A tax by any other name

A landmark legal victory, aided by American Experiment, forces St. Paul mayor to come clean about fees.

St. Paul Mayor Chris Coleman proposed a budget that dramatically reduces road maintenance fees and raises property taxes by an equally dramatic 23.9 percent. The fee reduction and property tax increase are largely offsetting.

The city is making this big revenue shift because St. Paul recently lost a legal challenge by two downtown St. Paul churches. In that landmark case, the Minnesota Supreme Court ruled the road maintenance fee was in fact a tax and, as a tax, needed to follow constitutional requirements on taxation.

American Experiment helped win that case by filing an amicus brief on behalf of the churches. We got involved because St. Paul wasn’t the only city resorting to fees to pay for public services traditionally funded through property taxes.

For us, the main problem with cities resorting to fees is that it undermines budget transparency and accountability to taxpayers. Fees divide revenue into multiple, harder-to-track sources, which makes it harder for resident taxpayers to compare what they actually pay for public services against what residents in other cities pay. Making it harder to compare budgets makes it harder for residents to hold city officials accountable.

In St. Paul, that was by design. A city report admitted that the changes in the road maintenance fee “were all a result of policy-maker wishes to control the growth of property taxes.”

Overall, St. Paul property owners won’t be paying any more in combined taxes and fees in 2018. When property taxes go up by 23.9 percent, St. Paul will just be going back to funding traditional public services the same way as other cities. In doing so, St. Paul property owners will find it far easier to assess whether St. Paul taxes are reasonable compared to neighboring cities. That means future city officials will find it much harder to hide inefficient and expensive city programs from public view.

Though property owners as a whole won’t be paying more, the shift from fees to taxes will impact every property owner differently. Some will pay more and some will pay less.

Mayor Coleman deserves taking a good amount of heat for this major disruption to the budget. For some reason, the city refused to negotiate with the churches and, instead, chose to defend the indefensible. How indefensible? Some churches were paying over $15,000 for the fee when a 25-story office building was paying closer to $5,000.

However, the decision to ramp up the road maintenance fee goes back to Mayor Randy Kelly who implemented this policy back in 2003 to make good on his campaign promises to not raise taxes.