St. Paul leaders debate how to pay for street maintenance

St. Paul officials are looking at using property taxes and even voluntary payments to cover street maintenance costs after a court ruling forced the city to look for a substitute for right of way assessments.

At a meeting Wednesday, Finance Director Todd Hurley said the city should use a mix of assessments and property taxes to cover street upkeep. But there was little consensus on the proposal, and some City Council members suggested the city should scrap its assessment program altogether.

"No other city does an assessment program like this," Council Member Rebecca Noecker said, adding that relying on property taxes makes more sense than the current approach of charging people based on their street frontage. The whole city benefits from well-maintained sidewalks and streets, she said.

City leaders did not make a decision Wednesday and will discuss the issue again March 8. At that meeting, they will also talk about how to avoid a potential $32 million hole in the 2017 budget. That's how much St. Paul anticipated getting from assessments this year, before legal concerns caused city leaders to look for other funding options.

The plan Hurley outlined was developed over six months by a work group including city staff. They recommended the city use general fund revenue to pay for most street upkeep while still relying on assessments to pay for some services, such as resurfacing streets and replacing sections of sidewalks.

St. Paul's ability to pay for street maintenance is pinched by its many tax-exempt properties, including colleges, churches, hospitals and other nonprofits. It relied on the assessments to get them to chip in and help cover city services.

Churches challenged the city's assessment process and the Minnesota Supreme Court ruled the assessments, which the city argued were fees, are actually another tax. The ruling sent city staff scrambling to come up with a new way to pay for street work.

City Attorney Sammy Clark said the program that city administration is proposing, which still relies on some assessments, is "entirely legally defensible" according to state statute.

If the city opts to rely entirely on general fund revenue — largely a mix of property taxes, state aid and franchise fees — that would force street maintenance to compete with parks and the police and fire departments for funds. Hurley said he has seen that happen in the past, and street repairs fell behind.

Whatever the council decides will be a "real sea change" for property owners, Council Member Jane Prince said. She asked for more public input on how the city should proceed.

Prince and other council members also suggested the city try to get nonprofits to make a payment in lieu of taxes.

Jack Hoeschler, the attorney who represented the churches that sued the city, said he has talked to a number of nonprofits that are on board with such a payment program.

"I think the nonprofits are willing to belly up to the bar," Hoeschler said.

But Council Member Chris Tolbert warned that such an agreement would be voluntary — the city cannot make the churches pay. "They're going to run into budget issues and that's going to be the first thing to go," he said.

Jessie Van Berkel • 612-673-4649