Leadership requires tough conversations and sometimes taking unpopular votes such as when the City Council voted 4-3 in early February to explore a possible 1% sales tax increase.
The money generated from this increase might be earmarked to pay for roads, housing, and pre-K programs. This is a tough sell for many, in great part because it comes on the heels of property tax levy increases of 5.85% in 2020, 10.5% in 2019, 23.9% in 2018 and 8.6% in 2017. These increases have most severely impacted our struggling neighborhoods. Nevertheless, the majority of the Council should be applauded for starting a much-needed conversation about exploring diverse funding sources.
In August 2019, St. Paul Public Works released a 47-page report regarding the condition of our streets. The report found that the $22 million the City currently spends each year on streets would need to more than double to nearly $50 million to move beyond status quo.
Additionally, we have a housing crisis. In 2018, the Met Council issued a forecast that St. Paul needs approximately 15,000 more housing units by 2030 and, notably, much of that needs to be “affordable” housing. Per the federal government, “affordable” housing is defined as housing costs not exceeding 30% of a person’s gross income. Clearly, we lack housing at all affordability levels. Our residential rental market only has a 2-3% vacancy rate and rental rates continue to rise.
And lastly, we have a failing downtown. Recent reports of crime near light rail stations, in the skyways, and on the streets have made this an undesirable location for many. We have a nagging amount of vacant office space, including entire buildings. The St. Paul Chamber of Commerce recently announced partnerships with East Metro municipalities due to dwindling membership in downtown. On top of all that, there’s the possibility of losing St. Joseph’s Hospital. Contrary to what has been said by some, downtown St. Paul is not on the verge of a renaissance, it is on the verge of falling off the cliff.
This begs the question of how we got ourselves into such a predicament to begin with. Why do we need to explore a sales tax increase? As the old saying goes, “Those who do not learn from history are doomed to repeat it.” That certainly seems to fit St. Paul.
Firstly potholes don’t materialize out of thin air. They are a product of (self-admitted) deferred maintenance. Even with constant maintenance, roads only last about 60 years. At some point, we need to start planning for rebuilding roads, in addition to actually doing required maintenance.
Secondly, the City needs to stop overusing Tax Increment Financing (TIF) subsidies for development. TIF financing is supposed to be a mechanism to attract growth in areas developers would otherwise pass over, by eliminating property taxes for an extended period of time. The problem though, is that the City has hurt our tax base by forcing development through heavy subsidies when there wasn’t a demand for the new development. As a result, this practice stole users from existing competitive buildings and discouraged new non-subsidized development. As last reported, the City is servicing former TIF debt obligations of $33 million dollars or 10% of Saint Paul’s tax capacity. Imagine what could have been done with that money.
A glaring example is the Lawson Commons building. During former Mayor Norm Coleman’s administration, the $100 million dollar project was funded with general obligation (GO) bonds. The project ran over budget by 10%. The City hired a contract developer to oversee the development of this taxpayer-funded project. The problem was that the developer was given the option to purchase the property after one year from its completion for a fixed, pre-determined price at a heavy discount. As even a novice would have guessed, the developer exercised the option after running over budget and purchased the building. About four years later, the developer sold the tower for a $35 million profit. Those profits were earned on the backs of hard-working taxpayers of St. Paul.
Saint Paul has also had its share of expensive political decisions like the Black Bear Crossing settlement for $800,000. What do we have to show for that?
In the end, while it’s true that we are a city of wonderfully unique and differing neighborhoods, we have much work ahead of us because of our aging infrastructure. To move forward, we need leadership that understands the needs of the future, but that also has a memory of the past. It’s not easy to talk about more taxes but diversifying our funding sources is the right conversation after understanding where we are and why we are here. To move forward, we need leadership that understands the needs of the future, but that also has a memory of the past.