Net Fiscal Impact of Michigan State University On The City of East Lansing

June 23, 2006
Net Fiscal Impact of

Michigan State University
on the City of East Lansing
Commissioned by:
Prepared by:
Patrick L. Anderson, Principal
Ilhan K. Geckil, Economist
Caroline M. Sallee, Senior Analyst
Anderson Economic Group, LLC

1555 Watertower Place, Suite 100
East Lansing, Michigan 48823
Tel: (517) 333-6984
Fax: (517) 333-7058
http://www.AndersonEconomicGroup.com
Anderson Economic Group, LLC 2006

Permissions for reuse granted given proper citations provided
Table of Contents
Table of Contents
I. Executive Summary..................................................1
Purpose of Report .................................................................... 1
Overview of Michigan State University .................................. 1
Overview of East Lansing Economy & City Budget ............... 2
Overview of Methodology ....................................................... 2
Summary of Findings ............................................................... 3
Table: Net Fiscal Impacts of MSU on City of East Lansing ........................3
Limitations of Analysis ............................................................ 4
II. Overview of Michigan State University and

Its Impact on Local Economies and the Region.....5
Brief History ............................................................................ 5
Figure: MSU Enrollment, 1950-2005 ..........................................................6
MSU Today .............................................................................. 6

MSU as an Enterprise: Revenue & Expenditures .................... 6
Table: MSU Revenue Summary, 2005 .........................................................7
Figure: Revenue Sources of MSU (%), 2005 ...............................................8
Table: Operational Expenditures, 2005 ........................................................9
Figure: Operational Expenditures of MSU (%), 2005 .................................9
MSU Community ................................................................... 10

Students .................................................................................. 10
Enrollment ...............................................................................10
Table: Fall Semester FTE Enrollment by Student Level, 1996-2005 ........11
Tuition, Fees and Student Expenditures..................................11

Table: Undergraduate Cost of Attendance per Academic Year,
1996/97 - 2005/06 ..................................................................................11
Faculty, Academic Staff and Non-Academic Staff ................ 12

Table: Number of MSU Fall Semester Faculty and Staff, 1996-2005 .......12
Faculty and Non-Faculty Earnings..........................................13

Expenditures............................................................................13
III. Overview of East Lansing ...................................14

Brief History .......................................................................... 14
Current State of East Lansing Economy ................................ 14
Table: Largest Employers in East Lansing, 2004 .......................................14
Table: Ten Largest Taxpayers in East Lansing, 2004 ................................15
Employment ........................................................................... 15
Table: Employment by Industry in East Lansing, 2000 .............................16
TOC - 1
Table of Contents
City Finances ......................................................................... 16

City Revenue ...........................................................................17
Table: City of East Lansings Revenue Sources, Fiscal Year 2004 ...........17
City Expenditures ....................................................................18

Table: City of East Lansings Program Expenses, Fiscal Year 2004 .........18
IV. Fiscal Impact: Methodology and Findings..........19

Our Methodology ................................................................... 20
Direct and Indirect Impact of MSU on City Services .............20
Direct and Indirect Impact of MSU on Property
Tax Revenue...........................................................................21
Direct Impact of MSU Community in East Lansing
on State-Shared
Revenue ...................................................................................22
Findings .................................................................................. 22
Table: Net Fiscal Impacts of MSU on City of East Lansing ......................23
Direct and Indirect Impact on Business-Type Activities ........23

Direct and Indirect Impact on Property Tax Revenue.............24
Direct and Indirect Impact on State-Shared Revenue .............24
Limitations of Analysis .......................................................... 25
Conclusion ............................................................................. 25
V. Appendix A: MSU Fiscal Impact Model: Input

Database .............................................................A-1
VI. Appendix B: MSU Fiscal Impact Model: Cost,
Benefits, and Net Impact .....................................B-1
VII. Appendix C: About AEG ..................................C-1
Patrick L. Anderson ............................................................. C-1
Ilhan K. Geckil ..................................................................... C-1
Caroline M. Sallee ............................................................... C-2
TOC - 2
Executive Summary
I.Executive Summary
PURPOSE OF REPORT
This report provides a comprehensive analysis of the net fiscal impact of Michigan State University (MSU or University) on the City of East Lansing
(City). The net fiscal impact is the difference between the fiscal benefits
that MSU provides the City and the additional cost to the City of having the
University in East Lansing. These benefits include direct payments for services
and additional tax revenue from MSU operations while the costs include forgone tax revenue and the additional cost of providing services to the MSU campus and community.
Obviously, merely adding up the benefits and the expenditures of the University
would exaggerate its contributions to the local economy; similarly, counting
only the costs of services to the campus would ignore the many benefits the
University provides. The net fiscal impact is a fair indicator of the relationship,
in dollar terms, between the City and the University.
This report does not attempt to measure the economic impact of MSU. An economic impact study would take into account all economic activity, such as
expenditures, wages, and employment. In this study, we estimate the fiscal
impact of MSU by calculating the additional revenue to and expenditures by the
City of East Lansing due to the Universitys presence.
OVERVIEW OF
MICHIGAN STATE
UNIVERSITY
Since its founding in 1857, Michigan State University has grown to become the
sixth largest university in the United States and the largest university in Michigan based on student enrollment. No longer a small agricultural college, MSU
offers 200 programs of study by 14 degree-granting colleges. In the fall of 2005,
45,166 students (35,678 undergraduate and 9,488 graduate and professional)
enrolled at MSU. Michigan State University employs approximately 4,500 faculty and academic staff and another 5,750 support staff. Currently, Michigan
States campus includes 5,200 acres with 2,000 acres in existing or planned
development.
Michigan State University is a significant part of the local and state economy.
The University spends approximately $1.4 billion annually, with most of this
money remaining in the region. Its students, faculty, and non-academic staff live
in East Lansing and the surrounding area. The University also attracts visitors to
the region, who spend money at the citys restaurants and businesses.
Besides its effect on the local economy, MSU affects the City of East Lansing in
other important ways. The University adds to the regions cultural richness,
intellectual depth, and ethnic diversity. The quality of life in East Lansing is
very high, thanks in part to the presence of Michigan State University.
Executive Summary
OVERVIEW OF EAST
LANSING ECONOMY &
CITY BUDGET
The City of East Lansing is home to a thriving community. With a population

over 46,000, East Lansing is one of Michigans largest cities outside the Detroit
metropolitan area. The citys proximity to the states capital has made East Lansing an attractive location for public and private sector firms. While much of the
citys economy revolves around educationMichigan State University is the
largest employerthe success of many smaller businesses has created a strong
economic foundation for the city.
The City of East Lansing receives funding for its activities from four main
sources: service fees, operating grants and contributions, property taxes, and
state-shared revenue. The City charges a fee to customers to help cover the costs
of water, sewer, and parking services it provides. In fiscal year 2004, the City
received over $51 million in revenue and spent over $52 million on its operations. The City spent most of its budget on public safety (fire and police), public
works, general government, and recreation and culture.
OVERVIEW OF
METHODOLOGY
Our firm has rigorously completed, or critiqued, numerous economic and fiscal
impact analyses. We depart from many other practitioners by insisting on a specific, conservative, and realistic definition of fiscal impact. We define fiscal
impact as only bona fide, net new tax revenue or reduced government expenditures directly or indirectly caused by the subject entity. In calculating the fiscal
impact, we take into account both costs and benefits. For example, we subtract
out any lost tax revenue or increased expenditures. In addition, we subtract from
the benefit figure any reductions in economic activity due to displacement or
substitution effects. This approach has been documented in published works
authored by one or more members of our project team, including the book Business Economics and Finance written by Patrick L. Anderson, which devotes
two chapters to the proper method of estimating net economic and fiscal impact.
In order to estimate the net fiscal impact of MSU, we looked at three ways the
University affects the City of East Lansings budget and operations. We calculated the direct and indirect impact of MSU in each of the following categories:
1.
City of East Lansing Services
2.
Property Tax Revenue
3.
State-Shared Revenue
For each category, we estimated the additional costs and benefits of hosting
MSU. This involved both identifying current expenditures and payments, and
estimating, for comparison purposes, what the tax revenue and business-type
activities revenue would be to the City if it did not host MSU. In particular, we
estimated the property tax revenue the City would gain if it placed on the tax
rolls a large portion of the currently tax-exempt land occupied by the MSU campus, and at the same time lost the significant additional economic activity that
MSU brings to the area.
Executive Summary
SUMMARY OF
FINDINGS
We estimate that the total net fiscal impact of MSU on the City of East Lansing
is a positive $8.63 million. Given the three separate impacts mentioned previously, we estimated the benefits and costs as follows:
A net fiscal loss of $429,924 for services to the MSU community;
This is the difference between $8.0 million in additional benefits (which

includes direct operating revenue from MSU, operating grants and contributions
from the state government to the City for MSU, the Citys revenue from the
MSU community for business-type activities, and MSUs indirect contributions
to the city services) and the $8.4 million cost of providing services.
A net fiscal gain of $7.88 million in property tax revenue.
This is the difference between the current property tax revenue to the City, given
the benefits of MSUs operations, and the likely property tax revenue assuming
that MSU was not located in the City.
A net fiscal gain of $1.19 million in state-shared revenue.
This is the net amount of additional revenue to the City from the State, given the
higher population and property values that the University brings to the City.
The table below summarizes the fiscal impact by category.

