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

Street light on Nicollet Mall
MinnPost photo by John Noltner
Officials are updating the city’s streetlighting fees.

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.

Comments (5)

  1. Submitted by James Hamilton on 10/29/2009 - 08:49 am.

    If it were up to me, we’d all pay property taxes, whether the property is owned by a church, a non-profit charitable organization, a private college or high school, a McDonald’s franchise or my grandmother. This exemption is contained in the state constitution. If I want to support an organization, I’d prefer to do so directly rather than subsidize someone’s religious or other activities. So, do me a favor. Don’t complain when you’re billed for a small portion of the public services you consume.

  2. Submitted by Bernice Vetsch on 10/29/2009 - 04:34 pm.

    Any new expense for a nonprofit is difficult, but the person to complain to (and about) is Timothy Pawlenty, our anti-tax, anti-government, anti-worker governor.

    Cities, counties and towns used to be able to cover expenses for essentials like streetlights, but after all the cuts to LGA (which is our property taxes put to work making sure every governmental unit statewide could maintain services) by the governor, they no longer can.

  3. Submitted by Richard Schulze on 10/29/2009 - 09:36 pm.

    Mr. Hamilton sums it up quite nicely.

  4. Submitted by Joe Musich on 10/29/2009 - 10:57 pm.

    If I have to pay for streetlights I’ll break them. Forcing tme to pay for something that is disguised pollution is outrageous. I had a light pole go down on the boulevard a few yeas ago. I did not want it reinstalled. To prevent that from happening I had to get everyone on the block to sign off. Only one did not so guess what. There are studies that show crime is lower in areas without lights. The light because we can philosophy needs to be examined, Over the years due to the light going down I’ve asked more than one councilmember here in Mpls what the expense is per light. I never got a straight answer. Before this tax is put upon anyone in my mind alot of questions need to be answered regarding it’s worth.

  5. Submitted by Rebecca Hoover on 11/03/2009 - 12:33 am.

    Mr. Hamilton, you have hit the nail on the head. I agree with you that nonprofits should have to pay taxes just as businesses and individuals must pay taxes. There may have been a day when nonprofits were Mother Teresa types of organizations surviving on a shoestring–but that day is long gone. Nonprofit heads frequently make more than the governor–much, much more–as much as five and ten times more. A nonprofit headed by a million dollar man/woman is hardly in need of tax breaks we might all be willing to extend to nonprofits if they were actually of the Mother Teresa type.

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