A city of St. Paul plan to fill a $30 million budget hole is a sensible way to recoup the funds in a balanced, fair way. Mayor Chris Coleman’s administration is proposing that about $20 million be collected through regular property taxes, with the remaining $10 million still financed through separate fees.
Under the right-of-way assessment program, St. Paul property owners paid fees (in addition to regular property taxes) for street maintenance based on their street frontage. The payment method was adopted in 2003 to keep property taxes low and to collect payments from tax-exempt properties such as hospitals, colleges and other nonprofits.
However, the Minnesota Supreme Court ruled last year that the assessment program was a tax and not a fee, as the city argued. St. Paul collected more than $30 million annually from the right-of-way program, so the court’s decision meant that the city had to find another way to finance those services.
Coleman’s office is proposing keeping some assessments because officials believe charging fees for some services is legally defensible. Under the new Street Maintenance Service Program, property owners would continue to receive a bill for street lighting, street sweeping and street repair programs such as sealcoating, which is only done every eight years. Taxpayers would receive those bills only when those services were performed.
There is precedent for such fees: City property owners have always received separate storm sewer charges. And home and business owners have historically received invoices for major street work such as new sidewalks, curbs and streetlights.
The Coleman plan calls for services including snowplowing, pothole patching, tree maintenance and traffic signs to be supported through regular property taxes. With the new payment structure, some lower-value homes would pay less in 2018, but the owner of a $161,200 home would pay nearly 3 percent more in taxes ($20); a $265,000 home would receive a 7.6 percent hike ($102) and the owner of an $800,000 property would pay 15.2 percent more ($640). Those increases would be even higher if the entire $30 million were shifted to the property tax bill.
Some City Council members and taxpayers would like to transfer all of the service costs to the property tax rolls, arguing that it would be more direct and less complicated than sending out a series of bills. But dropping assessments altogether could mean that the city’s tax-exempt properties might not pay anything for the services they use. Under the right-of-way assessments, those nonprofits paid about $4.6 million annually to the city. With the new payment method, that amount would drop to $2.5 million. But at least those organizations would have to contribute something to the city pot for things such as police, fire and some street maintenance.
Meanwhile, a Citizens League committee is studying whether nonprofits could pay more under a voluntary payment system. The organization expects to make recommendations to the city soon.
Coleman recently completed a series of public meetings to explain the plan, and City Council members will discuss it as part of budget talks this fall. The council should adopt it. The sensible proposal would spread out the tax increase burden, continue to collect at least some payments from nonprofits and keep the door open for possible voluntary payments.