TABLE 1. Net
Fiscal Impacts of MSU on City of East Lansing

Component Costs and
Benefits (millions)
Category
City Services
Benefits
$8.0
Costs
($8.43)
Net Benefits from City Services
($0.43)
Property Tax Revenue with MSU
$15.12
Property Tax Revenue without MSU

Net Property Tax Revenue Benefit
Net State Shared Revenue Benefit Due to

Higher Population with MSU
Net State Shared Revenue Loss Due to
Higher Property Value per Capita with MSU
Net State-Shared Revenue Benefit
Total Net Fiscal Impact
($7.2)
$7.88
$1.67
($0.48)
$1.19
$8.63
Source: Anderson Economic Group

a. This is our best estimate, which incorporates the assumption that without
MSU, East Lansing would have land use patterns similar to Delta, Delhi,
and Meridian Townships. An alternative estimate, which also includes Lansing Township, produces a net fiscal impact of $7.6 million. See Direct and
Indirect Impact on Property Tax Revenue on page 24.
Executive Summary
For further details, see Appendix B: MSU Fiscal Impact Model: Cost, Benefits,
and Net Impact on page 1 at the end of our report.
LIMITATIONS OF
ANALYSIS
There are limitations in this fiscal impact analysis, including the following:
We estimated the magnitude of MSUs fiscal impact on the City of East Lan-
sing, which required assumptions about the way East Lansing would have
developed without MSU. Even a carefully-prepared analysis of this type will
not include all the factors that would change if MSU was not located in the City.
We did not evaluate the structure or governance model of either the City or
MSU, nor the efficiency or efficacy of any individual program.
We used a level-of-materiality threshold of $50,000, and did not apportion ben-
efits or costs for any individual budget item below this threshold.
We used a composite of the land use and property tax values of cities and town-
ships close to East Lansing to estimate the net effect on property taxes due to
MSU. In addition, we used an alternative scenario suggested by the City that
provides a slightly different result. However, the actual property use is impossible to know for certain.
Overview of Michigan State University and Its Impact on Local Economies and the Region
II.Overview of Michigan State University and

Its Impact on Local Economies and the Region
Michigan State University is an important part of the local economy in East
Lansing. MSUs revenue from tuition, state and federal government, and private
contributions is spent in the City of East Lansing and surrounding regions.
These funds allow MSU to pay for services from the City, pay their employees,
and make capital investments and improvements on campus. In this section we
review MSUs impact on local economies and its relevance for estimating the
fiscal impact of MSU on the City of East Lansing.
BRIEF HISTORY
In 1855, the Michigan State Legislature appropriated funds and 677 acres for
the creation of the Agricultural College of the State of Michigan. This college,
which was renamed Michigan State University (MSU) in 1963, was formally
opened and dedicated on May 13, 1857. The precursor to other land-grant universities, MSU was the first college to teach scientific agriculture.
Michigan State University remained a small agricultural college until after
World War II. During the first 50 years of its existence, Michigan States enrollment grew steadily from a hundred students to 1,000 students. After World War
II, the Universitys enrollment jumped from its pre-war number of 8,500 to
almost 15,000 students by 1950. The universitys enrollment continued to rise
rapidly during the 1960s. Since 1970, the Universitys enrollment has remained
around 40,000 students.
FIGURE 1.
MSU Enrollment, 1950-2005
Total Fall Semester Enrollment Trend, MSU (19502005)

55
50
45
40
Enrollment (000)
35
30
25
20
15
10
0
1950
1960
1970
1980
1990
2000
2005
Months
Analysis: Anderson Economic Group, www.AEG1.com
Generated Date: 22 Nov 2005
Base Data: Michigan State University
MSU TODAY
Located in East Lansing, Michigan State University has grown to become the
sixth largest university in the United States and the largest university in Michigan based on student enrollment. In the fall of 2005, 45,166 students (35,678
undergraduate and 9,488 graduate and professional) enrolled at MSU. Michigan
State University employs approximately 4,500 faculty and academic staff and
another 6,000 support staff. Currently, Michigan States campus includes 5,200
acres with 2,000 acres in existing or planned development.
Michigan State University has grown from an agricultural college to a university that offers 200 programs of study by 14 degree-granting colleges. In its
Americas Best Colleges 2006 guide, U.S. News and World Report ranks Michigan State 30th best in its rankings of public universities in the U.S. The Institute
of Higher Education, which ranks universities according to their academic and
research performance, ranks Michigan State 49th best among North and Latin
American Universities in their Academic Ranking of World Universities: 2005.
MSU AS AN
ENTERPRISE:
REVENUE &
EXPENDITURES
As an enterprise, MSU creates jobs, services, and value for the City of East Lansing, surrounding localities, and the State of Michigan. With MSU spending
almost $1.4 billion annually, the University plays a vital role in local and state
economies. The value of MSU goes beyond its economic contributions, however. MSU enhances human capital in the Lansing region, adds cultural and
intellectual depth, and contributes ethnic diversity to region. For these reasons,
MSU has increased the quality of life in the region since its founding.
Michigan State University receives approximately $1.6 billion in revenue each
year. Major sources of MSUs revenue include student tuition and fees, state
appropriations, federal and state grants and sponsored programs, private gifts
and grants, and investment income. See Table 2 and Figure 2 below.
TABLE 2. MSU
Revenue Summary, 2005

$ (in millions)
Student Tuition and Fees
329
21.0
Grants and Contracts
320
20.4
Auxiliary Activities
235
15.0
Other Operating Revenue
129
8.2
1,013
64.7
State Appropriations
356
22.7
Investment and Other Revenue
134
8.6
62
4.0
552
35.3
Operating Revenues:
Sub-total
Net Non-operating and Other Revenues:
Gifts, Capital Grants, and Additions to Endowment

Sub-total
Total Revenue
1,565
Data Source: Michigan State University
FIGURE 2.
Revenue Sources of MSU (%), 2005
8.6%
Student Tuition & Fees

Grants & Contracts
Gifts, Capital Grants & Endowment Additions
Investment & Other Revenue
4.0%
21.0%
22.7%
20.4%
8.2%
15.0%
Analysis: Anderson Economic Group

Data: Michigan State University
Generated Date: 22Nov2005
Table 2, MSU Revenue Summary, 2005, on page 7, shows that most of

MSUs revenue comes from Michigan state taxpayers and residents. This is
largely because most MSU students are Michigan residents.
MSUs operational expenditures are a major contributor to economic activity in
the City of East Lansing. Michigan State University, General Motors, other
automotive manufacturers, and state government are the major industries in the
Lansing Metropolitan Statistical Area (MSA). Even though MSU does not
spend its entire budget in the Lansing MSA, most of MSUs annual expenditures enter the local economy. These expenditures include salary payments to
faculty and other academic employees (including graduate students), non-academic employees, and student employees, and direct payments for the services
provided by local government and business contractors. For a summary of operational expenditures, see Table 3 and Figure 3 below.
TABLE 3. Operational
Expenditures, 2005
$ (in millions)
Instruction and Departmental Research
420
30.3
Research
236
17.0
Public Services
172
12.4
Academic Support
66
4.8
Student Services and Scholarships and Fellowships
54
3.9
Institutional Support
61
4.4
Operation and Maintenance of Plants
102
7.3
Auxiliary Enterprises
208
15.0
69
5.0
Depreciation and Other Expenses

Total
1,388

FIGURE 3.
Operational Expenditures of MSU (%), 2005
5.0%
Instruction & Departmental Research
Research
Public Services
Academic Support
Student Services & Scholarships/Fellowhips
Operation & Maintenance of Plants
Depreciation & Other Expenses
15.0%
7.3%
30.3%
4.4%
3.9%
4.8%
17.0%
12.4%

