Some residents of St. Paul, distressed by affordable housing shortages, have expressed concern over the Ford site developer’s plans to allocate sites along the Mississippi River bluffs for high-end single-unit residences (“St. Paul planners reject single-family homes in Ford project,” March 9; “Ryan’s plan for Ford site moves forward with 6-1 vote by St. Paul council,” April 11).
But 10 percent of the 3,800 housing units proposed for the Ford site must be reserved for households at 80 percent or less of area median income, with another 10 percent for households at 30 percent or less of area median income. The city had approved a tax increment finance subsidy to include low-rent housing units within the overall plan.
But there is another aspect of plans for the bluff sites that aligns with both the developer’s financial outlook as well as the city’s fiscal agenda. In a given year, St. Paul property tax collections account for about 35 percent of the city’s general revenue. Much of the city’s real estate is owned by the state or by nonprofits (colleges, churches, etc.). Such properties pay no real estate taxes but still require services. Other city revenue comes from fees, fines, sales, etc., but the property tax share of the city’s budget is under constant pressure.
Minneapolis receives about 41 percent of the property taxes paid by the city’s residential and commercial-industrial property. The remainder goes to the county, school district and special districts (e.g., Metropolitan Council, Mosquito Control District, etc.).
Because Minnesota law limits how cities can raise revenue, they must plan for and protect certain land uses that generate more tax revenue than costs to provide city services to the properties involved. The difference is used to subsidize neighborhoods that require more services than they can afford to pay for.
Minneapolis and St. Paul are unusual among 19th-century northeastern American industrial cities in their comparative abundance of desirable residential neighborhoods inside the city limits. Those neighborhoods have attracted and retained middle- and upper-middle-class households that have more than enough financial wherewithal to relocate to the suburbs if they so chose. That’s what routinely happened in most of the cities of the Northeast, which are coping with serious fiscal headaches.
Moreover, cities like St. Paul and Minneapolis that have supported and retained prosperous neighborhoods have simultaneously retained commercial and office activity that serves those neighborhoods. When purchasing power leaves, nearby businesses fold or move.
In Minneapolis, there are hundreds of higher-end houses in the city’s Chain of Lakes district, along Minnehaha Parkway, near Lake Nokomis and Lake Hiawatha, and along West River Road, houses that have been well maintained and reinvested in over the years to make them even more attractive today than they were a century ago — with market values to match. The same is true in St. Paul, along East River Road, Summit Avenue, Crocus Hill and Linwood, Merriam Park, some of Ramsey Hill, Mac-Groveland and Highland Park.
Between 2010 and 2017 the population of Minneapolis grew by 10 percent and St. Paul’s grew by almost 8 percent. These cities must be doing something right.
I live in southwest Minneapolis, south of Lake Harriet. Near my house is a block bounded on the west by Thomas Avenue, on the north by W. Lake Harriet Parkway, on the east by Sheridan Avenue, and on the south by W. 49th St. That block contains 27 single-family houses with a combined current assessed (market) value of $26,763,500 and total taxes due in 2019 of $442,463 — an average of $16,875 per house.
In contrast, a somewhat typical block in a lower-income residential area of north Minneapolis, bounded by Logan Avenue, 16th Avenue N., Morgan Avenue N., and 15th Avenue N. contains 15 houses. One house, owned by the Minneapolis Housing Authority, is exempt from property tax. The 14 houses for which assessor’s data on market value and tax liabilities are available have a combined value of $1,875,600, and property taxes due in 2019 of $28,265 — or $2,019 per house.
Most of my neighbors have the means to move elsewhere if they choose. But they stay where they are and continue paying high taxes. The rest of the city benefits.
Conclusion: A few high-end houses along the river bluff at the western edge of the Ford site would probably yield a net positive outcome for the city of St. Paul.
John S. Adams is emeritus professor of geography, planning & public affairs, University of Minnesota.