Saint Paul officials have been lobbying the Minnesota Legislature this session to approve a new 1 percent sales tax in the city to help pay for two dozen street repair and reconstruction projects and the building and maintenance of new and existing parks and recreation facilities.
If approved by state lawmakers, the 1 percent sales tax would likely be placed on the citywide ballot this November. If approved by a majority of city voters, the sales tax is expected to generate about $984 million in revenue over the 20 years the city is seeking for the tax increase.
Proposal would raise sales tax in Saint Paul to 8.8 cents for every dollar
The sales tax in Saint Paul is currently 7.8 cents on the dollar. That includes 6.8 cents from the state sales tax, a half cent from Ramsey County’s transit tax and a half cent from the city’s existing sales tax. Add in another penny and that moves Saint Paul’s sales tax to 8.8 percent—more than Minneapolis’ 8 percent sales tax and equal to Duluth’s sales tax.
Mayor Melvin Carter “decided that this year was the year we needed to try again” for the sales tax increase, said Saint Paul Public Works director Sean Kershaw. With the DFL in control of the House and Senate and a DFL governor, Carter believed the request could succeed in 2023, Kershaw added.
The Legislature is seeing a record number of requests for local option sales taxes this year. According to the League of Minnesota Cities, 39 requests have been submitted. Some of those are due to the failure of state lawmakers to pass an omnibus tax bill in 2022, the league noted in a recent publication. That left 19 cities and two counties without final action on their proposed sales tax projects or adjustments.
Tax would address growing backlog of street and parks maintenance
The bill for Saint Paul’s proposed sales tax has been introduced in both the House and Senate, but no hearings had been set as of mid-March. According to Kershaw and Saint Paul Parks and Recreation director Andy Rodriguez, the sales tax increase is needed to meet the city’s needs in their departments. Local Government Aid from the state has not kept up with inflation, they said, and the city does not want to fund the improvements with an increase in property taxes. They noted that the parks and public works facilities in Saint Paul have regional significance, and the costs of maintaining those facilities should be spread out regionally with a sales tax on all who spend money in the capital city.
Cities and counties that submit a local sales tax request must have a detailed list of potential projects, Kershaw and Rodriguez said. Public Works listed its street projects with several criteria in mind. These included streets with public safety issues, regional transitways, major regional freight corridors and bicycle facilities.
“We could have picked any arterial or collector street because almost all of them need work,” Kershaw said. Given the city’s resources, “Saint Paul’s arterial streets are now on a 124-year replacement cycle,” he said. “Residential streets are on a 289-year replacement cycle. The industry standard is a maximum 60 years. And this year we’re going to see the worst pothole season we’ve ever seen.”
Two dozen streets are singled out for improvement
Public Works outlined two dozen street projects in the city’s sales tax proposal, including Summit Avenue between Mississippi River Boulevard and Kellogg Boulevard, Grand Avenue from Cretin Avenue to Dale Street, Hamline Avenue from Pierce Butler Route to Randolph Avenue, Shepard Road from Highway 5 to Elway Street and from Eagle Parkway to Sibley Street, Cretin Avenue from I-94 to Ford Parkway, Pelham Boulevard from Franklin Avenue to Mississippi River Boulevard, Vandalia Street from I-94 to Capp Road, Cleveland Avenue from Mississippi River Boulevard to Ford Parkway, Territorial Road from Vandalia Street to Cromwell Avenue, Transfer Road from Prior Avenue to Ellis Avenue, Ellis Avenue from Transfer Road to Vandalia Street, Marshall Avenue from Lexington Parkway to Western Avenue, and Kellogg Boulevard from Wabasha to Sibley streets.
Some of these road projects could receive federal funding and be taken off of the potential sales tax list, Kershaw said. Given rising costs, it is not likely that all 24 projects would be funded. The estimated needs for these Public Works projects alone is at $750 million.
Parks and Rec has backlog of $40M in maintenance needs
For Parks and Recreation, “our biggest need is capital maintenance,” Rodriguez said. His department has 39 recreation center buildings with an average age of 40-plus years. The city only has $2.5 million in its capital maintenance budget each year, and Parks and Rec has a backlog of $40 million in maintenance needs, Rodriguez said. Parks and Rec receives more than 3,800 maintenance service requests each year, he said. Only 75 percent of those requests are completed. And as buildings continue to age, the costs increase, he added.
Other parks and recreation facilities cited in the sales tax request include the Mississippi River Learning Center and National Park Service headquarters at Crosby Farm Park and downtown’s Pedro Park, Lower Landing Park, Kellogg Mall Park, Mears Park, Harriet Island, Wacouta Commons and the proposed River Balcony. A new multi-purpose recreation center on the East Side and new bike and pedestrian connections for the Bruce Vento Trail and Wakan Tipi center are also cited along with a new regional athletic center that does not have a designated site.
— Jane McClure
Businesses say sales tax hike is not best way to meet city’s needs.
Reaction to the city of Saint Paul’s proposed sales tax increase has been muted so far. The Saint Paul Area and Midway chambers of commerce and the Saint Paul Building Owners and Managers Association have heard presentations on the proposal, but have not taken formal positions.
B Kyle, president and CEO of the Saint Paul Area Chamber (SPAC), said her members understand the need for infrastructure improvements, but their preference seems to be for increases in Local Government Aid (LGA) rather than the city sales tax.
SPAC and other business organizations recently conducted an informal survey of businesses on the sales tax. Of the more than 200 respondents, 73 percent were opposed to the increase, 16 percent were in support and 12 percent were undecided.
The survey also included an open-ended question: If not through a sales tax, how should the city raise the revenues needed for street and park improvements?
Two themes emerged in the responses to this question. One is that the expenditures that would be covered by the sales tax are core functions of municipal government that should be prioritized through the city budget. The second theme is that businesses are worn down by government actions that have negatively affected the city’s economic viability. These actions include the 14.7 percent property tax levy increase in 2023, the recent imposition of rent control and growing concerns about public safety.
“While the Chamber and our member businesses wholeheartedly agree that we need to repair our streets, we simply can’t look at this issue in a vacuum,” SPAC stated. “The proposed sales tax would tie Saint Paul (with Duluth) as having the highest local sales tax in the state, when we already have the second highest property tax rate in the state.”
In its statement, SPAC calls out the “historic opportunity” in 2023 for Minnesota to make major investments in LGA. There is a bill before the Legislature that would provide Saint Paul with an additional $16.5 million in LGA per year. SPAC also cites the state’s $17-plus billion surplus and federal infrastructure funds as other potential revenue sources.
“The city’s expectation for residents to approve additional taxation to repair streets exposes a failure to prioritize fundamental needs of Saint Paul,” SPAC stated. “While the current administration and City Council may not be to blame for the status of Saint Paul’s roads, shifting the burden to residents and businesses to determine whether or not the streets of Saint Paul are drivable abdicates their leadership role.”
— Jane McClure
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