As winter ends St. Paul residents yet again experienced badly plowed streets and now miles of potholes that need not just patching but complete reconstruction. The City of St. Paul wants permission from the state and its voters to increase the existing sales tax of ½% to cover the costs of road maintenance.
While the city does need additional revenue to perform basic city services such as road maintenance, the sales tax increase is literally patching over a bigger problem for the city – how to increase its tax base.
The roots of the dilapidated streets has many causes.
One, for years road repair was at best only patching. The city stripped off the surface asphalt without reconstructing the base, the latter often is the original and worn-out brick or cobblestone. Such quick fixes are short term cheap, long term expensive.
Two, for years St. Paul has failed to prioritize basic city services in the budgeting and staffing allocation. This is especially true with streets.
But perhaps the most important reason is simple – the City of St. Paul is broke. It just does not have the money to fund road maintenance, at least under the way it currently operates. Thus the request for the increased sales tax. However, the proposed increase will not provide enough new funding to cover even the stated needs, no less sustain many other new and existing ones.
The solution to the city’s street and ultimately financial woes must lie in increasing its tax base. It cannot rely upon the state for more local government aid. Partisan disagreement and outstate legislators who do not feel an obligation to support the cities, especially when they see obvious mismanagement are reasons for this.
Sales tax increases are not an option. They are regressive upon the poor and especially in a city such as St. Paul which is not a major tourist center, they will fall more heavily upon residents who are already overtaxed.
Other user fees are not reliable and individuals can avoid them. For example, according to the Bike Coalition, 5% of the population are regular bike riders. If this amenity is paid from property taxes, 95% of the people who never use a bikeway will have to pay for it. This isn’t fair to most people. Automobile owners pay for license and registration fees, and gas tax. These funds are paid by automobile owners’ for the use, construction and maintenance of roads. Shouldn’t bike users pay fees to cover all the expenses for their particular use of bikeways? Bike riders have been able to shirk their responsibility to pay for an amenity few of us use.
Again, the solution is not raising taxes but expanding the overall tax base.
The root of the problem goes back to when Norm Coleman was mayor. He convinced the city to use tax increment financing (TIF) to fund development and St. Paul continues to rely on it to this day.
TIF operates by giving developers property and other tax breaks to developers for many years. In theory, the development is tax exempt but in practice is supposed to be captured by St. Paul in order to finance the tax break. It is sort of like supply-side economics for developers with the false belief that if we cut taxes for them everyone benefits.
The problem with TIF is that property taxes – which pay for city, school, and county services – are twofold. One, it takes away revenue to pay for the services for St. Paul, its schools, and the county. Two, overused as in St. Paul, it exempts more and more property from taxes, thereby failing to achieve its objective of promoting economic growth and an expansion of the tax base. St. Paul’s tax base, already challenged by the number of tax-exempted government and non-profit properties in the city, exacerbates its problem by giving developers TIF handouts that they do not need.
Since 1995, St. Paul has increasingly granted TIF to developers as an incentive to build in its city. This has been so abused to the point that without TIF expenses (debt service and reduced property valuations) St. Paul could more than cover all the needs of road repair and the Parks Department. The business community has always welcomed this subsidy, as well as most elected officials who see a benefit from new development, often before elections.
St. Paul has numbers approaching 60 TIF districts (not only just individual buildings). The legal requirement is that a TIF grant can be awarded to any development that will solve a situation of blight, and that the project would not proceed “but for” TIF. This has totally been ignored in St. Paul. Developers, when asked if they would develop without TIF, the answer of course has always been “No.” Property taxes for all these developments, for at least 25 year terms are granted back to developers. This results in a shifting of property taxes to other businesses and homeowners.
It doesn’t end there. Any developer interested in St. Paul, must compete with a myriad of competition from other TIF subsidized properties. Too often TIF is the easy answer. The theory is TIF will attract additional development that will provide new taxes. But new development in these districts also qualify for TIF and again do not increase any tax base. We have used up our most attractive commercial real estate for development that doesn’t generate taxes. Instead, it increases our tax burden these developments require for services.
Incentive to build new commercial projects in St. Paul, where there isn’t adequate demand, depletes overall commercial occupancy in the city. Rental rates are forced down. Property valuation on commercial property is determined from net operating income. When this is reduced, so is our tax base. This is the opposite result of what we were told TIF would do.
[image_caption]David Schultz[/image_caption]
So, in order to recover, we first need to stop the financial bleeding. This TIF addiction continues today. A sales tax increase does not solve the problem. A new strategy to expand the tax base is really what St. Paul needs to do.
John Mannillo is a commercial developer and Chair of St. Paul STRONG. David Schultz is a Hamline University Distinguished Professor of Political Science and a former housing and economic planner and director of planning and code enforcement.
