St. Paul Mayor Melvin Carter is proposing a 15% boost to the city's property tax collections in 2023, but in return residents will get a break on street maintenance bills.

In his annual budget address Thursday morning at the Harriet Island Wigington Pavilion, Carter proposed a $782 million budget that he called a "nuts-and-bolts" fiscal plan, marking a $41 million increase from 2022.

"This budget centers on the basics of municipal government — improving public safety outcomes, repairing city streets and city-owned buildings and addressing permitting backlogs so that residents and businesses can efficiently and effectively reinvest in our community," the mayor said.

A court ruling in May left St. Paul with a $15 million budget hole after a judge ordered the city to stop assessing individual property owners for routine maintenance of streets abutting their property.

Half of the $26.9 million levy increase would go toward providing services that assessments previously covered — lighting, sweeping, seal coating and mill and overlay. The other half accounts for inflation and other added operating costs, Carter said.

"Same as every family and resident, the work of the city costs more every single year," he said in an interview Monday.

The levy — which would total $202.3 million for 2023 — would amount to a $231 property tax increase for the owner of a median-value home, which is $261,800, according to Ramsey County. The property tax levy is the amount of money the city collects in property taxes, not the amount that individual property owners pay.

Staffing and services

Carter's proposal includes the addition of 53 full-time city workers across departments, including six Fire Department medical cadets, two arson investigators, three Department of Safety and Inspections employees and two community outreach workers for the city's Office of Neighborhood Safety.

The mayor also announced that he wants to move existing money from St. Paul's Housing Trust Fund to create an Inheritance Fund, which would offer forgivable loans up to $100,000 to former residents of the Rondo neighborhood and their descendants who can prove they lost property during the construction of Interstate 94 in the 1950s and 1960s.

The loans could be used on house down payments, closing costs and possibly home repairs and would not have to be paid back if a resident remains in their home for 15 years. Recipients would need to have an income at or below 60% of the area median income to qualify, Carter said.

St. Paul will continue to tap into the $166 million it received from the federal American Rescue Plan Act, though city officials said they have a plan to phase those dollars out of the general fund by 2025. Next year, Carter is proposing the city spend $1.2 million of the pandemic aid to hire parks and recreation staff and another $3.3 million for public works.

Carter said he also wants to tackle $24 million in deferred maintenance to city facilities using existing capital improvement bonds.

The City Council can set a levy that's different from the mayor's proposal. Members are expected to vote on a maximum levy increase in September and approve the final budget in December.

Paying for streets

It wouldn't be the first time St. Paul residents see a large property tax hike due to shuffling of street maintenance funding. The city stopped assessing property owners for most services after a 2016 state Supreme Court ruling said the program was not a fee, as the city argued, but a tax.

Former Mayor Chris Coleman moved $20 million worth of street services to property tax bills in 2018. But the city continued to assess residents for a handful of costs, which officials argued they had special permission to charge for under state law — until the court ruled against them earlier this year.

The decision means tax-exempt properties such as churches, hospitals and universities will no longer have to pay for street services for which they were previously assessed. About 20% of St. Paul properties are tax-exempt, according to the city.

Carter's budget proposal includes a new mill and overlay program for residential streets that would cost $4 million annually. Property taxes would cover most of that work, though the city could charge abutting households for a small portion if it provides them a special benefit, such as a demonstrable property value increase. John McCarthy, Office of Financial Services director, said the details of the program are still being worked out.

The mayor emphasized that shifting street maintenance costs "neither reflects an increase in the amount of funds we have to spend next year, nor solves the significant street maintenance challenges we've inherited."

"My 2023 budget proposes a path moving us past the decadeslong issues we've been working to address, to benefit our city for generations to come," he said.