Post by Marie Ellis, Director of Public Affairs and Legal Counsel
On Tuesday Mayor Coleman gave his 12th and final budget address as Mayor of the City of Saint Paul. In it, he highlighted many items that we at the Chamber find favorable, including:
One item remains a significant concern. As you may recall, last summer the Supreme Court ruled that the City’s Right of Way (ROW) assessment fee was not a fee but rather a tax, meaning that it could not be assessed to any properties. The bottom line is that when payment for the services included in the ROW fee moved from being a fee to a tax due to the Court’s ruling, the City lost the revenue it had assessed through the ROW fee on tax-exempt properties. In order for the City to continue providing the same level of services, it needs to restructure the $32.5 million that would have been revenue from the ROW fee in 2018.
The Mayor has proposed two ways of filling this budget gap: First, a new Street Maintenance Program, which will include five services that can be assessed as a fee (and therefore assessed on all properties): street sweeping, street lighting, seal coating, mill and overlay, and sidewalks.
These five services that can be assessed as a fee through the Street Maintenance Program will fill approximately one-third of the revenue lost by eliminating the ROW fee. To cover the other two-thirds the Mayor proposed a growth in the property tax levy of 19%. This revenue will fill the $21.1 million needed for services like snow plowing, tree trimming, and pothole patching. He has also proposed an additional 4.9% increase to cover inflation and service level increases. This makes for a total 23.9% increase to the property tax levy.
At first glance this seems like a massive increase in property tax costs for commercial and residential properties. However, these properties will see a significant reduction in their fees cost since the ROW fee was eliminated and the Street Maintenance Program fee will be much smaller. The amount that a property pays for these services, previously through the ROW program and now through the SMP and property tax increase, will vary greatly from property to property.
This spreadsheet shows the estimated change to City taxes and street maintenance under the Mayor’s proposal for an example property -- US Bank Place downtown. As you can see in 2017 this property, with a market value of $21,010,000, would have paid $125,173 in taxes to the City and $23,725 in a Right of Way fee*, for a total payment of $148,898 to the City.
In 2018 the same property has an estimated market value of $23,111,000 and under the Mayor’s proposal will pay nothing in ROW fees, since that program would be eliminated. Under the proposed Street Maintenance Program, the property’s fees to the City would be $3,862. The same property’s tax to the City under the proposal would be $162,431. (Keep in mind this is the amount of taxes that is collected for the City – it does not include the amount collected by the county or other entities). The property’s total payment to the City would be $166,293. This is an increase of $17,395 over the 2017 amount, an increase of 12%.
We understand that the City faces a tremendous challenge. The challenge for the business community is that the cost is shifting from a fee to a progressive tax, and will undoubtedly be an inordinate burden on our commercial tax base, which provides and supports jobs in the City.
It is hard to hear about a budget that stands in the way of job growth and retention at a time when we need to be particularly focused on these important initiatives in the City. In addition, innovative development in this city happens through public-private partnerships. Such a shocking tax increase for our largest building owners can have unintended consequences of reduced investments elsewhere.
The only worse outcome would be placing 100% of the lost ROW fee revenue onto property taxes, and we urge the City Council to halt any thought of doing so.
If you’re interested in City fees for a typical residential household, see this document.
*Because the City had budgeted for revenue from the ROW assessment in 2017 and then was not able to collect it in that way because of the court decision, the City used $19 million from the general fund to fill the gap in 2017. Therefore, properties paid much less for their city fees in 2017 than in previous years.
Our new President/CEO, B Kyle, has officially started as of Tuesday, August 1! To help you get to know a little bit about B and her thoughts about current issues and the future of the East Metro we did a Q & A session:
Share a story from your time in Germany
B Kyle: One of my favorite trips was to Amsterdam. Did you know that over 1/3 of that country is actually below sea level? Hence the wooden shoes.... Yes, we saw the Van Gogh Museum and the Rijksmuseum.... But my favorite tour was the Heineken Brewery (what can I say...). We got a fabulous tour and, of course, we spent a great deal of time in the brewhouse sampling. Gotta love the "Red Star" version of the beer! Still my favorite, next to Summit EPA, even today.
How are you planning to approach the $15 minimum wage discussions in Saint Paul?
Very carefully. What we know is the City of Saint Paul and her private partners, the Chamber included, care deeply about ensuring its citizens earn a livable wage. We also know that businesses, if for no other reason than economic imperative, need to pay their workers a competitive wage. What we don't know is the best policy approach - if there is one - to dictate such certainty.
In Seattle, to be sure, the $15 minimum wage mandate already is creating challenges for employers and workers alike. Negative outcomes like these tell me we have more work to do here, thoughtfully considering the unintended consequences of such a policy.
Where do you see Saint Paul in five years?
I love this city. And I love being a part of its future. As I see it, Saint Paul is working to become an equitable innovation economy. A mouthful, to be sure, and yet true. We are striving towards innovation in how we think about business, how we partner on development. And we place the very highest value on executing such innovation under the umbrella of equity. I'm telling you, exciting things are happening - new people are moving here, and new money is being invested.
In the words of the President of the College of St Benedict, Dr. Mary Hinton (a new friend from my alma mater), we are "working towards a colorful and just tomorrow." That's what Saint Paul will look more like in five years.
What would people be surprised to know about you?
Back in the day, I was a competitive ballroom dancer. International Latin... a long time ago, so don't ask me to mambo.
We hope you will be able to attend one of our upcoming events to meet B and perhaps share your stories and hopes about the Saint Paul and East Metro with her!