St. Paul develops plan to pay for street maintenance in an unusual 'pinch year'

St. Paul city leaders are ironing out the details of a plan to fill what could have been a $32 million budget hole this year.

City Council members and staff Wednesday dove into the financial weeds of how to pay for 2017 street maintenance after legal challenges forced them to rethink funding. The debate will continue at council meetings over the next month.

The plan city staff and officials have come up with for 2017 could differ from how the city funds street maintenance in 2018 and beyond.

"It's a pinch year," City Council Member Rebecca Noecker said. "We're in a very unusual situation that we won't be in again."

That unusual situation is the result of the city's process of paying for street maintenance with right-of-way assessments, which it charges to nearly all property owners. The city began relying more on the assessments in the early 2000s and has been using them to pay for services from snow removal to street sweeping to litter pick up. The assessments are based on street frontage and what type of street the property abuts.

The Minnesota Supreme Court ruled last year that the charges were taxes, not fees as the city argued. Since then, city staff members have come up with a plan to use a mix of property taxes and some assessments to pay for street maintenance in 2017.

The assessments that remain are legally defensible under state law, City Attorney Sammy Clark has said.

The city will pull from its general fund to pay for other street maintenance, like pothole patching and snow removal. Since the city cannot raise taxes to cover those costs this year, it is not adding new services it had planned and is drawing from fund balances to fill the gap. It is also putting some bridge maintenance and work to fight emerald ash borer on hold.

A public hearing on the new street maintenance policy and amendment to this year's budget is scheduled for April 5. Corner property subsidies — a remaining point of contention — will likely be debated then. Assessment discussions will not end there.

City Council Member Jane Prince said the city will create a commission of business and community leaders to look into street maintenance funding in the future. At an assessment discussion last month, a couple City Council members suggested moving away from the service charges entirely and relying on property taxes.

Officials will hash out how to pay for 2018 street maintenance throughout the year and during budget talks this fall.