Looking ahead to 2013 budget, Mount Pleasant considers income tax

Months remain before Mount Pleasant adopts a finalized operating budget for 2013, but already, city officials are wading through options to keep it balanced without reducing services.

One option on the table since February has been an income tax.

On Monday, city commissioners approved Mount Pleasant’s contracting with Municipal Analytics, LLC, an Ann Arbor-based firm, to complete a feasibility study of installing an income tax. Mount Pleasant has lost nearly $1.5 million in state-shared revenue in 12 years and proposed legislation making headway through Lansing would eliminate personal property taxes, a major source of city earnings, for some businesses.

The Pivoting Point Key facts about the city: • State-shared funds was once 50 percent of the city's revenue • Cuts in taxes returned to the city (as state-shared revenue) was estimated by staff to cost residents a cumulative $8.5 million • City staff has been cut by 12 percent and the current millage rate (just under 16 mills) has been maintained for more than a decade • An income tax, if favored, would have to be put on the ballot for residents to approve • The city can raise the millage rate up to 20 mills without approval from voters

City Manager Kathie Grinzinger reminded commissioners that if nothing changes, the 2013 budget will be at least $450,000 in the red.

“Michigan doesn’t give its communities many alternate ways to raise revenue, so we are left with few choices,” she said. “Cities can either eliminate staff and reduce services, you could raise the millage, you could drastically raise all fees and charges or you can enact one of the only other kinds of taxes allowed to cities in Michigan, which is an income tax.”

The City Commission OK’d officials’ search for a firm in February. Municipal Analytics offered what Grinzinger told commissioners was the “more economical” of two options at $17,550.

According to city documents, officials expect to work primarily with the firm’s founder and principal consultant, who was charged with a previous income tax feasibility study for Mount Pleasant in 2001 while working for the Michigan Municipal League.

Prior to 2001, the city additionally fielded a study in 1990. Neither time was an income tax the favored option to increase revenue.

Vice Mayor Kathy Ling said it was important for people to realize the commission's contracting of a feasibility study is only the start of the process, and they're simply considering the implications of such a tax.

"We don’t know what the results of this study are going to be and, if they come in the same as the study done 10 years ago, there are going to be some questions about whether this was the best direction to move in," Ling said. "What I’m looking for is, has the situation changed enough where it looks like this could be an appropriate way for us to deal with some of our revenue shortage?"

Commissioner Nancy English said she too didn't want residents to assume that everyone's taxes will simply go up.

After reviewing the 2001 study, she said the process was a balancing act and that even with an income tax "not everyone wins and loses (income) the same."

"It's spreading the wealth a little bit," English said. "Not (from) one of those things we can automatically assume we're all going to have an increase in taxes. It could actually be beneficial to some."

On Thursday, Grinzinger said re-examining the income tax isn't because of how much the population in Mount Pleasant has changed, but rather, it's a matter of how much property value versus the local income value has changed since the last study.

Based on Municipal Analytics proposal to city officials, the firm's scope of work is expected to take 185 hours of work over three to four months.


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