Nonprofits object to Minneapolis' streetlight fees, feeling 'death by a thousand cuts'

Minneapolis officials in the midst of updating the city's streetlight assessment fee — which is paid not only by businesses and residents but also by nonprofit organizations, including churches, cemeteries and the YMCA — are getting an earful from some of those who pay it.

The city hopes to generate about $155,000 next year from 1,600 "nongovernmental tax exempt parcels" in the city, with an average assessment of $96. Currently, the city says it's collected about $51,000 in assessments from nongovernmental tax-exempt properties.

Governmental buildings are not charged the fee.

Nonprofit organizations — which are not required to pay property taxes on their land and buildings — say they are increasingly being hit with fees and assessments to pay for elevator inspections, waste water, fire inspections and other local government functions.

Many speak at public hearing
And the new focus on the streetlight fee, while not a big expense in itself, has caused some groups to worry about the trend. Dozens attended a City Council committee meeting last week, speaking against the fee at a public hearing.

"The key for many of the folks who testified is the cumulative effect of these fees and assessments," said Peter Rodosovich, a YMCA executive. "Nonprofits have tax exemption for a reason — they provide service to the community that lessens the burden on government. We are partners with government and the community. But as these additional fees and assessments get assigned, if comes out of our donated dollars and resources." [Full testimony by Rodosovich here - PDF]

The pastor of a Minneapolis church showed "a stack of bills from the city, an inch high," said Rodosovich, a former state representative.

"For every fee added, we have to rearrange our resources," Rodosovich said. "It's clear that we're in this together, trying to make our community a better place. And we acknowledge that the city is struggling, but so are each of us.

"We're trying to show all the things we do in the community, at no cost to the city, and show that if the assessments and fees keep going higher, we won't be able to provide the same level of service. And if we don't, does the city pick up the slack? And what will be the impact on kids and families?"

Fees haven't been delineated clearly
Some of the nonprofits were particularly riled because they said the fees and assessments weren't broken out by the city, and they didn't even realize they were being charged for streetlights until they received notice of the public hearing.

With representatives of many organizations speaking against the proposal last week, the committee postponed action and asked its staff to review the testimony. The matter will be considered in committee again Nov. 5, before a scheduled review by the full council on Nov. 13.

Jeannie Fox, deputy policy director for the Minnesota Council of Nonprofits, said many agencies are feeling "death by a thousand cuts," from the proliferation of fees and assessments from local government.

"They understand the situation that cities and counties face, with the economic problems and state budget cuts, but they're very concerned about the effects," she said.

Under the radar — until now
A city staff report says that streetlight operations — electricity and bulb replacement — cost about $3 million a year. A 1973 state law allowed the city to begin assessing nongovernmental tax-exempt property for maintenance of streets and street lighting. Until now, though, it's been under the radar and apparently not easily identifiable.

In August the City Council authorized an update of the nongovernmental tax-exempt streetlight assessment, leading to the round of hearings.

Exempt under existing rules and in the updated proposal are seven government bodies with property in the city: the City of Minneapolis, Hennepin County, the University of Minnesota, Minneapolis Parks and Recreation Board, Metropolitan Council, state of Minnesota and the Minneapolis School District.

A new streetlight fee is under consideration in Rochester, says the Rochester Post-Bulletin. It would be a new expense for all property owners, including homeowners, businesses and nonprofits, as city officials look for ways to ease their budget problems. If approved, the fee would be added to utility bills starting in 2011, and cost about $2 per month for residents, $4-$11 to businesses and $4-$6 for churches.

Such assessments on nonprofits are becoming more common around the country, says Governing magazine, especially as user fees for residents and businesses become onerous and voters begin to suspect they're paying extra for things government should handle.

"The states and localities that are doing this can't not know they're on shaky political ground [with the proliferation of fees]. It's an indication of how bad things are economically" says Ivan Kenneally, who teaches political science at the Rochester [N.Y.] Institute of Technology.

That hasn't stopped state and local officials from looking for new places to impose fees. One of those places is charitable institutions — also known as 501(c)(3)s. They don't have to pay property or sales taxes, but they are liable for fees.

Joe Kimball writes about politics, St. Paul and other subjects. He can be reached at jkimball [at] minnpost [dot] com.