East Lansing review panel backs income-tax extension through 2040 or until pension is fully funded; committee not unanimous

A citizen financial review committee preparing a report for the City of East Lansing recommended retaining the city's income tax through 2040 or until the city's pension plan reaches 100% funding, whichever occurs earlier, while urging that any excess funding be used to reduce property taxes.

The recommendation follows a detailed committee review of pension numbers presented by a committee member, Matt, who said the city's pension assets were reported at roughly $171 million (updated to $181 million at the end of 2024), annual benefit payouts near $16 million and that MS materials list an assumed rate of return of 6.93% alongside a 35‑year annualized return of 8.29%. "If you take that assumed greater return of 6.93... multiply that by the investment dollars East Lancing has of 171 million, you're going to get just under 12 million a year plus the required payments of 9.5 million," Matt said while walking members through scenarios for reaching full funding.

Why it matters: The committee was balancing two voter-facing goals: assuring voters that the income tax will not produce a long-term windfall for the city, and giving the city flexibility to use the revenue to address long‑term liabilities. Several members argued that tying expiration to a funding benchmark (100%) would allow the city to end the tax earlier if funding improves; others worried that leaving the mechanism open would allow city leaders to retain revenues indefinitely. The report language the committee settled on keeps the 2040 benchmark from the actuarial report but also recommends ballot language tying the extension to an earlier attainment of 100% funding when feasible.

Committee debate centered on three practical questions: the accuracy and interpretation of MS's actuarial assumptions, what to do with surplus funding if 100% is reached early, and how to present any millage rollback or property-tax reduction to voters. Some members favored a contingent millage rollback if the pension becomes fully funded before 2040; others recommended placing a permanent property-tax reduction on the ballot when the extension is considered or at the time of expiration. The committee recorded that it was not unanimous on adding an expiration date to the recommendation.

Members also discussed MS governance and fees: committee members questioned the smoothing rules MS applies and asked staff to request scenario modeling from MS that shows outcomes without the smoothing factor. One committee member raised the figure reported in the transcript that "MS's fee is 37% of our assets under management" (as stated in the discussion) and urged staff to clarify fee schedules and incentives in the final report; staff and other members agreed to seek clearer documentation from MS and the actuarial report.

Next steps: The committee plans to transmit the final report to city council and recommended that council consider the report either on the consent agenda or as a discussion item; the committee suggested a follow-up presentation or Q&A if council members request it. The committee also recommended planning for a citizens' review or focus group ahead of future income-tax votes to improve public engagement.

Provenance: Topic introduced at SEG 057; detailed funding discussion spans SEG 073–SEG 156 and the income-tax expiration/millage debate spans SEG 846–SEG 1311. Representative excerpt used: Matt's breakdown of return assumptions and funding scenarios (SEG 073–SEG 089).