Data: Michigan State University
Generated Date: 22Nov2005
Expenditures by the MSU community, which includes faculty, students, and

administrative, non-academic and student employees, have a positive effect on
local businesses and property values. We review the MSU community beginning with the section MSU Community on page 10. In Fiscal Impact: Methodology and Findings on page 19 we review the impact of the MSU
communitys expenditures on the local economy and on residential and commercial property values.
In addition to direct expenditures, MSU impacts the local economy in other
ways. For example, visitors often come to East Lansing because of the University. These visitors come for sporting and cultural events, graduation ceremonies, and leisure or business trips. While in East Lansing, these visitors spend
money, which benefits local businesses and the economy.
MSU COMMUNITY
The MSU community includes faculty, academic support staff, non-academic

employees, and undergraduate and graduate students. Since MSU has a compact
campus, most members of this community live off-campus in East Lansing or in
surrounding localities (e.g., City of Lansing, and Meridian, Delhi and Delta
Townships). Many students, faculty, and non-academic employees live in the
City of East Lansing. Compared to the citys population of 46,525, MSU is a
significant part of East Lansing with its 45,166 undergraduate and graduate students, and 11,244 full-time employees. We estimate that 21,060 of East Lansing
population is MSU faculty, staff and students. We review the MSU community
under three separate sections below: Students, Faculty, and Non-Faculty
Employees.
Enrollment
STUDENTS
A quick way to gauge MSUs impact on the surrounding area is to look at its
student enrollment. Since its founding, MSU has experienced consistent growth
in enrollment. Since 1970, MSUs enrollment has remained around 40,000 students. During the last ten years, MSUs fall enrollment has steadily grown.
Between 1996 and 2004, enrollment grew at an annual rate of 1.5%, or by more
than 4,500 students. See Table 4, Fall Semester FTE Enrollment by Student
Level, 1996-2005, on page 11.
10
TABLE 4. Fall
Semester FTE Enrollment by Student Level, 1996-2005
Years
Undergraduate
Students
1996
29,281
5,371
1,378
36,029
1997
30,391
5,509
1,347
37,248
1998
31,173
5,393
1,351
37,918
1999
30,955
5,449
1,325
37,729
2000
31,407
5,476
1,346
38,229
2001
32,013
5,640
1,363
39,016
2002
32,397
5,903
1,378
39,678
2003
32,361
6,424
1,370
40,155
2004
32,935
6,345
1,370
40,650
2005
33,359
6,310
1,479
41,148
1.5%
1.8%
0.8%
1.5%
Annualized
Growth
(1996-2004)
Graduate
Students
Professional
Students
Total Students
* Note: Data from 1996 to 2004 are from Statements, MSU Data Digest, 2005 report. 2005
data is from the Office of Planning and Budgets.
Tuition, Fees and Student Expenditures

For the school year 2004-2005, an average resident undergraduate student paid
$6,540 for tuition, $5,502 for room and board, $826 for books, and $1,420 for
food and entertainment. The only difference between resident and non-resident
expenditures for students is tuition. On average, non-resident students paid
$17,336 annually for tuition in 2005.
TABLE 5. Undergraduate
School Years
Cost of Attendance per Academic Year, 1996/97 - 2005/06
Fees
Books
Room &
Board
Personal
& Misc.
Resident
Tuition
Non-Resident
Tuition
Resident
Total
NonResident
Total
1996-97
$ 586
$ 638
$ 3,972
$ 1,124
$ 4,336
$ 11,366
$ 10,656
$ 17,686
1997-98
$ 604
$ 670
$ 4,090
$ 1,194
$ 4,466
$ 11,706
$ 11,024
$ 18,264
1998-99
$ 610
$ 716
$ 4,208
$ 1,178
$ 4,564
$ 11,760
$ 11,276
$ 18,472
1999-00
$ 626
$ 716
$ 4,334
$ 1,184
$ 4,670
$ 12,034
$ 11,530
$ 18,894
2000-01
$ 642
$ 752
$ 4,508
$ 1,186
$ 4,830
$ 12,454
$ 11,918
$ 19,542
2001-02
$ 694
$ 778
$ 4,720
$ 1,308
$ 5,258
$ 13,560
$ 12,758
$ 21,060
2002-03
$ 750
$ 790
$ 4,974
$ 1,354
$ 5,704
$ 14,716
$ 13,572
$ 22,584
11
TABLE 5. Undergraduate
School Years
Cost of Attendance per Academic Year, 1996/97 - 2005/06
Fees
Books
Room &
Board
Personal
& Misc.
Resident
Tuition
Non-Resident
Tuition
Resident
Total
NonResident
Total
2003-04
$ 822
$ 810
$ 5,272
$ 1,382
$ 6,266
$ 16,170
$ 14,552
$ 24,456
2004-05
$ 856
$ 826
$ 5,502
$ 1,420
$ 6,540
$ 17,336
$ 15,144
$ 25,940
Annualized Growth
(1996-2004)
4.9%
3.3%
4.2%
3.0%
5.3%
5.4%
4.5%
4.9%
Along with state appropriations, student tuition and fees are a major source of
revenue for Michigan State. Revenue from tuition and fees allows the University to pay salaries and its other expenses. High tuition rates for non-resident
(out of state) students also contributes to the local and state economy by bringing outside money into the region.
Student expenditures on books, food and grocery, entertainment, and other personal items have a direct economic impact on local businesses. In addition to
these items, most students also purchase housing off-campus. Michigan State
University provides housing for approximately 15,000 students, while some
20,000 undergraduates live off-campus. Those students probably pay similar
amounts for room and board as students who live on-campus. See Table 5,
Undergraduate Cost of Attendance per Academic Year, 1996/97 - 2005/06, on
page 11. The impact of students expenditures on the City of East Lansing is
analyzed under the section Fiscal Impact: Methodology and Findings on
page 19. Student expenditures in East Lansing affect property tax values and are
one of the factors in our fiscal impact model.
FACULTY, ACADEMIC
STAFF AND NONACADEMIC STAFF
TABLE 6. Number
Years
Michigan State University employs 4,599 faculty and other academic staff,
5,750 non-academic employees and 1,400 student employees (graduate assistants) in 2005. See Table 6, Number of MSU Fall Semester Faculty and Staff,
1996-2005, on page 12, for historical figures.
of MSU Fall Semester Faculty and Staff, 1996-2005

Faculty
Other
Academic Staff
Graduate
Assistants
Non-Academic
Staff
Total
Employment
1996
2,461
1,333
1,335
5,195
10,324
1997
2,446
1,415
1,362
5,255
10,478
1998
2,452
1,464
1,391
5,353
10,660
1999
2,485
1,549
1,438
5,488
10,960
2000
2,518
1,633
1,447
5,697
11,295
12
TABLE 6. Number
of MSU Fall Semester Faculty and Staff, 1996-2005
Years
Faculty
Other
Academic Staff
Graduate
Assistants
Non-Academic
Staff
Total
Employment
2001
2,560
1,711
1,490
5,832
11,593
2002
2,542
1,680
1,517
5,889
11,628
2003
2,519
1,669
1,418
5,761
11,367
2004
2,505
1,665
1,366
5,707
11,243
2005
2,841
1,758
1,400
5,750
11,749
Annualized Growth
(1996-2005)
1.6%
3.1%
0.5%
1.1%
1.4%
Faculty and Non-Faculty Earnings

In 2005, the average MSU salary for an academic faculty member was $83,424.
MSU pays competitive compensation/salaries to its faculty compared to other
Big Ten universities.The average earnings for teaching assistants was $13,004
and $13,467 for research assistants.
These high earnings vitalize the local economy, help local businesses to be profitable and raise the value of both commercial and residential properties in the
local market. Higher property values ultimately affect the City, which receives
more revenue from property taxes.
Expenditures
Expenditures of faculty, graduate assistants, and non-academic employees are
essential for any university town. The City of East Lansing and surrounding
localities benefit from the expenditures of MSUs employees. We estimate that
the average MSU faculty member spends $13,701 for housing, $13,153 for
apparel, food, and transportation, and $4,932 for meals and entertainment away
from home.
While the economic impact of the MSU communitys expenditures on the City
of East Lansing is outside the scope of this project, we carefully considered
these expenditures in order to estimate the fiscal impact of MSU on the citys
property tax revenue and business-type activities. See Appendix A: MSU Fiscal Impact Model: Input Database on page 1 for the detailed expenditures data.
13
Overview of East Lansing
III.Overview of East Lansing

BRIEF HISTORY
Almost thirty years after the founding of Michigan State University, students
and faculty began to develop off-campus housing near the college. In 1887, the
first housing development appeared in the area and by 1901 the college community had formed its own school district. In 1907, the state granted the communitys request to be incorporated as a city. Located three miles from the states
capitol, the legislature gave the town the name of East Lansing.
In the following decades after the citys incorporation, East Lansing rapidly
grew. Stores began to move into the area close to campus, and by World War I a
small downtown had formed near the corner of Grand River and Abbott. As the
Universitys enrollment grew, so did its need for housing. Developers built new
homes and schools to accommodate the growing student and faculty population.
Restaurants, stores, and other businesses quickly moved into the area as well.
Today, East Lansing is a thriving community. With a population over 46,000,
East Lansing is one of Michigans largest cities outside the Detroit metropolitan
area. The citys proximity to the states capitol has made East Lansing an attractive location for public and private sector firms.
CURRENT STATE OF
EAST LANSING
ECONOMY
Much of East Lansings economy revolves around education. The largest

employer in the City of East Lansing is Michigan State University, which
employs almost 12,000 faculty and support staff employees. Other large
employers include the East Lansing School District and the Michigan Education
Association.
While the University provides jobs directly, it also indirectly creates many more
jobs in the entertainment, accommodation, retail, and food service industries by
providing a clientele for those businesses. East Lansings second largest
employer is Meijer, a discount department/grocery store. The City of East Lansing has benefited from the presence of these businesses. As Table 8 on page 15
shows, several of East Lansings largest single taxpayers are rental properties
that provide housing for students.
TABLE 7. Largest
Employers in East Lansing, 2004
Employer
Approximate Number
of Employees
11,243*
Meijer, Inc.
650
East Lansing School District
600
Michigan Education Association
526
Michigan State Police
500
14
TABLE 7. Largest
Employers in East Lansing, 2004

Approximate Number
of Employees
Employer
City of East Lansing
359
U.S. Postal Service
300
Burcham Hills (Retirement Community)
300
* The employment number according to MSU.