I have to point out that, in this otherwise sensible column, the paragraph about taxes and bicycling is absurd. One major reason why US cities, St. Paul very much included, are struggling with financing is that cities subsidize a huge amount of public infrastructure for private automobiles. Streets are very expensive; the fewer miles of streets, the better for St. Paul’s bottom line. Every privately-owned downtown parking lot represents a huge opportunity cost for St. Paul, land that could be valuable that’s instead paying a property tax pittance for car storage. Heck, St. Paul even owns a bunch of downtown parking lots, which have become largely empty sunk costs. The Downtown TIF extension recently floated by the Deputy Mayor, as reported in yesterday’s Pioneer Press, is primarily to subsidize the expensive, falling-apart River Center parking ramp.
The more that a city like St. Paul can shift people out of cars and back onto the downtown sidewalks, the more we can boost transit and low-impact, space-efficient, low-cost bicycling, the better fiscal shape we’re in. The authors completely miss that point, which is a shame.
You need to look at what prevents people going from cars to public transit and/or bikes. For starters, there are some due to age, physical barriers, who do not bike or take transit. Add to it concerns of crime, long winters or hauling children around and that limits the numbers. The article makes some very good points to ponder, including that many of the developments, long term, do not bring in that expected revenue as outlined in the article.
Shift them to what? To a failed public transportation system?
“People in Minneapolis make 4 percent of their trips by bicycle.”
Taken directly from your bevoled vision zero safety data on city of MPlS website. Can’t imagine St. Paul is much different.
Ah, to behold the white savoir elite at their most hubristic. Please tell me again how and where I should live. I say good chap, a run for the office of king may suit you nicely.
Collectively, 4% may be correct. But for some residents, the number is high in the double digits. One claim in the article is that “Bike riders have been able to shirk their responsibility to pay for an amenity few of us use.” I find that offensive. I’m a mpls property owner, and make infrequent use of my car. Over about 15°, I’ll bike to the store rather than drive. Are my property taxes adjusted to reflect that minimal use of roads? Of course not. But the bozos that wrote this piece think I’m ‘shirking’ my obligations. It’s actually the heavier users of roads that are sticking it to the rest of us. The gas tax & user fees are insufficient to fund road maintenance. Therefore those who use them the most and/or with heavier vehicles are the actual free-riders here.
I’m also a mpls property tax payer. I also use my bike in drier and warmer months. Or, when I dont need to haul equipment or supplies for work. I fully support some new type of user based funding for bike infrastructure.
The deal those regular bike trail users are getting is unfair to 96% of people trying to navigate by their other preferred modes of transportation.
I only ever see into the River Centre parking structure when I take Exchange to Kellogg, and it always looks empty. How necessary, actually, is this facility? I assume it’s full when there’s an event at the Excel Center—but in terms of 24/7 use (or whatever metric is used for parking structures) does it pay its way?
And, if it’s successful and does pay its way, why does it need TIF?
I completely agree with the authors’ main point: St. Paul is addicted to TIF. Minneapolis has largely wised-up concerning this issue, but not St. Paul. In fact the problem began before Norm Coleman was mayor, it started to become serious when George Latimer ran the Port Authority. It’s a cumulative problem of long duration, and calling a halt to establishment of further unnecessary TIF projects will bring long-term alleviation. As to satisfying the immediate need for more revenue, there seems to be no painless remedy.
Bill, I think the authors singled out the costs of converting streets to accommodate bicycles which do have to come from the general fund. There’s no great reduction in linear miles of streets driven by motor vehicles; the conversion merely concentrates the motorized traffic onto fewer lanes, with the consequence of increased wear on those lanes. And in winter, far fewer individuals ride bicycles, while at the same time winter weather is the big pothole culprit. Further, it’s trucks that cause the greatest wear and tear on road surfaces, and we cannot have urban commerce based on bicycles and public transit.
Another lecture from Bill Lindeke. Just what the world needs.
The column is spot on. Bicyclists who use the lanes need to pay something (how that is decided or worked out is another conversation).
The remainder of the column concerns T.I.F., which is greatly overused. It might be an attractive incentive in some lower socio-economic circumstances, but when communities such as Edina and St.Louis Park hand out these T.I.F. incentives, they are being foolish. The property would eventually be developed without any incentive. Ridiculous.
Used to own a business in St Paul. Paid triple the property tax of similar size homes. (Sorry for that vent) The major problem is there are so many public (non paying property tax) structures in St Paul the balance get forwarded to others. If you really want a cash cow light rail is sucking the financing out a the infrastructure budget in the Saintly city. Millions in over runs, crime and drug use.
This article thoroughly makes the case that (1) TIF has been abused in St Paul and (2) the 1% sales tax is ill-advised and is the wrong way to increase the city’s income. Thank you for taking the time to write it. I hope City officials and voters are paying attention.
While TIF might be a big outlier in budget abuses, my secondary takeaway is that the City’s expenses need a full audit. Open Budget reveals a much larger than inflationary growth in spending, rising from $572.6M to $881.5M in ten years. Limited “American Rescue” funds (COVID money) can account for part of the jumps in 2021 and 2022, but the large increases in 2016, 2017 and 2019 defy an obvious explanation.
