St. Paul City Council approves 2018 budget that shifts street maintenance costs to tax bills

St. Paul will boost its property tax collection by 24 percent in 2018, but city leaders said tax hikes will be partly offset by a drop in residents' annual street maintenance bills.

It was a challenging budget year, City Council members said Wednesday as they approved the levy and budget. While there will be a big tax levy change, they said they kept the city's overall spending flat.

"The increase in taxes is being particularly felt in a few areas of the city that are lower income areas," Council Member Jane Prince said. "So people in my community are looking to us to be careful and prudent, and I am happy to say I think we've achieved that."

The City Council made about $1.5 million in last-minute additions to next year's $563 million budget, including adding money for police cars, parking meter upgrades and a bicycle and pedestrian safety program. A projected increase in sales tax revenue and money from a parking fund will pay for the new budget items.

For the most part, the council left Mayor Chris Coleman's proposed budget intact — a budget Coleman said was difficult to suggest but necessary to avoid passing a street maintenance finance problem on to his successor.

A 2016 Minnesota Supreme Court ruling prompted St. Paul to overhaul the right of way assessment program it has used to pay for street upkeep. The court determined the assessments were taxes, not fees as the city argued, making the city's system of charging all property owners — even tax-exempt hospitals, colleges and churches — problematic.

Coleman decided to shift about $20 million in street maintenance costs from assessment bills to tax bills, which accounts for 19 percent of the total increase in the 2018 tax levy. St. Paul will continue to assess residents for a handful of street services.

That switch, along with an uneven rise in home values, means the impact on residents will vary widely. People who live in neighborhoods like Thomas-Dale and the North End, which were slow to bounce back from the recession, are finally seeing a boost in home values — and, accordingly, a tax increase.

Jamie Hendricks, who lives in the North End, told the City Council last week that she was shocked to see her home's value increase by about $34,000 in one year without any improvements.

"We are going to end up taxing people out of St. Paul," Hendricks said.

The owner of a median-value $173,900 home will see their city property tax bill grow by $164, while their assessment bill for street work will shrink by $130. That homeowner will end up paying $1,539 for all St. Paul taxes and fees, along with Ramsey County and school district taxes.

Despite the major levy increase, from $114 million to $141 million, this year's budget process was relatively uneventful. Coleman and city staff held numerous community meetings earlier this year to tell residents about the rising levy and falling assessment bills.

"I think a key to the success of passing this budget is getting people to understand … 19 percent was a shift," Financial Services Director Todd Hurley said.

Officials had to make cuts to the 2017 budget after the state Supreme Court ruling sent the city scrambling to find street maintenance funding. The 2018 budget will include some of the priorities that were cut, including combating emerald ash borer and a firefighter health and wellness program.

The fire and police departments could see some significant changes next year. St. Paul will add four police officers to a mental health crisis unit, and city leaders will work with the next fire chief to potentially devote more resources to medical emergency response.

This was Coleman's 12th and final budget proposal. Mayor-Elect Melvin Carter, who takes office in January, will have to work within the financial parameters Coleman and the council set for next year.

"Leadership often means having to make difficult decisions about how to invest public dollars," Coleman said in a statement after the council's vote. "This budget was no different."

Jessie Van Berkel • 612-673-4649