Data Source: City of East Lansing
While Michigan State University is the largest single employer in East Lansing,
it is not the largest taxpayer. Under Michigans Constitution, governments and
education institutions do not pay property taxes. MSU, the City of East Lansing,
East Lansing Schools, and Michigan State Police do not pay property taxes. The
University does pay for the business services it receives from the city. Two of
the largest taxpayers are rental property companies. Meijer, which is the second
largest employer in the city, is the ninth largest taxpayer. Please see Table 8
below for the top ten largest taxpayers in the City of East Lansing.
TABLE 8. Ten
Largest Taxpayers in East Lansing, 2004
Taxpayer
Product or Service
Taxable Value
Percentage of Total
DTN Management
Apartments
$31,143,510
3.94
MEA Special Services
Teacher Association/Insurer
$15,915,810
2.01
Sam Eyde Development Co.
Developer
$11,542,870
1.46
Wells Goodsir
Rental Properties
$11,428,190
1.45
Dunn Development Group
Apartments
$7,102,360
0.90
Mutual Insurance Company of America
Physicians Assurance
$6,885,470
0.87
Capstone University Commons
Apartments
$6,743,370
0.85
D.L. Kesler & Associated Properties
Golf Course/Developer
$6,551,000
0.83
Meijer Inc.
Department /Grocery Store
$6,538,830
0.83
South Bend Nursing Home Association
Commercial Properties
$5,318,580
0.67
Data Source: City of East Lansing, 2004 Annual Financial Report
EMPLOYMENT
According to the U.S. Census, the City of East Lansings population was 46,525
in 2000. Most of the citys population (43,032) was at least 16 years old. In
2000, 63.6% were in the labor force. The employed civilian population for this
population group was 24,520, or 90%. The unemployment rate for the city was
6.6%, while 15,659 persons over the age of 16 were not in the labor force.
Included in this group are the citys many high-school and college students.
When East Lansing is compared with the State of Michigan, a lower percentage
of persons 16 years and older were in the labor force and employed in East Lansing than in the state as a whole.
15
East Lansing residents primarily work in education or leisure related industries.

In 2000, more than 40% of employed residents worked in the educational,
health, and social services fields. A sixth of employed residents (16.9%) worked
for firms in the arts, entertainment, food services, and accommodation industries. Table 9 on page 16 presents detailed information on employment by
industry for East Lansings residents.
TABLE 9. Employment
by Industry in East Lansing, 2000
Industry
Number
Percent
Agriculture, forestry, fishing and hunting, mining
250
1.0
Construction
349
1.4
Manufacturing
718
2.9
Wholesale Trade
313
1.3
2,327
9.5
280
1.1
Information
1,064
4.3
Finance, insurance, real estate, and rental and leasing
1,237
5.0
Professional, scientific, management, administrative,

and waste management services
1,863
7.6
Educational, health, and social services
9,973
40.7
Arts, entertainment, recreation, accommodation and

food services
4,139
16.9
824
3.4
1,183
4.8
Retail Trade
Transportation and Warehousing, and Utilities
Other services (except public administration)

Public administration
Data Source: U.S. Census
We estimate that 11.9% of East Lansings working residents (2,941 residents)

worked at MSU in 2000.
CITY FINANCES
In its Annual Comprehensive Financial Report for the Fiscal Year 2004, the
City of East Lansing presents information on its revenue sources and expenditures for three types of activities:
Governmental activities - basic services such as police, fire, public works,
courts, streets, recreation, library, solid waste disposal, parks, and general
administration;
Business activities - water, sewer, and parking; and

Component units - activities conducted by the Downtown Development Author-
ity and the Downtown Management Board.
Between July 1, 2003 and June 30, 2004 the city received $51,864,763 from
various revenue sources and paid out $52,019,312 in program expenses. The
citys net assets fell $154,549 during the course of the year.
16
City Revenue
East Lansing receives funding for its activities from four main sources: service
fees, operating grants and contributions, property taxes, and state-shared revenue. Property tax revenue, state-shared revenue from sales taxes, court revenues, and fees for services fund most of the citys governmental activities. The
City charges a fee to customers to help cover the costs of the water, sewer, and
parking services it provides.
TABLE 10. City
of East Lansings Revenue Sources, Fiscal Year 2004
Revenue
Program Revenue
Charges for services
Operating grants and contributions
Capital grants and contributions
25,408,517
4,027,903
486,286
General Revenue
Property taxes
State-shared revenue
14,856,993
6,134,877
Unrestricted investment earnings
146,051
Unrestricted franchise fees
318,825
Miscellaneous
485,311
Total Revenue
51,864,763
Source: City of East Lansing, Annual Financial Report, 2004
The City received $29.9 million in program revenue in FY 2004. Most of this
revenue ($25.4 million) came from charges for services. Half of this revenue
came from fees for governmental activities (police, fire, recreation, and parks)
and half came from charges for business services (water, sewer, and parking).
The City also received over $4 million in grants and contributions. See Table 10
above.
MSU contributed directly to City revenue by paying $1.3 million for sewer and
parking services from the City. MSU also contributed indirectly to City revenue.
The City received $394,995 from the State for providing fire and police expenditures for MSU.
In FY 2004, the City received $14.8 million in property tax revenue. None of
this revenue came from Michigan State University due to its tax exempt status.
The City also received $6.1 million in state-shared revenue. See Direct Impact
of MSU Community in East Lansing on State-Shared Revenue on page 22.
17
City Expenditures
A majority of the City of East Lansings revenue supports its governmental
activities. In 2004, the Citys largest expenditure was for public safety. The City
spent over $15 million on fire and police services. The City also spent between
$6 million and $7 million each on public works, general government, and recreation and culture. See City of East Lansings Program Expenses, Fiscal Year
2004 on page 18.
TABLE 11. City
of East Lansings Program Expenses, Fiscal Year 2004
Expenses
Governmental Activities
General government
7,537,175
Public safety
15,222,360
Public works
6,848,258
Health and welfare
164,365
Community and economic development
963,337
Recreation and culture
7,104,655
Interest on long-term debt
1,128,930
Business-Type Activities
Water
3,089,991
Sewer
6,432,431
Parking
3,527,810
Total Program Expenses
52,019,312
Source: City of East Lansing Annual Financial Report, 2004
The City of East Lansing spent over $13 million on business-type activities.
Almost half of this amount was spent on sewer services. The City spent another
$3 million providing water to residents and $3.5 million providing parking services.
18
Fiscal Impact: Methodology and Findings
IV.Fiscal Impact: Methodology and Findings

The purpose of this report is to estimate the net fiscal impact of Michigan State
University on the City of East Lansing. Net fiscal impact is the difference
between the benefits that MSU provides the city minus the additional costs of
having the University in the city.
Our firm has rigorously completed, or critiqued, numerous fiscal impact analyses. These studies are often recognized as the most reliable and timely available.1 The basis for this methodology is stated in Patrick Andersons book
Business Economics and Finance.2
We depart from many other practitioners by insisting on a specific, conservative, and realistic definition of fiscal impact. We define fiscal impact as only
bona fide, new tax revenue or reduced government expenditures directly or indirectly caused by the subject entity. In calculating the effects, we take into
account both costs and benefits. To arrive at our total net fiscal impact figure,
we subtract out any lost tax revenue or increased expenditures. In particular, we
subtract from the total net benefit figure any reductions in economic activity due
to displacement or substitution effects.
The resulting findings are much more conservative, and realistic, than many
reported analyses that fail to subtract costs, ignore substitution effects, or exaggerate benefits. In reporting our analysis, we also identify key assumptions,
1. Previous AEG reports on similar topics available at our website (http://www.andersoneconomicgroup.com) include:
Critical Review: Northeast Blackout Likely to Reduce US Earnings by $6.4 Billion, East Lansing, MI: Anderson Economic Group, August 19, 2003; the estimated impact included in this
report was later corroborated by a completely independent analysis produced several months
later, and the estimate has been included in numerous DoE and US Government publications.
Lost Earnings Due to the West Coast Port Shutdown - Preliminary Estimate, Lansing, MI:
Anderson Economic Working Paper, October 7, 2002; this analysis, which produced an estimate of economic impact many times smaller than that commonly cited in news media reports
at the time, was later corroborated by academic research in the US, and was also used by the
Australian government in assessing risks of disruptions of maritime ports.
Economic Benefits of Wayne State University, Wayne State University, October 2004. This
report uses a much more conservative method for calculating economic impact than that commonly used for colleges, and directly considers the likely substitution effects should university-owned property be converted to private sector use.
Economic and Fiscal Impact of a Casino in Wayland Township (2003); Fiscal Analysis of the
Link Michigan Proposal (2002); and Economic and Fiscal Impact of Expansion of the
Detroit-Wayne County Port (2001) are some other studies AEG completed during the past
years.
2. Patrick L. Anderson, Business Economics and Finance, CRC Press, 2004.
19
describe our methodology, and identify in the text any important factors that
cannot or were not quantified in our analysis.
OUR METHODOLOGY
In this report we looked at the fiscal impact MSU has on the citys operations
and budget. In order to estimate the fiscal impact, we looked at three ways the
University has a fiscal affect the city. These include the direct and indirect
impact of MSU on:
1.
City of East Lansing Services
2.
Property Tax Revenue
3.
MSU provides benefits to the city directly and indirectly through the payment
for services, and indirectly through property taxes and state-shared revenue. The
City also has certain expenditures because of the presence of the University.
This includes lost property tax revenue and public safety expenditures. Below
we describe our methodology for estimating the direct and indirect impact of
MSUs presence in East Lansing on the City.
Direct and Indirect Impact of MSU on City Services

