Freedom Rally speakers announced
Center of the American Experiment announced today they will host a Freedom Rally at the Minnesota State Capitol on Tuesday, April 4, 2023, at 11:00 am. The rally theme is…
In January 2016, Center of the American Experiment filed an Amicus Brief supporting a legal challenge to the City of St. Paul’s right-of-way maintenance (ROW) fee on behalf of two Lowertown churches. These arguments carried the day later in the year when the Minnesota Supreme Court unanimously ruled the city’s ROW fee was in fact “a tax subject to constitutional restrictions on the taxing power.”
This forced St. Paul to change the way it collects approximately $26 million in revenue to fund road maintenance.
Instead of abiding by this clear ruling and fully transitioning the ROW assessment to a tax, St. Paul attempted a new legal maneuver to avoid compliance. This landed the city back in court and this week, Ramsey County district judge Robert Awsumb again ruled that the city’s charges for road maintenance are a tax, not a fee.
American Experiment got involved in this case because cities across Minnesota were looking to replicate the St. Paul approach. Duluth had just established a Street System Maintenance Utility in 2014, funded through a fee on all property owners’ utility bills.
There are both legal and policy problems with funding road maintenance through fees. Under the Minnesota constitution, activities that serve a public purpose must be funded through taxation and taxes must be uniform.
The St. Paul ROW fee clearly funded public purposes because everyone uses and benefits from a well-maintained road system. Also, the fee was far from uniform. Because the fee was based on the length of a property’s road frontage, properties with lower values that imposed less impact on the roads were charged much higher rights than downtown high-rise buildings. For instance, in the 2016 case, the city had assessed the First Baptist Church plaintiff a $15,706 fee compared to a $5,458 fee on the owners of the 25-story UBS Plaza.
As to the policy problem, fees are also far less accountable and transparent to the public. St. Paul’s ROW fee allowed Mayor Randy Kelly to keep a campaign promise to not raise taxes. Low taxes is great policy, but it’s terrible tax policy to keep taxes low by shifting revenue collections to multiple hard-to-track fees.
In response to the Minnesota Supreme Court’s 2016 ruling, St. Paul replaced the ROW maintenance program with a new Street Maintenance Services Program (SMSP). The SMSP narrowed the number of services for the program from 27 to four, but the program was still funded by a fee and carried a hefty price tag. The new program also shifted from billing for the estimated cost of future maintenance to the cost of maintenance already provided.
The new SMSP was really a legal shell game used to shift some language in the city ordinance to recharacterize what had been a tax program into a fee program, without ever changing the actual character of the program. The new SMSP still serves a public purpose just the same as the old ROW program.
Judge Awsumb easily saw through this shell game. As he summed up the City’s argument on their billing shift: “In substance, the argument is that the City is not raising revenue to cover the cost of street maintenance, but rather covering the cost of street maintenance by raising revenue.”
Obviously, that argument is nonsense. Therefore, Judge Awsumb held the SMSP fee is still a tax.
As result, unless the city appeals, they will need to find a different way to raise the millions of dollars they currently assess illegally. If they don’t and keep playing games, property owners could follow through on threats to file a class-action lawsuit to recover the fees illegally assessed against all property owners over the years.
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