In$ight St. Paul's Guiding Principles for Fiscal Accountability and Sustainability

We are a group of St. Paul residents who love this city and want it to be the best institution for all its residents and businesses. We want to make sure that this city can provide the opportunity for all of its residents and businesses to be successful.

The city can only be successful if it is financially stable and sustainable over the long term. Yet over the past 30 years, city leaders have deferred maintenance of the city’s infrastructure including streets, sidewalks, parks and recreational facilities and libraries, while continuing to seek capital financing to build massive new facilities that we do not yet have the means to care for or operate.

The city relies primarily upon its property tax to support operations and maintenance of its facilities. Before adjusting for the state’s annual property tax refund, St. Paul’s effective property tax rate — 1.39% of estimated market value — is the highest for all of Minnesota’s 20 regions.

Property taxes are regressive and hurt mostly those on fixed incomes and those at lower income levels who can least afford property tax increases.

In 2023, St. Paul voters were persuaded to pass a ballot referendum to increase our city’s sales tax by one percent, with many supporting the tax under the assumption that it would be used solely to address the $100 million in deferred maintenance for existing streets, major roads, bridges and park and recreational facilities.

However, the legislation adopted in 2023 did not limit the use of the sales tax for deferred maintenance alone. Consequently, the city council has proposed using a significant portion of the sales tax revenues for several, multi-million dollar NEW facilities, including the Mississippi River Balcony, the Mississippi Learning Center, and a Regional Multi-Sport Athletic Complex.

The city has requested over $82 million in funding from the Minnesota Legislature for the River Balcony, Learning Center, and Athletic Complex along with $118 million for nine other capital bonding requests, even as we lack funding to maintain the ones we have. None of the sales tax funds will be used for residential street reconstruction or any street maintenance.

It is high time for greater oversight and long-range planning for operations and maintenance of our city’s infrastructure and public resources. This should be done before any municipal capital projects are awarded at the local level through the city’s capital improvement budget process, or at the legislative level, where St. Paul’s legislative delegation gets behind the funding of new infrastructure in St. Paul.

The city needs to hold the line on building new facilities, which will require property tax levy increases to staff, operate and maintain, until the backlog of deferred maintenance on existing facilities is completed. To ensure financial accountability and sustainability, we propose these guiding principles:

Prioritize the reconstruction of the city’s arterial streets, sidewalks, and maintenance of existing parks and recreational facilities, and other assets before any new capital project is developed.

The extensive backlog of maintenance needs for the city’s roads and recreation facilities was the driving reason for the approval of the new sales tax. Residents and businesses expect that the new tax revenue will be used for maintenance and replacement of existing roads and facilities, not new projects.

The City Council must identify the future costs for staffing, operations and maintenance that are expected to be paid for by property taxes for all capital funding requests to the Legislature and new facility additions to the Capital Improvement Budget.

We intend to seek city and state legislation to require that any new capital project funding requests to the Legislature are accompanied by a fiscal note that discloses all future tax increases that will be necessary for new projects before funds are approved. The requests for funding of new facilities from the legislature nearly always neglect the impact on property taxes to pay for the staff and on-going maintenance necessary for these new facilities.

Legislators, residents and businesses logically expect the mayor and city council members to identify the need for future increases in property taxes to support the operation and maintenance of these facilities. This same requirement should apply to any new projects proposed in the capital improvement budget.

Seek payment-in-lieu-of-taxes (PILOT) for tax-exempt properties.

Residents and businesses expect all property owners to pay their fair share of services provided by the city. Non-profit organizations exempt from property taxes still use city services, especially police, fire, and street maintenance and snow plowing. The city should engage these organizations to pay for their fair share of services provided by the city especially when a number of large organizations offered to continue paying for such services after the city lost its ability to levy an assessment for such services.

Reduce the city’s reliance on the use of Tax Increment Financing starting now. Avoid renewing any expiring TIF districts.

TIF is envisioned as a financing mechanism to support development in blighted areas that otherwise would not have occurred, “but for” this additional public funding. Future property taxes for up to 30 years (and beyond) are returned, up-front, to private developers to service project debt. It has also been used as a way to seed future development without adequate results. In St. Paul, not only has new development been subsidized, but excessive TIF use has generated unnecessary competition for other existing tax paying commercial properties. It is readily apparent that the city has over-used TIF so much that most of the tax burden is now unfairly placed on home owners, renters, and the remaining businesses. TIF has reduced revenue to Ramsey County and our School District and even competes with other existing TIF projects. It is imperative to reduce the city’s reliance on TIF and establish a higher standard for its use in the future.

In$ight St. Paul Report Nov 12, 2024