In order to estimate the direct impact of services provided by the City of East
Lansing for MSU, we obtained data from the City and the University on the
amount MSU pays the city for sewer and public safety services, and the amount
the City spends providing these services.The net fiscal direct impact of MSU on
the City of East Lansing is the sum of payments from MSU for these services,
and any operating grants and contributions from federal and state governments
to East Lansing for MSU, less the cost of these services provided to the MSU
community.
In calculating the direct benefit the City receives through payment for water,
sewer, and parking from the MSU community, we were careful to recognize that
not all the population associated with the University would leave if MSU were
no longer in East Lansing. Our model accounts for the fact that some percentage
would remain in East Lansing even if the University were not there. Thus, we
did not attribute all payments the City receives for business-type activities from
MSU faculty, staff, and students to MSUs presence in the City. Our model
includes a 40% substitution effect, meaning that 40% of the current MSU community would remain in East Lansing even if the University were no longer
there. This substitution effect parameter was used for both benefits to the city
(e.g., state-shared revenue) and costs (e.g., forgone tax revenue).
MSU also provides indirect benefits and costs to the City of East Lansing. MSU
maintains roads and provides public safety services for MSUs campus. If MSU
did not do this, the City would have to spend additional money providing these
services. The net fiscal impact of these indirect benefits is the money the City
20
receives or saves because of the University minus the costs of providing services to the MSU community.
Direct and Indirect Impact of MSU on Property Tax Revenue

Michigan State Universitys campus includes 5,200 contiguous acres in the City
of East Lansing.This is property that, due to its tax exempt status, the City of
East Lansing does not receive property tax revenue from. MSU has two different types of impact on property tax revenue:
1.
MSUs presence increases the value of residential and commercial property.
2.
MSU does not pay property tax to the City because of its land-grant status.
In order to estimate MSUs impact on the Citys revenue we had to consider

MSUs impact on property values and what property tax revenue the City would
receive if MSU were not located in East Lansing. We concluded that if MSU
were not in the region, the area that today is East Lansing would look similar to
the other townships surrounding Lansing.
Best Estimate. In our best estimate of MSUs impact on property tax revenue,
we had to consider the property mix of the land within the citys limits and the
taxable value of that land without MSU. To do this, we obtained the taxable
value of land by type for Delhi, Delta, and Meridian Townships. We
believe that if MSU had not been founded in the area that is now the City of East
Lansing, the area would be similar to these nearby townships. Using this
assumption, we then looked at the taxable value of land by type of land (e.g. residential, commercial) for each township and adjusted the taxable value to reflect
the size (in square miles) of East Lansing. We then averaged the taxable values
of land for the townships in order to arrive at our estimate for the total taxable
value of land in East Lansing without MSU. We then applied the same tax rate
in order to reach our property tax revenue figure.
We also looked at each townships housing and expenditure data when developing our property tax model. We used this information to determine the appropriate counterfactual to MSUs presence in East Lansing. While the townships are
very similar, they do have subtle differences. For these reasons, we use a composite of these townships taxable values in our model.
Alternative Estimate. We also provide an alternative estimate of MSUs
impact on property tax revenue, in which we include Lansing Township in our
composite of comparison communities. We feel that Lansing Township is not a
perfect comparison community, as it does not have the residential and commercial mix that we think East Lansing would have if MSU were not in the area. It
is a much smaller township that is made up of non-contiguous tracts of land. We
include it in an alternative estimate because of its proximity to the cities of East
Lansing and Lansing, and because it was the opinion of some East Lansing offi-
21
cials that the city today would be more like Lansing Township if MSU had not
been established in the area that came to be East Lansing.
Direct Impact of MSU Community in East Lansing on State-Shared

Revenue
The MSU community affects the amount of state-shared revenue the City of
East Lansing receives. Michigan States presence affects the population size,
taxable value of property, and property tax rates in the City of East Lansing,
which are some of the factors that determine the amount of sales tax revenue
each local government receives from the State of Michigan.
Sales tax revenue is collected by the State of Michigan and distributed to local
governments six times each year. The Michigan Constitution dedicates 15% of
4% gross collections of the state sales tax. Another 21.3% of 4% gross collections of the state sales tax is earmarked for local governments based on statute.
Constitutional revenue is distributed on a per capita basis. The statutory payments are determined based on a complex formula that involves three separate
calculations using the type of government, population size, taxable value of
property per capita, and local tax rates in each local government unit.
If MSU were not located in East Lansing, the areas population would be
smaller and the land would most likely have a lower taxable value. These two
factors affect state-shared revenue. Payments increase with population size, and
units with a smaller per capita tax base receive larger payments.
These various factors were used to calculate payments until 2004. In FY 2004,
local governments received 90% of the revenue they received in FY 2003. In
FY 2005, a local unit received 98.9% of the FY 2004 amount.
FINDINGS
Taking into consideration both the fiscal benefits and costs of Michigan State to
the City of East Lansing, we estimate that the net fiscal impact of MSU is
between $7.6 million and $8.6 million. See the summary table below. For
details, see Appendix B: MSU Fiscal Impact Model: Cost, Benefits, and Net
Impact on page 1 at the end of our report.
22
TABLE 12. Net
Fiscal Impacts of MSU on City of East Lansing

Component Costs and Benefits (millions)
Category
Best Estimate
Alternative Estimatea
City Services
Benefits
Costs
$8.00
$8.00
($8.43)
($8.43)
Net Benefits from City Services
($0.43)
Property Tax Revenue with MSU

Property Tax Revenue without MSU
$15.12
$15.12
($7.2)
($8.37)
Net Property Tax Revenue Benefit

Net State Shared Revenue Benefit Due to Higher
Population with MSU
Net State Shared Revenue Loss Due to Higher
Property Value per Capita with MSU
Net State-Shared Revenue Benefit
Total Net Fiscal Impact
($0.43)
$7.88
$6.75
$1.67
$1.67
($0.48)
($0.41)
$1.19
$1.26
$8.63
$7.58
Source: Anderson Economic Group

a. Our Alternative Estimate includes Lansing Township as a comparison community when calculating property tax
revenue in addition to the three other townshipsDelhi, Delta, and Meridianused in both estimates.
Direct and Indirect Impact on Business-Type Activities

The fiscal impact of MSU on the City of East Lansings services is negative
$429,924. This figure takes into account the direct and indirect benefits the City
receives from MSU, as well as the cost of providing certain services for the
MSU community.
The City of East Lansing receives over $5.0 million in direct benefits from
MSU. This figure includes money the City receives directly from the University
for services, grants given to the City because of MSU, and revenue from business-type activities provided to the MSU community. In 2004, Michigan State
paid over $1.4 million for sewer and parking services to the City. According to
the Citys financial report, East Lansing received $385,915 in operating grants
and contributions from the State for public safety expenditures related to the
University. We estimate that the City received $3.3 million for business-type
activities provided to the MSU community.
23
MSU also provides indirect fiscal benefits to the City. If MSU were not present
in East Lansing, the City would need to provide certain services that MSU provides, such as on-campus road maintenance and public safety. MSU also provides rent-free land for a sewage facility the city operates. We estimate these
indirect benefits of MSU to the City to be $3.0 million. See Appendix B: MSU
Fiscal Impact Model: Cost, Benefits, and Net Impact.
Another important indirect benefit is additional revenue the City receives by
being able to charge a higher price for the services its provides. When compared
to the average Michigan city, East Lansing receives almost six additional dollars
per person in revenue. We have assumed that some of this is due to MSUs presence in the community. We estimate this additional revenue to be $136,386.
In 2004, the cost of providing services to the MSU community was over $8.4
million. We estimate that the City spent $3.5 million on providing water, sewer,
and parking services for the MSU community, and another $6.0 million providing public safety and public works services directly. The City has lower costs
per capita than the average Michigan city for public safety and public works.
Part of this can be explained by MSUs provision of some of these services. See
Appendix B: MSU Fiscal Impact Model: Cost, Benefits, and Net Impact.
Direct and Indirect Impact on Property Tax Revenue

