Ballot issue taxes ties between MSU, East Lansing

East Lansing – This college town and its university have forged a tight bond, working together on everything from the arts to public safety. East Lansing’s letterhead proudly proclaims the city “the Home of Michigan State University.”

But lately the same letterhead has produced less-than-charitable comments about MSU. In a series of letters, the city and school have questioned each other’s motives, abilities and concerns for their constituents.

“This (fighting) doesn’t look good. They should be working together,” said resident Cathy Kosinski.

The source of the consternation is a Nov. 7 ballot measure that would impose a local income tax on residents and workers who don’t live in the city. It would include the university’s 2,500 workers and most of the 50,300 students.

Skyrocketing pension and retiree health care costs have left the city $200 million in debt, city officials said. East Lansing responded by cutting its workforce by a fourth, reducing health care benefits and entering cost-sharing partnerships with other municipalities.

MSU, which is the biggest employer in the city, has launched a three-pronged offensive against the proposition.

MSU President Lou Anna Simon has proposed giving the city $2 million a year for 10 years in lieu of the tax.

The school is lobbying the Michigan Legislature for a moratorium on local income taxes as the state searches for ways to help financially struggling cities.

And if the tax is passed, Simon wrote in the letters, the university will “aggressively” educate its workers about the levy and ways they could reduce it. She didn’t specify how the tax liability could be lessened and, through a spokesman, declined to elaborate.

Mayor Mark Meadows, who exchanged missives with Simon, said $2 million wasn’t enough. That’s when things got snippy.

“Some (MSU regents) remain adamantly opposed to paying the City to remedy its past financial mismanagement,” Simon wrote on July 21.

Meadows harrumphed that other factors had caused the fiscal mess.

“This statement is offensive and uninformed,” he wrote July 25.

Tax issues

In Michigan, the only major college whose hometown has a local income tax is Wayne State University in Detroit. Ann Arbor, the home of the University of Michigan, is talking about the possibility of putting such a measure on the ballot next year.

In East Lansing, the ballot question would impose a 1 percent tax on residents and 0.5 percent on nonresidents who work there. The proposal also would reduce property taxes from 17 mills to 13. The twin moves would boost city coffers an estimated $5 million a year, according to a city study.

The city, whose population is 48,900, said it has run out of things to cut.

“We didn’t suddenly decide, ‘Hey, let’s raise taxes,’” Meadows told The Detroit News. “We appointed a team that worked on it for a year.”

But Simon wrote that the city, by coupling the income tax with the drop in property taxes, is shifting the tax burden from residents to MSU. The school has more workers, 14,000, than all other city employers combined.

She said the larger tax would especially hurt those least able to afford it — lower-salaried employees and part-time student workers.

“Shifting the costs of the City’s past policy decisions to individuals who had no role in making these decisions or electing those who made them is not fair,” she wrote on Aug. 10.

Simon declined to be interviewed. School spokesman Jason Cody said state campaign finance laws limited what he could say about the matter because they prevent universities from taking positions on local ballot issues.

Negotiations stall

The first shot in the war was fired last year when a city committee studying the debt hired a consultant to identity what services the city provided to the school that weren’t reimbursed.

The move disturbed the Michigan Association of State Universities, which said it never heard of a Big Ten college town doing such a thing.

The study, presented on Halloween, identified $3.75 million worth of services in 2015 by city police, fire and public works departments. MSU pronounced the report “cherrypicked.”

After meeting in June, Simon and Meadows exchanged letters over five weeks as they bartered how much the school should give the city in lieu of an income tax.

Simon began by offering $2 million a year for five years, then doubled the number of years. Meadows proposed $5 million a year for 20 years.

The mayor then agreed to $20 million over 10 years if it was coupled with a smaller income tax, 0.5 percent for residents and 0.25 percent for workers. No dice, Simon said.

In making arguments for their positions, the two sides seemed to be writing more to the general public than each other. In fact, in an Aug. 24 letter, Simon accused Meadows of sending his letters to the local paper before delivering them to her.

“This approach to communications and negotiations can’t help but bring into question your motivation for writing,” she said.

Meadows denied the charge.

When Simon said she was concerned about the proposed tax’s impact on students, Meadows said the school reacted to its own financial struggles by shifting the burden to students.

Since 2000, MSU’s tuition has tripled from $152 per credit hour to $482, Meadows said. Tuition, which once supported 41 percent of the general fund budget, now accounts for 72 percent.

“Tuition is taxation so they reacted to their financial issues by increasing taxes,” Meadows told the News.

A school spokesman declined to respond to Meadows’ figures. But the state’s 15 public universities, including MSU, have argued to state lawmakers that a decline in state aid that began in the early 2000s has put more pressure on university finances and tuition.

With the city and school playing a game of chicken, Nov. 7 draws ever closer. When the election is held, one side will lose its leverage.

The last correspondence was Aug. 24. Meadows said he talked to Simon at a joint city-school program last week but they didn’t discuss the income tax.

Some residents said they weren’t crazy about the idea of paying an income tax but, if one was passed, MSU should pay its share. School workers use the same services as residents, they said.

“It’s only fair,” said resident Marcie Lanza. “They come every day and don’t foot the bill.”

Among some of MSU’s employees, there was ambivalence over the issue. They said workers should bear some of the cost but, by also reducing property taxes, the city seems to be shifting a disproportionate load to employees.

“I don’t mind the idea of paying something,” said Walt Peebles, who runs the woodshop in the university’s art department. “But, by cutting property taxes, it seems not to address the problem as much as it could be.”

Peebles, 59, who lives in Eaton Rapids, said he sympathized with the city’s plight. With a loss of taxes and state revenue sharing, the city is being pressured from all sides, he said.

“The community is stuck between a rock and hard place,” he said.

fdonnelly@detroitnews.com

(313) 223-4186

Twitter: @francisXdonnelly