A sore spot in a lot of Minnesota municipal budgets — how to cover the mounting cost of new and/or improved streets — is due to become more painful if a Minnesota Court of Appeals ruling issued this week stands. And that pain looks likely to be passed along to property taxpayers unless the Legislature provides relief.
Those are the implications of Monday’s ruling invalidating the “major roadway assessment” that the city of Woodbury has long charged private developers of new housing subdivisions. Such assessments are not authorized by state statutes, Judge Diane Bratvold wrote for a three-judge appellate panel.
Woodbury is not alone in asking developers to bear some or all of the cost of the public infrastructure that new projects require. Though the east-metro suburb was the one unlucky enough to be sued by New Brighton-based developer Martin Harstad, who balked at the city’s attempt to collect nearly $1.4 million for a 183-home development, a number of other growing cities around the state will be obliged to end that practice unless Woodbury opts to take the lawsuit to the Minnesota Supreme Court and its seven justices read state statutes differently. The Woodbury City Council has not yet decided whether to appeal.
The Woodbury case provides fresh reason for cities to ask the Legislature for help in paying for streets. That plea won’t be new. It’s been heard at the Capitol with growing intensity in recent years, for a number of reasons.
The state’s dedicated transportation funds, supplied by the gas tax, license tab fees and sales taxes on vehicles, aren’t growing apace with inflation, largely because of lagging gas tax receipts. What’s more, the constitutionally determined municipal slice of those funds can be used only in cities with populations greater than 5,000 and for no more than 20 percent of their streets. Smaller cities have no permanent claim on those funds, though the 2017 Legislature agreed to send them a paltry $8 million per year in 2018-19.
Further, state aid to cities never fully rebounded from the Great Recession — years when many cities coped with state aid cuts by putting off street improvements. Several cities, St. Paul among them, opted to impose a right-of-way assessment on all property owners. That assessment as applied to tax-exempt nonprofits was invalidated by the Minnesota Supreme Court last year. Another funding mechanism, franchise fees charged to the utilities that share street right-of-way and that are passed on to utility customers, has come under increasing criticism at the Legislature.
The resulting squeeze on street funding spurred the League of Minnesota Cities to ask the 2017 Legislature for a new funding stream — a $10 surcharge on license tab fees and motor vehicle title transfers, generating $57 million per year. More than 200 city councils adopted a resolution calling for a new source of dedicated, dependable funds for streets.
Their request was spurned by the GOP-controlled Legislature. It deserves a warmer reception in 2018 in light of the trouble the Woodbury case could spell for street budgets in growing suburbs. An election year would be a fine time for the Legislature to renew its half-century-old commitment to helping all of the state’s cities provide basic municipal services at a property-tax price that does not tax homeowners out of their homes.