Due to the presence of MSU in East Lansing, the City collects more property
tax revenue than it would if the University were not located in East Lansing. In
2004, the City collected $15.1 million in property tax revenue. Without MSU,
we estimate that the taxable value of the Citys land would be much lower.
Property Tax Revenue, Best Estimate. When including Delhi, Delta, and
Meridian Townships as comparison communities, we estimate that the area that
is East Lansing would generate $7.2 million in property tax revenue for the City.
This results in a net fiscal benefit of $7.9 million to the City that can be attributed to MSU.
Property Tax Revenue, Alternative Estimate. At the current millage rate of
19, we estimate that the area that is East Lansing would generate $8.4 million in
property tax revenue for the City, assuming a property mix and taxable value
that is an average of four comparison townships: Delhi, Delta, Meridian, and
Lansing Township. This results in a net fiscal benefit of $6.75 million to the
City that can be attributed to MSU.
Direct and Indirect Impact on State-Shared Revenue

In 2004, the City of East Lansing received $6.1 million in state-shared revenue
from constitutional and statutory sources. The constitutional amount was given
on a per capita basis, and the statutory amount was based on four factors: popu-
24
lation, type of government, taxable value of land, and local property tax rates.
We estimate that the total net fiscal impact attributed to MSU is between $1.2
million and $1.3 million.
We estimate that $1.7 million of East Lansings state-shared revenue is due to
MSUs population. After reviewing population data for the City of East Lansing, we concluded that almost half of East Lansings population is due to the
University. We therefore calculated the direct impact of MSU on state-shared
revenue based on the Citys population that can be attributed to Michigan State,
taking into account a substitution effect of 40%.
We also estimated the indirect impact of MSU on state-shared revenue. As mentioned above, other factors, namely the taxable value of land and property tax
rates, result in the City of East Lansing receiving a smaller state-shared revenue
payment than they would without MSU. We took this into account and estimate
that MSU costs the city between $410,915 and $479,466 depending on the taxable value comparison we use. When we include Lansing Township in our comparison communities, the city receives $410,915 less in state-shared revenue
due to MSU. In our best estimate (when we use Delhi, Delta, and Meridian
Townships) the taxable value of land in East Lansing without MSU is lower,
resulting in a greater loss ($479,466) in state-shared revenue.
LIMITATIONS OF
ANALYSIS
There are limitations in this fiscal impact analysis, including the following:
We estimated the magnitude of MSUs fiscal impact on the City of East Lan-
sing, which required assumptions about the way East Lansing would have
developed without MSU. Even a carefully-prepared analysis of this type will
not include all the factors that would change if MSU was not located in the City.
We did not evaluate the structure or governance model of either the City or
MSU, nor the efficiency or efficacy of any individual program.
We used a level-of-materiality threshold of $50,000, and did not apportion ben-
efits or costs for any individual budget item below this threshold.
We used a composite of the land use and property tax values of cities and town-
ships close to East Lansing to estimate the net effect on property taxes due to
MSU. In addition, we used an alternative scenario suggested by the City that
provides a slightly different result. However, the actual property use is impossible to know for certain.
This analysis is based on data from a specific time; the net impact will, of
course, change in the future.
CONCLUSION
Michigan State University has a positive net fiscal impact on the City of East
Lansings budget. Our analysis suggests that it is costly for the City to provide
public services for the MSU community, and that payments from the University
cover most, but not all, of these costs. It also suggests that the City greatly benefits from the Universitys presence, in the form of increased property tax reve-
25
nue and state-shared revenue due to the added population and economic activity
generated by the University. These benefits exist even when the use of taxexempt property by the University is taken into account.
When all three categories of costs and benefits are taken into account, it is clear
that the net fiscal impact on the City is quite positive.
26
Appendix A: MSU Fiscal Impact Model: Input Database

Input Value
A. MSU Revenue & Expenditures
Total Revenue: Teaching, Research and Operations
Notes
2004-2005
$
1,565,000,000
100.0%
Operating Revenues
Student Tuition and Fees
Grants and Contracts
$
$
$
$
$
1,013,000,000
329,000,000
320,000,000
235,000,000
129,000,000
64.7%
21.0%
20.4%
15.0%
8.2%
Net Nonoperating and Other Revenues

Investment and Other Revenue
Gifts, Capital Grants, and Additions to Permanent Endowments
$
$
$
$
552,000,000
356,000,000
134,000,000
62,000,000
35.3%
22.7%
8.6%
4.0%
1,388,000,000
100.0%
$
$
$
$
$
$
$
$
$
$
$
420,000,000
236,000,000
172,000,000
66,000,000
25,000,000
29,000,000
61,000,000
102,000,000
208,000,000
65,000,000
4,000,000
30.3%
17.0%
12.4%
4.8%
1.8%
2.1%
4.4%
7.3%
15.0%
4.7%
0.3%
Direct Payment for Services provided by East Lansing
1,331,124
State Grants City of East Lansing Received for MSU
385,915
$
$
326,000
59,915
3,313,000
$
$
650,000
2,663,000
Total Operational Expenditures: Teaching, Research and Operations

Memo:
Operational expenditures do not reflect funds necessary for plant replacement, major
projects, and post-retirement health benefits for employees.
Instruction and Departmental Research
Research
Public Services (includes public safety expenditures)
Academic Support
Student Services
Scholarships and Fellowships
Operation and Maintenance of Plants
Depreciation
Other Expenses
East Lansing Direct Revenue from MSU
Charges for Services / MSU Fire

Charges for Services / "MSU Special"
MSU's Indirect Contributions to City Services
Roads and Parking Area Annual Maintenance and Snow Removal by MSU on Campus
Major Road Repair Projects by MSU on Campus
B. Students
Total Number of Students
2005
45,166
(includes "Non-Degree" enrollments)
Number of Undergraduate Students

Living on Campus
Living off Campus and in East Lansing
Living out of East Lansing
Number of Graduate Students (includes graduate professionals)
Living on Campus
Data Sources: City of East Lansing; Michigan State University;
Anderson Economic Group; U.S. Census
35,678
14,985
13,795
6,898
AEG est.
AEG est.
9,488
2,372
MSU est.
page 1 of 5
Appendix A: MSU Fiscal Impact Model: Input Database (cont'd)

Input Value
Notes
4,744
2,372
AEG est.
AEG est.
Average Annual Expenditures of Undergraduate Students (excluding tuition and fees)

(per year)
Undergraduate Student Living on Campus

Room and Board
Books
Apparel, Food & Grocery, and other basic needs
Meal & Entertainment - away from campus
$
$
$
$
$
11,576
5,788
854
1,526
3,408
AEG est.
50%
7%
13%
29%
Undergraduate Student Living off Campus

Rent
Books
Meal & Entertainment - away from home
43%
6%
27%
24%
$
$
$
$
$
14,077
6,000
854
3,815
3,408
AEG est.
AEG est.
Graduate Student Living on Campus

Room and Board
Books
Meal & Entertainment - away from campus
$
$
$
$
$
15,416
7,708
1,206
2,289
4,213
AEG est.
50%
8%
15%
27%
Graduate Student Living off Campus

Rent
Books
39%
8%
26%
27%
$
$
$
$
$
15,416
6,000
1,206
3,997
4,213
AEG est.
AEG est.
AEG est.
AEG/MSU est.
AEG est.
Average Annual Expenditures of Graduate Students (excluding tuition and fees)
C. Faculty, Student and Non-Academic Employees
AEG est.
AEG est.
AEG/MSU est.
AEG est.
2005
Total Number of Faculty & Academic Staff (FTE)
4,500
Living in East Lansing

1,753
2,747
Total Number of Non-Academic Employees (FTE)
5,750
Living in East Lansing

767
4,983
Total Number of Student Employees (includes teaching and research assistants) (FTE)
1,400

350
1,050
Average Annual Earnings and Expenditures of Faculty

Average Salary
Average Income Tax Rate
Average Earning After Tax (Disposable Income)
$
$
73,400
30%
51,380
Average Annual Expenditures

Housing (Rent & Mortgage)
Apparel, Food & Grocery, Transportation, and other basic needs
Other Expenses
$
$
$
$
$
41,104
13,701
13,153
4,932
9,317

AEG est. (Census)

AEG est. (Census)
AEG est. (Census)
AEG est. (Census)
AEG est. (Census)
page 2 of 5

Input Value
Notes
Average Annual Earnings and Expenditures of Non-Academic Employees

Average Earning
Average Earning After Tax (Disposal Income)
$
$
40,800
25%
30,600
Average Expenditures
Housing (Rent & Mortgage)
Apparel, Food & Grocery, Transportation, and other basic needs
Meal & Entertainment - away home
Other Expenses
$
$
$
$
$
24,480
8,160
7,834
2,938
5,549
AEG est. (Census)

