Every fall, just after receiving the final yearly tax notice, St. Paul property owners get an additional bill for city services. Called a right-of-way assessment (ROW), the fee is based on street footage per property and is used for services such as snowplowing, tree trimming, lighting and street sweeping.
But a recent Minnesota Supreme Court decision called ROW a tax — not a fee — and questioned the way funds are collected. In addition to St. Paul, the ruling could affect other cities statewide.
The Supreme Court said there are limits, under state taxing authority rules, on the methods cities can use to collect taxes and fees. As a result, St. Paul may have to come up with a different way to maintain the $30 million currently raised through ROW. That could be a positive step, because it would result in greater transparency and simplicity in tax collections.
The court’s opinion also draws attention to whether tax-exempt properties should be required to help pay for city services. In our view, that’s not up for debate. Justices weighed in on the subject because two downtown St. Paul churches challenged their ROW bills in 2011, arguing that their charges were unfair because similarly situated churches in neighborhoods outside of downtown paid considerably less. Neighborhood and downtown assessments differ, city officials say, because downtown churches, businesses and other properties receive more services. Downtown has more lighting, for example, and streets are cleaned twice a week instead of twice a year.
But in the ruling, Justice David Lillehaug wrote that ROW charges are taxes aimed at benefiting the public as a whole, not fees issued in exchange for special benefits for certain properties. The high court sent the case back to Ramsey County District Court to work out the details, and the lower court could issue an opinion before the 2016 assessments are mailed out early next month.
The high court did not prohibit ROW assessments, so city officials say they will keep collecting the fees even if they are required to reconfigure how they do it. St. Paul City Attorney Samuel Clark said the city would “evaluate’’ ROW. “The court did not invalidate our program,’’ Clark said. ‘‘It’s not about whether we can collect, but what mechanism we use to do it.’’
Still, the ruling could open the door to similar challenges from other St. Paul property owners and become an issue in other cities.
About one-third of the properties in St. Paul — including government buildings, churches, nonprofits, hospitals, schools, colleges and universities — pay no property taxes. When the ROW fees were first imposed in 2002, officials argued that it would help spread the cost among all properties that benefit from city services.
Some cities accomplish that through voluntary payments instead of taxes, in which tax-exempt entities agree to pay the city some fee for service. Others include fees on water, utility and cable bills.
The court ruling presses St. Paul — and other Minnesota cities — to re-evaluate tax and assessment practices. But there should be no question that all property owners have a responsibility to help pay for the essential city services they use.