Sobering news as the budget process winds down. Also, Council approves a permit for redeveloping the old Silver Dollar property; Emergent Biosolutions wants to expand; and supporting striking Red Cross workers.
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Andy Balaskovitz
Monday, May 14 — It was a bad day for the city of Lansing’s budget.
In a matter of three hours between 3:30 p.m. and 6:30 p.m. today, the City Council learned from the Bernero administration that the General Fund may have to start funding a $1.6 million deficit for the city’s Tax Increment Financing Authority starting in 2014; a budget deficit in the city’s General Fund will appear at the end of this fiscal year; and the city may have to inject another $3 million annually into its two retirement systems due to rising health care costs.
MLive.com reported last week that the city’s TIFA, which oversees a district covering downtown meant to capture increased tax revenue from new development, is facing a $1.6 million deficit in the next fiscal year. Interim Finance Director Angela Bennett said while the TIFA is able to cover the deficit for the upcoming fiscal year 2013 budget, there aren’t enough reserves in the TIFA to do it any longer than that. Council President Brian Jeffries said tonight, “I did not realize TIFA will be experiencing a $2 million shortfall” over each of the next three years.
“They’re using $1.6 million of reserves this year, leaving $400,000 (in reserves) for next year, and it won’t be able to do that,” Bennett said, leaving open the possibility that the future shortfall will need to be remedied by the General Fund.
Moreover, the trend of declining property values — which is exacerbating the TIFA’s budget problem — will last until at least 2015: Bennett said it will take another three years for property values to stabilize. Jeffries said tonight that granting tax incentives and abatements within the TIFA district is “what’s generating a lot of this.”
In more budget news, a third quarter status report for the current fiscal year shows the city is behind in collecting revenue, which will require a deficit reduction plan by the end of the fiscal year. Bennett said the administration is “in the process” of determining how much it will cost to eliminate the deficit for the fiscal year ending June 30. After being pressed by Jeffries and At-Large Councilwoman Carol Wood about how much and how the deficit would be paid for, Bennett said that information is not yet available.
“We are looking at our options. We do not want to spend from the rainy day fund any further,” Bennett said in response to a question from Wood if the “mythical number” would come from the city’s reserves. Chief of Staff Randy Hannan said it’s “not likely” city workers will be asked to take furlough days this fiscal year.
And if that isn’t enough, the administration issued a press release at 3:30 this afternoon with findings that the city should be contributing more into its two employee retirement systems — $3 million more — annually. A pair of draft actuarial studies recommends the city contribute $1.9 million more a year into its Police and Fire Retirement System and $1.1 million more a year into its Employee Retirement System. The city currently contributes $2 million a year from the General Fund into those accounts.
The recommendations, if adopted by the city’s pension boards and approved by the Council, would devote all of the new police and fire millage revenues into paying for the pension funds, and then some.
“Although these studies have not been adopted by the pension boards, we can make conclusions that should be considered very serious warning signs,” Hannan said tonight.
Wood, who sits on the two pension boards, said there are “many variables within that study that can be adopted in part or in whole. It doesn’t necessarily mean there will definitely be a $3 million increase in those.”
Meanwhile, the Council is scheduled to vote on a finalized budget for fiscal year 2013 at its next meeting.
In development news, the Council unanimously approved a special land use permit tonight for a mixed-use building at 3411 E. Michigan Ave. The Silver Dollar Saloon and nightclub formerly occupied the property but was demolished three years ago. Local developer Pat Gillespie is behind the plan. While the zoning would currently allow for construction to start, the one-acre piece of property is situated in the 100-year flood plain of the Red Cedar River. Anything more than a half-acre requires a special permit.
The project, at the city’s eastern boundary near Frandor, calls for three stories of apartments above a 2,200 square-foot, first floor bank and 1,624 square feet of leasable retail space, the application shows.
The Council also held a public hearing tonight on a brownfield redevelopment plan for Emergent BioSolutions, which is looking to expand at its site on North Martin Luther King, Jr. Boulevard. Karl Dorshimer, president of the Lansing Economic Development Corp., said the $13.6 million expansion would include a new 33,000 square-foot administration building and infrastructure improvements. Emergent is also planning another $95 million expansion at its Lansing campus in the coming years, Dorshimer said.
About $6.5 million of the first phase costs will be reimbursed as eligible brownfield activities, including lead and asbestos removal and demolition. Dorshimer added that the 28-year brownfield plan would likely not take that long and last 10 to 15 years. He also said the city would see $2.5 million in additional property and income taxes once the project is complete.
“The numbers are really in our favor on this,” Dorshimer said.
In other news, the Council unanimously approved a resolution in support of local American Red Cross workers who have been on strike since March 30. The resolution says that the Red Cross has been responsible for numerous safety violations by the Food and Drug Administration, resulting in more than $30 million in fines, and that Red Cross staff have been “harassed and discriminated against” for reporting such issues. The resolution also says: “The Lansing City Council calls on the Red Cross to meet and bargain fairly with its employees and resolve this strike in an equitable manner that assists in protecting America’s blood supply and preserves workers’ rights to collectively bargain.”
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