Falcon Heights wants to hit State Fair, U campus with franchise fee

Faced with a huge jump in the cost of law enforcement in the wake of the 2016 fatal police shooting of Philando Castile, Falcon Heights is preparing to impose a form of taxation on the Minnesota State Fair and the University of Minnesota's St. Paul campus — large tax-exempt entities within its borders.

"Everyone thinks we get a penny off every Pronto Pup. That's just not the case," said Falcon Heights Mayor Peter Lindstrom.

Falcon Heights dropped its $670,000 annual law enforcement contract with St. Anthony when it was unable to reach an agreement in the wake of the Castile shooting.

The new contract with the Ramsey County Sheriff's Office came in a hair over $1 million, said City Administrator Sack Thongvanh.

The mechanism being proposed for extracting money from the city's tax-exempt entities is a franchise fee, charged against a portion of their use of electricity and gas.

It would yield about $130,000 annually, a large sum for a small city, though not all of it — perhaps around half — would come from tax-exempt properties.

The main way of covering the higher tab likely will be a bump in next year's property taxes, softened for at least 2018 by the council's inclination to pull money from reserves. But it's not a bottomless well, Thongvanh said.

"People assume we get taxes from the State Fair and think we must be loaded. We don't get anything from them," he said.

Charging franchise fees is a move many cities make, according to Xcel Energy officials. About 125 cities across Minnesota collect them, the company said.

The State Fair and the U have responded differently to the prospect.

Erick Garcia Luna, the U's director of community relations, attended a City Council meeting at which the issue was discussed.

"We have been following the process and we are waiting to hear specifics on our share of the responsibility," he said. "We consider ourselves a critical part of the communities our campuses are in and we are always open to having conversations with our local government partners."

State Fair officials are standing by to officially hear from the city on what's going on and will have no comment until then, they said.

General Manager Jerry Hammer reported that no one from Falcon Heights had mentioned the subject to him as of the week before Thanksgiving, said spokeswoman Lara Hughes.

Lindstrom said the move was only fair.

"There's 8,000 people streaming onto [the U's St. Paul] campus every day, and 1.9 million of our closest friends come visit us for 10 days late each summer.

"For the most part, both are good neighbors," he said. "They are assets for us, but paying taxes is not among their assets, and they do impose costs."

For instance, he said, they use Falcon Heights' roads. And it's not just the visitors during the State Fair; the fairgrounds draws thousands for other events the rest of the year, such as a street rod show, art shows and a computer sale.

The issue came up at least a year before the Castile shooting, city officials said, so the rise in law enforcement costs is not the only motivation for charging franchise fees.

But plainly it's happening against that backdrop.

The council is likely to make the move by December or January, Lindstrom said.