From https://information.stpaul.gov/pages/budget
Expense Budget:
2014 $572.6M
2015 $575.4M
2016 $614.4M (huge jump)
2017 $691.1M (huge jump)
2018 $701.4M
2019 $750.7M (huge jump)
2020 $714.6M (decrease)
2021 $710.3 M (small decrease)
2022 $811.2 M (HUGE jump–includes American Rescue funds)
2023 $881.5 M (HUGE jump–includes American Rescue funds)
For record (I just googled it), Melvin Carter took office on January 2nd, 2018 as the 46th mayor of Saint Paul, Minnesota. So this is not all on Mayor Carter’s watch, but he’s now holding the bag and therefore accountable.
I guess I’m hoping the Viewpoint authors will apply their writing and research skills to figuring out exactly where our budget dollars are going. In theory, the average taxpayer should be able to see where the money is going — see the link below with colorful charts — but I couldn’t make sense of it, can you?
https://information.stpaul.gov/apps/saint-paul-expense-budget-archive/explore
I also must add my support for the authors’ cited criticism of outsize bicycle infrastructure spending, as well as the comments by David Markle, Lisa Miller and others defending its use as an example. I’m a relative newcomer to Minnpost reporting, but in my short time here I’ve already noticed a pattern in the comments. They reveal a dangerous zealotry by some to promote capital B “Bicycle” above any and all other things, without practical limitations. Zealous support is ripe for budgetary abuse, and the Bike Brigade does seem zeal-bent on the most intrusive, most divisive and most expensive bicycle infrastructure possible: “Why spend $1/2 million on a bike facility when you can spend $12 million?” seems to be the attitude. We need to embrace a back-to-the-basics budget that invests in delivering essential City-level services like plowing, parks and libraries and holds the line on property and sales tax increases. The City needs boundaries: leave large societal pocket book items to the large society pocketbook (e.g. at the state and federal level). Let’s be reasonable about our very, real budget limitations at the city level . Let’s invest in local needs– fire, police, and maintaining the roadways. And, sure, along the way be sure to stripe some low-cost bike lanes in appropriate locations.
Will you please run for mayor or city council? This is one of the best comments I’ve seen here.
For all the arguing in the comments about bicycle infrastructure, this is the key part of the essay.
“Since 1995, St. Paul has increasingly granted TIF to developers as an incentive to build in its city. This has been so abused to the point that without TIF expenses (debt service and reduced property valuations) St. Paul could more than cover all the needs of road repair and the Parks Department.”
Supply side economics are a scam, period. However we resolve the problem, getting businesses to pay their share of the tax burden must be a big part of it.
Agree with Bill on the point that the bicycle paragraph has no business in this article. It is irrelevant to the argument.
For those who suggest bike riders should pay something, if they live in Saint Paul, they pay plenty for the streets. The streets are financed by our taxes generally, not solely user fees. And soon lower-income folks will pay still more to use the streets via the sales tax.
The article cites a stat about “regular” riders and then treats it as though it includes all bike riders. I don’t know whether I qualify as a regular rider or not, but I pay plenty of taxes for my cars and bikes to use roads that work. Bill is also right that we pay a ton directly and indirectly for cars to have below-cost parking on streets or parking lots.
The bigger issue in my mind isn’t just TIF as the authors argue effectively, but the fact that Saint Paul, like many cities, has very little accountability in politics. Most people don’t bother to vote on local issues and probably fewer could name their city council member right now. Without accountability, there is no reason to expect the city to do better.
As a bicyclist I feel the need to point out many like myself also own a car. We pay gas taxes and various fees like anyone else.
Ok great! That is your driving portion of transport covered. Now it’s time to pony up for the bike infrastructure you are also using.
Gas taxes do not pay for local roads. The only minor exception is the few stated aid roads that get some state funding. But the street you live on is not funded by gas taxes, or motor vehicle sales taxes, or the sales tax on auto parts. My property taxes pay for the local streets I drive on, as well as bike lanes and trails funded by my city and county.
For most people bicycle season is motorcycle season. We do not have Amsterdams climate. Let’s spend the money where it helps everyones quality of life.
So the answer is to broaden the tax base. Sounds good, but how exactly do you suggest we do that?
Yes, Saint Paul has dug itself into a deep hole with TIF abuse and we should stop digging. That doesn’t directly address the immediate, enormous problem.
Yes Saint Paul has dug itself into a deep hole by deferring maintenance and reconstruction of our streets. But I don’t see in this article any constructive suggestion for raising the money to do the work that has to be done.
Mayor Carter has put forth a responsible proposal to raise the necessary money. Everyone hates it, probably the mayor hates it too. But right now the sales tax increase is the only proposal out there. I hope Messrs. Mannillo and Schultz will let us know when they come up with an actual idea. Until then, I hope they will quit trying to distract us by carping about bike lanes.
Do what we’ve avoided doing for the past 20 years: rebuild the streets and assess benefitting property owners.