The city of East Lansing laid out its projections for its financial future at a discussion-only city council session on Tuesday.
The discussions, described by city manager George Lahanas as the "traditional kickoff to the budget process," were originally scheduled as a budget retreat for Feb. 10. That retreat was canceled to allow city staff additional time to review feedback from the budget community engagement sessions held in January.
Lahanas and finance director Jill Feldpausch presented council with the budget projections through fiscal year 2023.
Feldpausch said she was concerned the threat of cuts to police and parking enforcement through the next five years could mean the city's revenue from fines and forfeitures will be lower than projected.
Although uncertainty over state fire protection funding and a decrease in the issuance of licenses and permits might cause revenue to fluctuate from its current projections, Feldpausch said it was a positive sign to see the city's revenue continuing to grow, albeit at a slow rate.
Development projects, such as the planned "The Hub" redevelopment at the intersection of Grand River Avenue and Bogue Street, are expected to be a primary driver of revenue growth within the city.
The city's expenditures are growing much faster than revenue, however, only fiscal year 2019 is forecasted to see higher revenue growth than expenditure growth. The forecast predicts the city's general fund will be in the red by the end of fiscal year 2022.
As such, Lahanas presented a "no-revenue solution" for recovering the $3 million he has estimated to minimize the damage to the budget caused by the underfunding of pensions for retired city employees.
The recommended cuts for 2020 focus largely on reductions in funding for downtown events, recreational activities and additional cuts to public safety departments. Lahanas also recommended in the no-revenue plan for 2020 that the city close the Hannah Community Center and lay off all staff who work there, a move that would save an estimated $1 million.
That $1 million number does not take into account the external costs that could arise as a result of shutting down the Hannah Center, like storage of items removed from the building or resolving any issues over the termination of employment.
Acknowledging the likely public outcry that would come from shuttering the Hannah Center and eliminating all programs that run through it, Lahanas said it is time for difficult decisions to be made given the severity of the city's budget deficit.
"No one likes putting cuts on the page for people to see," Lahanas said. "This is not a rosy picture, it's a tough picture."
Councilmember Shanna Draheim said while residents might hope the city's budget issues can be solved through only cuts or only revenue increases, in reality it will take a substantial combination of both to begin resolving the budget struggles.
"Even if we were able to pass revenues, there may still be some things that need to be cut, because those pension costs and our infrastructure costs are growing and growing," Draheim said. "We're going to need to continue to find places to be uber-efficient, and potentially make cuts in order to fund those things into the future."
At the session, Lahanas also laid out the city's strategic priorities, which marked a major tone shift from the long discussion of cuts and financial uncertainty that dominated most of the session.
The priorities were broken down into five key sections: Strong neighborhoods, vibrant economy, enhanced public assets, environmental preservation and high-performing government.
Under "vibrant economy," Lahanas highlighted the active redevelopment of the Park District area as a major goal. Also in the section was a stated goal of leasing city-owned properties instead of selling them, as a way to maintain a consistent revenue stream in the face of the budget deficit.
"Land is a very valuable asset especially when you're a largely built-out city," Lahanas said. "The community has the flexibility to generate revenue from it, but at the end of those leases, the end of those durations, the city still owns the land."