Fiscal watchdog In$ight St. Paul offers some fixes for city’s budget crisis

The battle over St. Paul’s budget is coming to a climax.

KSTP reports:

Nearly 200 people filled St. Paul City Council chambers on Monday night to express concern and some support for Mayor Melvin Carter’s proposed 7.9% property tax increase as part of his $855 million budget proposal for 2025.

One resident told city council members that he feels like he’s being taxed out of his home.

“You’ve raised my taxes by 16% — to $11,324. That is insane,” said the unnamed resident.

Kare 11 reports:

Many of them, like Jimmy Sande, came to talk about Mayor Melvin Carter’s plan for property tax hikes, which would cost the median homeowner more than $100 per year.

“Just like everybody else, I got the bill and just about fell over,” Sande said. “It was a tough pill to swallow.”

Some city councilors have proposed roughly $6 million in cuts to the 2025 budget to keep the property tax increase closer to 5%. “In response,” Kare 11 reports:

Mayor Carter has argued that these cuts could put essential city services at risk. According to a city analysis shared by Carter’s office, the proposed reductions could result in the loss of 16 officers from the authorized strength of the Saint Paul Police Department. 

Additionally, the analysis found that libraries could face shortened hours and that recreation centers would also “face drastic cuts, with full closures or program suspensions becoming inevitable. Impacts could include eliminating weekend access, shutting down on specific weekdays, or reducing daily hours by 2–3 at every center.”

This is absurd. As we noted last week, the Pioneer Press recently reported:

Carter has sought to fund a variety of social and environmental initiatives, such as free swim classes for kids, library-based social workers and homebuyer assistance, and to hire a coordinator for climate change-related programs, a position that has previously been funded through grants…

“In August,” I wrote:

…we offered some suggestions: Carter’s $7.4 million package of spending on “affordable housing;” expanding St. Paul’s Inheritance Fund, which provides forgivable loans from that pool to descendants of Rondo neighborhood residents, to families displaced by the demolition of the West Side Flats in the 1960s; $1 million for the city’s homeowner rehab loan program; $1 million to waive fees for a pair of office-to-residential conversions; and $1.4 million to address the impacts of climate change. These should all go.

Others have noticed similar problems and offered potential solutions. The Pioneer Press carries an op-ed by Carl Michaud and Gary Todd of In$ight St. Paul, “a group of St. Paul residents who are very concerned about the financial health of the city.” They note that:

We were alerted to the dire financial condition of the city when the mayor sought the 1 percent increase in the sales tax to cover over $100 million in deferred maintenance for park and recreational facilities and rehabilitation of several major city arteries. Frankly, we were astounded to learn that, over time, our city leaders had let our major city assets fall into such disrepair ultimately costing all of us much more money than it would if these assets had been taken care of properly. Many of us voted for the sales tax increase, but were left wondering how we got into this position.

What made matters even more incomprehensible was that city leaders recently requested more than $100 million in bonding from the State Legislature to build even more facilities knowing full well that they couldn’t maintain and operate what we already owned. This doesn’t make any financial sense, let alone show responsible stewardship of city facilities.

In an article for the Minnesota Reformer, Todd and Jane Prince, also of In$ight St. Paul, offer as concerns:

Growth of the city’s workforce. St. Paul’s full-time equivalent staffrose nearly 10% to 3,209 as planned for 2025, from 2,924 in 2016. Yet among the state’s five largest cities, only St. Paul’s population declined since 2020. five largest cities. + Diverting revenue from needed upkeep of already built infrastructure to shiny new objects.  The city’s Parks and Recreation Department is proposing huge new facilities that will require more city staffing and services, while failing to prioritize the $100 million in deferred maintenance of its existing facilities.  Meanwhile, the new facilities will carry their own maintenance and service costs that are currently unaccounted for. 

Tax-exempt property. The city’s property tax revenues have long been limited by its unusually large amount of tax-exempt properties, e.g. state government and college buildings. Currently, 18.7% of its more than $43 billion value of all property in the city is exempt vs. 11.3% in suburban Ramsey County. We urge St. Paul officials to revisit the Citizens League’s comprehensive study, commissioned by the city in 2017. This analysis cites successful efforts of other cities to seek payments in lieu of taxes from the owners of tax-exempt property such as universities and hospitals.

Tax increment financing. This is a method used to attract economic development by estimating and tapping future property tax revenue generated by new projects to pay for the current cost of these projects. St. Paul is the state’s biggest TIF user. The city’s leaders should be more transparent in explaining and disclosing data about these projects before doing more of them.

These are all real problems and their proposed solutions, partial as they may be, seem sensible.

I concluded last week by noting that:

From 2019 to 2023, St. Paul’s city budget grew by 30.1% while the Consumer Price Index increased by 19.2%. While St. Paulites might be struggling with inflation, their government isn’t. 

If Mayor Carter is telling the truth and, after years of inflation-busting tax hikes the city government will be unable to continue functioning without a further massive tax hike, it is a damming comment on his management of the city.