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Wednesday, February 9,2011

Tax hikes in the city?

Lansing voters may face a special election in May to raise property taxes to help pay for police and fire protection and roads. Mayor Bernero: ‘This may be the year that I have to cry uncle’

by Andy Balaskovitz

This story was updated Feb. 9


Wednesday, Feb. 9 — Lansing Mayor Virg Bernero strengthened his support today for a potential property tax increase in Lansing.

Appearing on “City Pulse on the Air” today, Bernero said he would vote for the potential 4-mill tax increase and hopes city residents will too.

“This year things are so bad, the cuts so deep, I have to in all honesty say I think we need more revenue,” Bernero said. “The reason I said no for five years on a tax hike is because it wasn’t necessary.”

While the tax increase would make up for roughly half of the projected $15 million budget deficit, Bernero said cuts to services will happen either way.

“The only question is do I need a meat axe or a scalpel (to cut services),” he said. “I’m hoping they (voters) give me the power to use a scalpel. If necessary I’ll use a meat axe.”

City Council Vice President Kathie Dunbar is crafting a ballot proposal for a special May election that would generate roughly $8.5 million through a 4-mill property tax increase on city residents.

Dunbar and Bernero support the idea of letting voters decide on a tax increase.

Bernero said he will prepare a budget that looks at across-the-board cuts to services, no tax increases. But the potential election would take place a few weeks before the Council must approve a finalized fiscal year 2012 budget.


Lansing Mayor Virg Bernero is wavering from his trademark no-tax-increase stance in light of a projected $15 million budget deficit for the city.


Bernero is expressing support for a plan being hatched in the City Council to put on the ballot a proposal to levy a property tax increase on city residents to help patch the projected deficit.


So far, the plan calls for holding a special election in May — before the Council has to approve a fiscal year 2012 budget — that could generate roughly $8.5 million in additional revenue for the city through a 4-mill property tax increase. Feb. 22 is the deadline for the Council to call a special election.


“This may be the year that I have to cry uncle,” Bernero said, adding that the decision to raise taxes would be decided by voters. “I have always expressed my preference with involving the public on this decision.


“These are unchartered waters with the volume of deficit and the constant flood of economic news from the state,” Bernero said. “You have to consider revenues and expenditures. We have eliminated the low-hanging fruit. Without additional revenue it’s starting to look bad.”


City Council Vice President Kathie Dunbar has spent the last month crunching the numbers. She wants to know exactly how all Lansing residents would be affected by a 4-mill property tax increase.


Dunbar chairs the Ways and Means Committee, which is crafting the ballot proposal. Four mills — or $4 for every $1,000 of taxable property — would generate roughly $8.5 million in additional revenues.


Dunbar said new tax revenue would likely be used to help fund the Police and Fire departments and roads, whose budgets total about $68 million this year.


"People are more likely to accept an increase if they know where their money is going," she said.


But Dunbar is quick to point out that, like the mayor, she neither favors nor supports a property tax increase at this point. She would like to see what voters think.


“People in the city need to have an option if they don’t like the way the budget looks,” Dunbar said. That option is between cuts to services, an increase in property taxes or both. “The people will decide this. I’m providing the information.”


“In prior years I was not in favor of a tax increase because we hadn’t looked at all of the ways to cut services,” Dunbar said. “Those days are over.”


The City Council could unilaterally vote to increase property taxes — and seek input through public hearings — but Dunbar said doing that negatively affects the city’s bond rating. Also, public hearings are not as representative as a citywide vote, she said.


Bernero said he likes the idea of dedicating new revenues to police, fire and roads.


“Police, fire and roads are all at the top of public safety. If you don’t have that, you have nothing,” Bernero said. “We don’t want to raise taxes on a whim.”


According to figures she has worked on with the help of City Assessor Maria Irish, Dunbar says about three-fourths of city residents will still see a decrease in their annual property tax dues, even with a 4-mill increase.


Ingham County Treasurer Eric Schertzing said many Lansing residents wouldn't feel a property tax increase because property values have dropped so much.


Average home values declined about 10 percent in the city for 2011, Schertzing said, adding it is one of the largest drops in the region.


Countywide, average home values dipped about 5.5 percent, Schertzing said. Places like East Lansing and Meridian Township saw less of a drop off than Lansing in valuations.


Schertzing’s only concern with the idea of raising taxes is on those who are already struggling to pay taxes.


“Would a tax hike keep delinquencies flat or go up? There is no model for that,” he said. “But it’s all driven by jobs. You have to create an environment in the city where people want to live.”


However, with Lansing’s high home value declines, Schertzing said a 4-mill increase “makes sense.”


City Pulse surveyed 18 Lansing residents last week to see if they supported property tax increases, cuts to services or both as a means to balance the budget. They were residents from each ward and from various age, educational and economic backgrounds. Results showed support for higher taxes: Of 18 surveyed, 11 supported a combination of a tax increase and spending cuts, while two supported an increase without cuts. Five said they only favored spending cuts.


If Council approves placing a property tax increase on the May ballot, the election would be unique. It would give voters an opportunity to decide how a fiscal year budget is formed, Dunbar said.


“I have never heard of a scenario on whether citizens can vote on altering the revenue stream before we pass the budget,” she said. The Council’s budget vote will be about two weeks after the election.


City Clerk Chris Swope said Feb. 22 is the filing deadline to get anything on a ballot for a May 3 election.


That means the Council would need to approve a resolution with ballot language by then. It has a regular meeting scheduled for Feb. 21.


But what if voters don’t go along with some form of tax increases?


“They’re telling me they’re OK with services being cut,” Dunbar said.

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