Committee Recommends 10-Year Extension of City Income Tax, Rejects Permanent Change

The Financial Review Committee recommended a 10-year extension of the city’s income tax and rejected a separate proposal to make the levy permanent.

The committee met on June 14 in East Lansing and debated two competing recommendations: one to extend the tax for 10 years (through 2040) and another to make the tax permanent. Both proposals included a suggested change in charter language to replace the word “pension” with “long-term liabilities,” broadening allowed uses if voters approve the change. After discussion about budgeting, pension payoff timing, and how any future excess revenue should be used, members voted down the permanent measure and approved the 10-year extension recommendation.

Why it mattered: proponents and some members said the income tax has helped stabilize the city’s pension obligations and fund public safety and infrastructure. Committee members and staff presented fiscal estimates showing current net income-tax receipts of about $10.6 million (after reimbursements and administrative costs) and projections that paying down the unfunded actuarial liability could free roughly $6–7 million by the late 2030s and significantly reduce annual pension payments — producing an estimated combined capacity of roughly $13 million at that point. Members discussed using that future capacity for a property-tax rollback (several members suggested a 5‑mill rollback as an example), long-term liability payments (including OPEB/post‑employment health costs), and infrastructure or wet‑weather resiliency needs.

Ballot mechanics and limits: staff reminded the committee that the income-tax allocation is written into the city charter, so any change in the allowed uses (for example replacing “pension” with “long-term liabilities”) must be approved by voters through a charter amendment. Members cited a prior ballot failure and said voters want clear, specific guarantees on how revenue will be used if changes are proposed.

Committee direction and next steps: the committee instructed staff to include the 10‑year extension recommendation and the proposed charter-language change in its final report to the city council. Committee members also recommended that any council proposal to make the tax permanent should provide clearer, voter-facing commitments about how freed funds would be used (for example, specifying the priority for property-tax rollbacks). The committee will send the finalized recommendations to council; any charter amendment would require placement on a future ballot and additional public outreach.