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Continued: St. Paul wants to keep paying debt with sales tax funds

  • Article by: CHRIS HAVENS , Star Tribune
  • Last update: December 3, 2008 - 9:54 PM

St. Paul will ask the Legislature during the upcoming session to allow it to continue using a portion of the city's half-percent sales tax to pay off debt.

That would keep the city from raising property taxes, several St. Paul officials said.

The City Council approved an amendment to its legislative agenda Wednesday that would let the city use the money, known as Neighborhood STAR funds, to pay $3.5 million in recurring capital improvement debt in each of the next five years.

The goal, said city finance director Margaret Kelly, is to find a different source to cover the debt costs by the end of that time.

The extension is important, she said, because the city will likely see a $10 million to $23 million budget gap in 2010.

Revenue from that half-cent tax is divided so 40 percent goes to pay debt on the RiverCentre Convention Center. The remaining 60 percent is split between funding the neighborhood loan and grant program and the cultural program.

After St. Paul lost a chunk of state funding in 2003, it began to use the STAR money to cover debt. In 2005, the Legislature put a sunset date of 2009 on the practice.

If the city has to stop using the STAR money for the debt, either property taxes will rise or cuts will have to be made elsewhere, said Council President Kathy Lantry.

Council Member Lee Helgen was the lone dissenter to putting the item on the legislative agenda. He suggested a thorough review of the program.

Between 1995 and 2006, the program gave out $69 million to more than 450 projects, which in turn attracted $324 million in matching funds, said STAR board chairman Steve Gordon.

In 2008, about $2.8 million out of a total of $12 million went to the neighborhood loan and grant program.

For 2009, the breakdown for the total $8.6 million neighborhood program looks like this:

• $1.9 million will go toward neighborhood loan and grant programs.

• $3.5 million will go toward debt service on capital improvement bonds.

• $1.7 million goes toward debt on Invest St. Paul bonds.

• $1.5 million will go toward city capital expenses, such as leases for police and fire vehicles.

Gordon suggested that neighborhood STAR should get $4 million to $5 million before other city needs.

Also Wednesday, an amendment trying to get the state to authorize cities to impose a tax or fee on parking in ramps and non-compostible, disposable plastic bags failed on a 3-3 vote. The proposals, sponsored by Council Member Russ Stark, were meant to encourage people to be more environmentally friendly and provide "modest" revenue for other projects. New York City is considering charging for plastic bags, and San Francisco has banned non-biodegradeable bags.

Chris Havens • 651-298-1542

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