AEG est. (Census)
AEG est. (Census)
AEG est. (Census)
AEG est. (Census)
Average Annual Earnings and Expenditures of Student Employees (includes teaching and research assistants
Average Earning (Teaching Assistantship)
$
Average Earning (Research Assistantship)
$
$
Average Earning (TA & RA)
Average Earning After Tax (Disposal Income)
$
Memo:
Expenditures for student employees are already taken into account under "Students" sub-section
D. Other MSU Data for the Model
13,004
13,467
13,236
20%
10,588
2005
acres
Inventory of Land Acres

Developed Campus
Protected Natural Area
Experimental Research Farm
Off-Campus Properties
Note: 1 Mile Square = 640 Acres
sq. miles
23,667
2,000
700
2,500
18,467
E. City of East Lansing Related Data
2004
37
3.1
1.1
3.9
28.9
per capita $
Total Revenue
51,864,763
1,114.8
Program Revenue:
Charges for Services - Governmental Activities
Charges for Services - Business-Type Activities
Operating Grants and Contributiuons
$
$
$
$
29,922,706
12,569,087
13,325,716
4,027,903
643.2
270.2
286.4
86.6
General Revenue:
Property Taxes
State-shared Revenue
Other
$
$
$
$
21,942,057
14,856,993
6,134,877
950,187
471.6
319.3
131.9
20.4
Total Expenses
52,019,312
1,118.1
Governmental Activities
General Government
Public Safety
Public Works
Health and Welfare
Community and Economic Development
Recreation and Culture
Interest on Long Term Debt
$
$
$
$
$
$
$
$
38,969,080
7,537,175
15,222,360
6,848,258
164,365
963,337
7,104,655
1,128,930
837.6
162.0
327.2
147.2
3.5
20.7
152.7
24.3
Business-Type Activities
Water
Sewer
Parking
$
$
$
$
13,050,232
3,089,991
6,432,431
3,527,810
280.5
66.4
138.3
75.8

page 3 of 5

Input Value
F. Property Data, City of East Lansing and Other Lansing Area Cities
& Townships
2004
City of East Lansing

Total Area (sq. miles)
Total Population
Total Housing Units
Housing Density (units per sq. mile)
Owner-occupied Units
Total Taxable Value (TV) (Real Property)
Residential TV
Commercial TV
Industrial TV
Agricultural TV
Developmental TV
11.3
46,525
15,318
1,356
4,178
$
$
$
$
$
$
Delhi Township
Total Population
Total Housing Units
Residential TV
Commercial TV
Industrial TV
Agricultural TV
Developmental TV
$
$
$
$
$
$

655,310,829
525,702,625
111,556,779
15,460,638
2,590,787
35.0
29,682
13,107
374
7,139
$
$
$
$
$
$
Meridian Township
Total Population
Total Housing Units
Residential TV
Commercial TV
Industrial TV
Agricultural TV
Developmental TV
795,675,370
509,294,350
280,312,330
827,850
524,010
4,716,830
29.0
22,569
9,012
311
5,280
Delta Township
Total Population
Total Housing Units
Residential TV
Commercial TV
Industrial TV
Agricultural TV
Developmental TV
Notes
1,154,773,902
692,622,604
355,587,968
100,580,733
2,303,501
3,679,096
31.8
39,116
17,101
538
9,116
$
$
$
$
$
$
1,449,704,850
1,117,485,076
328,041,238
3,662,240
516,296
-
page 4 of 5

Input Value
Lansing Township
Total Population
Total Housing Units
Residential TV
Commercial TV
Industrial TV
Agricultural TV
Developmental TV
Notes
5.1
8,458
4,325
848
1,953
$
$
$
$
$
$
G. Other Data
278,538,700
111,441,500
146,520,000
20,577,200
-
2002
Average Michigan City Expenditure Data

Fire Cost Per Capita
Police Cost Per Capita
Public Works Per Capita
Water Per Capita
Sewerage Per Capita
Total Expenditure Per Capita
$
$
$
$
$
$
68
166
305
111
142
3,929
Average Intergovernmental Revenue

Revenue From Federal Government Per Capita
Revenue From State Government Per Capita
Total Intergovernmental Revenue Per Capita
$
$
$
130
1,673
1,802
Average City Revenue From Services

Water Revenue Per Capita
Sewer Revenue Per Capita
Parking Revenue Per Capita
Water, Sewer and Parking Total Revenue per Capita
$
$
$
$
163
111
7
281
720
Property Tax Revenue Per Capita

Sales and Gross Receipts Taxes Per Capita
Total Taxes Per Capita
$
$
$
786
17
874
Total Revenue Per Capita
3,605
Average Michigan City Revenue Data
Total Services Revenue Per Capita

Average City Revenue From Taxes

page 5 of 5
Appendix B: MSU Fiscal Impact Model: Cost, Benefits, and Net Impact
A. Direct and Indirect Impact of MSU on Services of East Lansing
Direct Benefit:
East Lansing's Total Direct Operating Revenue from MSU
1,382,590
Operating Grants and Contributions from State Government to East Lansing for MSU
(mainly for fire and police expenditures)
385,915
3,243,706
City Revenue for Business Type Acitivities (BTA)

e.g. water, sewer and parking services
Memo: MSU Population assuming 40% substitution
Total East Lansing Population
MSU Population in East Lansing
46,525
21,060
Memo: Does not include Operating Revenue from MSU
12,636
MSU Share in Population

City Revenue from MSU Community for Business Type Activities
MSU community includes faculty, non-academic employees, and students
residing in East Lansing
Less:
Substitution Impact Multiplier
Substituted MSU population
City Revenue for Substituted MSU Community for BTA
11,943,126
45.3%
$
5,406,176
0.40
8,424
2,162,470
City Revenue from MSU Community for Business Type Activities After Substitution
Direct Benefit - Services
5,012,211
Indirect Benefit - Services
2,983,822
Total Direct and Indirect Benefit
7,996,032
Indirect Benefit:
MSU's Indirect Contributions to City Services for Roads and Parking
Assuming that the City of East Lansing would need to spend 40% of what
MSU spends for these services to provide the same services to the MSU Campus.
1,325,200
MSU's Indirect Contributions to City Services for Public Safety

Assuming that the City of East Lansing would need to spend another 10% of its current
public safety expenditures to provide police services on MSU Campus
1,522,236
136,386
East Lansing Population (non-MSU)

Additional Revenue per Capita of Providing BTA
The difference between per capita BTA revenue of East Lansing and
per capita BTA revenue of the average Michigan city
Incremental City Revenue from BTA Due to MSU
ANDERSON ECONOMIC GROUP
25,465
5.4
1 of 4
Appendix B: MSU Fiscal Impact Model: Cost, Benefits, and Net Impact (cont'd)
Direct Cost:
City Expenditures for Business Type Acitivities (BTA)
e.g. water, sewer and parking
City Expenditures for MSU Community for Business Type Activities
MSU community includes faculty, non-academic employees, and students
residing in East Lansing
Less:
City Expenditures for Substituted MSU Community for BTA
13,050,232
46,525
21,060
45.3%
5,907,319
0.40
8,424
2,362,927
City Expenditures for MSU Community for Business Type Activities After Substitution
City Expenditures for Public Safety and Public Works
e.g. police and fire
City Expenditures for MSU Community for Public Safety Services
Less:
City Expenditures for Substituted MSU Community for Public Safety and Public Works
City Expenditures from MSU Community for Public Safety and Public Works After Substitution
3,544,391
5,994,292
22,070,618
46,525
21,060
45.3%
9,990,487
0.40
8,424
3,996,195
Direct Cost - Services
9,538,683
Indirect Cost - Services
(1,112,727)
Total Direct and Indirect Cost
8,425,956
Net Impact - Services
Indirect Cost:
Additional Cost per Capita for BTA
The difference between per capita BTA expenditures of East Lansing and
per capita BTA expenditures of the average Michigan city
Incremental City Expenditure for BTA Due to MSU
Additional Cost per Capita of Providing Public Safety and Public Work
The difference between per capita public safety & works expenditures of East Lansing and
per capita public safety & works expenditures of the average Michigan city
Incremental City Expenditures for Public Services and Public Work Due to MSU
25,465
20.7
526,741
25,465
(64.4)
(1,639,468)
(429,924)
2 of 4
B. Direct and Indirect Impact of MSU on Property Tax Revenue
East Lansing Property Data (with MSU's Operations and Tax-Exempt Property):
Taxable Value (TV)
Residential TV
Commercial TV
Industrial TV
Agricultural TV
Developmental TV
Total Taxable Value
$ 509,294,350
$ 280,312,330
$
827,850
$
524,010
$
4,716,830
$ 795,675,370
Effective Millage Rate on TV

