 million over 10 years plan with a different set of restrictions, including halving the proposed income tax levies.

Meadows also requested the university publicly support the income tax, should they reach an agreement. 

In a letter dated Aug. 10, President Simon rejected that offer, calling it a clear break in the way negotiations had been proceeding. 

"That does not address your demand that I somehow compel the elected Trustees on MSU’s Board to support the City’s ballot initiative,” Simon wrote. “Your new proposal is a giant step backward.”

A letter dated Aug. 14 from Meadows expressed regret at not being able to reach an agreement on the city’s recent proposal, which he wrote met each requirement President Simon laid out. 

“You have indicated that you hold your past proposals open for the City’s consideration,” Meadows wrote. “We have already considered them. I ask that you reconsider the City’s most recent proposal.”

The State News learned of the offers through a source privy to the negotiations on Sunday and confirmed the information Monday through a FOIA request with the City of East Lansing. 

MSU spokesman Jason Cody could not be reached for comment at the time of publication.


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