Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.
More answers needed on St. Paul sales tax
Among other questions, is now the right time to add to the city's growing tax burden?
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Just about anyone who regularly navigates St. Paul streets knows the problem: Too many of the Capital City's roads are in poor condition despite the city's yearslong efforts to improve them. There's no question that there is a need for ramped-up street repair and maintenance.
With that goal, Mayor Melvin Carter has proposed a 1% sales tax increase — a move that could raise nearly $1 billion over 20 years dedicated to roads, parks and other uses. The city's current sales tax is 7.875%, compared with 8.025% in Minneapolis, according to the Minnesota Department of Revenue's "Local Sales and Use Tax Rate Guide." The increase would give St. Paul one of the highest sales tax rates in the state, alongside Duluth and Walker.
Although legitimate needs exist, questions remain about whether a sales tax increase is the best solution.
Carter told an editorial writer that St. Paul has not fared well under Minnesota's existing local government aid (LGA) formula. He said historic underinvestment from the state and the city in the past contributed to a large backlog of street maintenance and reconstruction.
Carter said the city should devote about $30 million per year to bring roads up to par and needs a sustained source of funding to meet that goal. St. Paul shouldn't "kick the can down the road" any longer, he said.
In addition to raising $738 million for road improvements and $246 million for upgrades in park facilities, the sales tax increase would fund a new multipurpose East Side community center; a mixed-use National Park Service headquarters at Crosby Farm Regional Park, and a 1.5-mile River Balcony promenade downtown.
But before imposing a sales tax increase, several issues should be considered, including:
How would the sales tax burden be spread out?
Yes, additional taxes would be collected from visitors who buy taxable items as they work, play and visit St. Paul. But it also may drive some of those purchasing more expensive items to other cities with lower sales taxes. And city residents, especially those with lower incomes, would bear the brunt of the increase.
How would St. Paul businesses be affected?
In a statement and an interview with an editorial writer, St. Paul Chamber of Commerce representatives said that although they understand St. Paul's budget challenges, they are considering polling chamber members about the impact any increase would have on the cost of doing business. We hope they will.
According to chamber President and CEO B Kyle, the city's legislative priority this year should be LGA. "St. Paul is sorely underfunded and has been for years," she said.
Is this the right time to increase the sales tax?
City property owners are already facing a proposed 15% increase in property taxes, with about half that increase offset by the elimination of the street frontage assessments.
Although the City Council voted Wednesday 6-1 to authorize sending the sales tax proposal to the Legislature for its approval, there's time for more debate and research before a Jan. 31 submission deadline. Council Member Jane Prince, who cast the lone "no" vote, said in an interview with an editorial writer and publicly on Wednesday that she understands the arguments behind the proposal and has supported an increase in the past.
She pointed out that similar sales tax increases were considered in 2019 and again in 2020 before being withdrawn. This time though, Prince believes the timing is questionable and wants to hear more from residents and the business community. Given the property tax hike, she believes the city should make winning more LGA from the state the top priority this session.
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Even if the city ultimately does submit a sales tax proposal to the Legislature and wins approval, the increase would have to go before city voters in a referendum.
The Star Tribune Editorial Board wants to learn more about the proposal and its potential impact on the city. St. Paul residents should be especially engaged. As the process continues, demonstrating the benefits certainly won't be a problem. Users of St. Paul streets can attest to that.
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