Total Property Tax Revenue (with MSU)
0.019
$
15,117,832
8,367,195
East Lansing Property Data (without MSU's Operations and with Redeveloped Property):
(based upon Delhi, Delta, and Meridian Townships)
Alternative
Estimate
Best Estimate
Taxable Value (TV)
Residential TV
Memo: Share of MSU Campus
Commercial TV
Memo: Share of MSU Campus
Industrial TV
Agricultural TV
Developmental TV
Total Taxable Value (including MSU campus)
Effective Millage Rate on TV
Total Property Tax Revenue (without MSU)
$275,184,885
$ 268,118,514
192,784,330
192,784,330
$ 91,613,635
$ 149,870,814
107,761,094
107,761,094
$ 13,266,296
$
645,560
$
395,941
$381,106,316
$ 21,347,877
$
645,560
$
395,941
$ 440,378,706
0.019
0.019
$
7,241,020
Alternative
Estimate
Best Estimate
Net Impact - Property Tax
7,876,812
6,750,637
3 of 4
C. Direct and Indirect Impact of MSU on State-Shared Revenue
Constitutional Portion
Statutory Portion
East Lansing's Total State-Shared Revenue
Substitution Effect
Total Share After Substitution Effect
$
$
$
3,251,485
2,883,392
6,134,877
$
$
883,090
783,118
46,525
21,060
45.3%
0.40
27.2%
Additional Constitutional State-Shared Revenue due to Larger Population Size with MSU
Additional Statutory State-Shared Revenue due to Larger Population Size with MSU
Net Impact Due to Larger Population Size with MSU
Including Lansing Township
Total Taxable Value with MSU
Total Taxable Value without MSU
MSU Share in Total Taxable Value
Change in Constitutional State-Shared Revenue Due to Higher Taxable Value with MSU
Loss of Statutory State-Shared Revenue Due to Higher Taxable Value with MSU
Net Impact Due to Higher Taxable Property Value per Capita with MSU
Not Including Lansing Township
Total Taxable Value with MSU
Total Taxable Value without MSU
MSU Share in Total Taxable Value
Change in Constitutional State-Shared Revenue Due to Higher Taxable Value with MSU
Loss of Statutory State-Shared Revenue Due to Higher Taxable Value with MSU
Net Impact Due to Higher Taxable Property Value per Capita with MSU
$ 795,675,370
$ 440,378,706
44.7%
$
$
(410,915)
$
(410,915)
(479,466)
$ 795,675,370
$ 381,106,316
52.1%
$
$
Best Estimate
Total Net Direct and Indirect Impact of MSU on State Shared Revenue
$
Note: City of East Lansing's state shared revenue would be 3.8 million, if MSU were not in East Lansing.
(This is higher than state shared revenue received by Delhi, Delta and Meridian Townships)
1,186,742
(479,466)
Alternative
Estimate
$
1,255,293
Alternative
Estimate
Best Estimate
TOTAL NET FISCAL IMPACT
1,666,208
8,633,630
7,576,005
4 of 4
VII.Appendix C: About AEG

This project was conducted under the direction of Patrick L. Anderson, Principal with Anderson Economic Group. The project team included Ilhan K. Geckil
and Caroline M. Sallee.
PATRICK L.
ANDERSON
Mr. Anderson founded the consulting firm of Anderson Economic Group in

1996 and serves as a principal in the company. In this role he has successfully
directed projects for state governments, cities, counties, nonprofit organizations,
and corporations in over half of the United States.
Prior to founding Anderson Economic Group, Mr. Anderson served as the chief
of staff of the Michigan Department of State, where he supervised more than
182 offices, 2,100 employees and annual tax collections in excess of $1.4 billion. He also served as a deputy director of the Michigan Department of Management and Budget, where he was involved in the largest state privatization
project in U.S. history and the landmark 1994 school finance reform constitutional amendment.
Prior to his involvement in state government, Mr. Anderson was an assistant
vice president of Alexander Hamilton Life Insurancewhere he shared responsibility for $5 billion in invested assetsan economist for Manufacturers
National Bank of Detroit, and a graduate fellow with the Central Intelligence
Agency in Washington, D.C.
Mr. Anderson has written over 95 articles published in periodicals such as The
Wall Street Journal, The Detroit News, The Detroit Free Press, American Outlook, Crains Detroit Business; and monographs published by the Mackinac
Center for Public Policy, The Economic Enterprise Foundation of Detroit, the
Ethan Allen Institute in Vermont, and the Heartland Institute of Chicago. His
book Business Economics and Finance was published by CRC Press in August
2004, and his paper on Pocketbook Issues and the Presidency was awarded
the Edmund Mennis Award for best contributed paper in 2004 by the National
Association for Business Economics.
He is a graduate of the University of Michigan, where he earned a masters
degree in public policy and a bachelors degree in political science. He has been
a member of the National Association for Business Economics since 1983.
ILHAN K. GECKIL
Mr. Geckil is an economist with Anderson Economic Group with a background

in applied economics, industrial organization, statistics, and public finance. Mr.
Geckil's work includes economic and financial analysis, business valuation and
damage analyses, strategy development, advanced statistical and econometric
analysis, and forecasting.
C-1
He has contributed to projects for clients in automotive and alcoholic beverage

industries, retailers, and local and state governments. Additionally, he provides
economic forecasts for Bloombergs monthly economic survey. Recent papers
by Mr. Geckil include A Game Theoretical Model of Corporate Average Fuel
Economy, on regulation in the automobile industry and Pocketbook Predictions of Presidential Elections, both published in Business Economics. The latter was awarded the Edmund A. Mennis Contributed Paper Award of the
National Association for Business Economics in 2004.
Prior to joining Anderson Economic Group, Mr. Geckil worked as an assistant
consultant for PDF Corporation in Istanbul, Turkey, and as a research assistant
at Michigan State University.
Mr. Geckil holds a Masters degree in Economics from the Eli Broad Graduate
School of Management at Michigan State University, and a Bachelors degree in
Economics from KOC University in Istanbul, Turkey. He is a member of the
National Association for Business Economics (NABE), and the Institute of
Business Appraisers (IBA).
CAROLINE M. SALLEE
Ms. Sallee is a senior analyst at Anderson Economic Group, working in the

finance and business valuation and economic and fiscal impact practice areas.
Ms. Sallees background is in applied economics and public finance.
Prior to joining Anderson Economic Group, Ms. Sallee worked for the U.S.
General Accounting Office as a member of the Education, Workforce and
Income Security team. She has also worked as an analyst for Hbitus, a market
research firm in Quito, Ecuador and as a legislative assistant for two U.S. Representatives.
Ms. Sallee holds a Masters degree in Public Policy from the University of
Michigan and a Bachelors degree in Economics and History from Augustana
College.
C-2

Net Fiscal Impact of Michigan State University On The City of East Lansing

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June 23, 2006

Net Fiscal Impact of

Anderson Economic Group, LLC

Anderson Economic Group, LLC 2006

Limitations of Analysis ............................................................ 4

II. Overview of Michigan State University and

MSU Today .............................................................................. 6

MSU Community ................................................................... 10

Tuition, Fees and Student Expenditures..................................11

Faculty, Academic Staff and Non-Academic Staff ................ 12

Faculty and Non-Faculty Earnings..........................................13

III. Overview of East Lansing ...................................14

Anderson Economic Group, LLC

City Finances ......................................................................... 16

City Expenditures ....................................................................18

IV. Fiscal Impact: Methodology and Findings..........19

Direct and Indirect Impact on Business-Type Activities ........23

V. Appendix A: MSU Fiscal Impact Model: Input

Anderson Economic Group, LLC

Anderson Economic Group, LLC

The City of East Lansing is home to a thriving community. With a population

City of East Lansing Services

Property Tax Revenue

Anderson Economic Group, LLC

This is the difference between $8.0 million in additional benefits (which

The table below summarizes the fiscal impact by category.

Fiscal Impacts of MSU on City of East Lansing

Net Benefits from City Services

Property Tax Revenue with MSU

Property Tax Revenue without MSU

Net State Shared Revenue Benefit Due to

Source: Anderson Economic Group

Anderson Economic Group, LLC

MSU, nor the efficiency or efficacy of any individual program.

We used a level-of-materiality threshold of $50,000, and did not apportion ben-

Anderson Economic Group, LLC

II.Overview of Michigan State University and

Anderson Economic Group, LLC

MSU Enrollment, 1950-2005

Total Fall Semester Enrollment Trend, MSU (19502005)

Generated Date: 22 Nov 2005

Base Data: Michigan State University

Anderson Economic Group, LLC

Revenue Summary, 2005

Student Tuition and Fees

Grants and Contracts

Other Operating Revenue

Investment and Other Revenue

Gifts, Capital Grants, and Additions to Endowment

Data Source: Michigan State University

Anderson Economic Group, LLC

Revenue Sources of MSU (%), 2005

Student Tuition & Fees

Analysis: Anderson Economic Group

Generated Date: 22Nov2005

Table 2, MSU Revenue Summary, 2005, on page 7, shows that most of

Anderson Economic Group, LLC

Instruction and Departmental Research

Student Services and Scholarships and Fellowships

Operation and Maintenance of Plants

Depreciation and Other Expenses

Data Source: Michigan State University

Operational Expenditures of MSU (%), 2005