A coalition of self-styled fiscal watchdogs has released a sweeping 18-page report aimed at raising alarm about the state of St. Paul’s finances and fiscal prospects, from rising property taxes to a growing tax base. minor in the city center.

The report, written in part by a former city council member, a developer and the city’s former budget director, discourages the city from investing in new park initiatives like the proposed Mississippi River Balcony, the Mississippi Learning Center or a regional multi-sport sports complex. until the city can “right the ship,” prioritize basic maintenance of parks, streets and sidewalks, and stop supporting projects through developer tax incentives known as “TIFs,” or tax increment financing districts.

“If we don’t have enough money to maintain our park facilities, why are we putting more money into the budget to build new facilities?” said Gregory Blees, who served as the city’s budget director in the 1980s under then-Mayor George Latimer and later as the city council’s financial analyst. “That’s a big frustration for our entire committee.”

Given the city’s growing debt load, the “In$ight St. Paul” report warns that the city could jeopardize its coveted AAA bond rating. That would make it harder and more expensive to borrow funds to pay for major construction. That could lead homeowners and other property owners to pay even higher taxes to keep up with higher interest rates. St. Paul’s effective property tax rate for mid-value homes (1.39% of estimated market value) is already the highest of Minnesota’s 20 regions, and the sales tax rate, 9.875 %, is the highest in the state.

Between 2020 and 2023, St. Paul was the only one of Minnesota’s five largest cities to lose population. At least two major private employers located downtown announced this year that they were leaving the city.

“Really good public education”

The city tax grew 101% between 2015 and 2024, while the Minneapolis tax grew 64% in the same period, according to the report. Looking at a slightly different period, “city leaders did not help their constituents financially from 2016 to 2024, when certified property taxes increased 97.4%,” from $105.6 million to $208.5 million.

However, part of St. Paul’s tax increase is offset by a reduction in the city’s “right of way.” street maintenance feesBlees acknowledged.

The report was shared Tuesday with St. Paul Mayor Melvin Carter’s office and City Council members by In$ight committee co-chairs Jane Prince, a former City Council member, and Gary Todd, who has been active in fighting the city’s plans for a new bike lane along Summit Avenue.

“I think the biggest value is that it’s a really good public education,” Prince said Tuesday. “It is information that is rarely all available in one place. …Based on our findings, we have the highest property tax and sales tax in the state. We are the capital city. Isn’t there some way the state should help with some of this? “It’s about looking at our finances at a time when we are facing many challenges in the city.”

Other committee members include Blees; Dave Beal, former Pioneer Press business columnist; Julián Loscalzo, lobbyist; John Mannillo, developer and former mayoral candidate; Carl Michaud, former Metropolitan Council environmental planner and assistant Hennepin County administrator; and public affairs consultant Donna Swanson, recent executive director of the St. Paul Police Foundation.

Contacted Tuesday, city council president Mitra Jalali said she had just received a copy of the report and would read it carefully. Jalali noted that the council is reviewing the mayor’s 2025 budget proposal with city department leaders and that many of the city’s financial challenges and opportunities would not be a surprise.

The mayor’s office said Tuesday that the report refers to tax increases that do not take into account two court decisions that transferred street maintenance costs from fees to the general fund backed by tax dollars.

While the city’s Office of Financial Services offered to “discuss corrections and inconsistencies in financial and other data in the draft report prior to its release today, we received no response,” the mayor’s office said in a statement. The city council will host a public hearing on the budget later this fall.

Recommendations

Among some of the report’s recommendations:

• Establish a committee to advocate for more voluntary payments in lieu of property taxes by tax-exempt entities.

• Fail to approve Parks and Recreation design or construction funding this or next year for any facility or park that does not currently exist, including the East Side Community Center, Mississippi River Balcony, River Learning Center at Crosby Park , a multi-use regional sports complex and new or improved water features throughout the city.

• Do not approve sales tax bond issues until the city’s Office of Financial Services prepares a complete report on bonds and debt service.

• Do not use long-term bonds to pay for police and fire public safety vehicles that have a short useful life and will not survive the life of the bond issue.

22 research papers

The report, which is based on 22 unpublished Blees research articles culled from data from five government agencies, does not dwell at length on rent control or a Nov. 5 ballot question that would raise city property taxes to pay municipal childcare subsidiesbut he has a bleak view of both.

The report acknowledges that many municipal practices (such as a heavy reliance on TIF districts for economic development) predate the Carter administration or the current city council, which has seven members, more than half of whom were elected last November . Still, the report notes that leaders are elected to confront the problems and say freezing spending on major projects would be a start.

The In$ight report found that city government staff, measured in full-time equivalents (2,924 positions in 2016), would grow to 3,209 employees under the mayor’s proposed 2025 budget.

“Parks and Recreation is planning five new projects…without budgeting for additional maintenance expenses,” reads the report, which questions whether the department has been setting aside enough money to maintain existing facilities.

Sales tax, projects, tax-exempt entities.

A 1% municipal sales tax for 20 years approved by voters last November It will focus on rebuilding major arteries like Grand Avenue, as well as a variety of park projects, but not on fixing residential streets.

“The city has requested more than $82 million in funding from the Minnesota Legislature for the River Balcony, Learning Center and Athletic Complex along with $118 million for nine other capital bond applications, even as we lack funds to maintain the (public services) that we have. ”the report reads.

Unique among Ramsey County cities, St. Paul encompasses many parks, schools, nonprofit organizations, government buildings and other uses that rely on public services, such as streets and sidewalks, but are exempt from taxes.

In total, 18.7% of properties within the city (which have a property value of $8 billion, out of $43.4 billion in total property value citywide) do not pay property taxes. property. That adds to the city’s fiscal pressures and could be addressed, the report said, if the city required payments in lieu of taxes, a model used in Boston and other cities to recover at least limited funds from nontaxable properties.

TIF, tax disparities program

The In$ight report examined “two complex municipal financing tools”: tax increment financing and the state’s tax disparities program. It found that St. Paul is the largest user of TIF in the state, allowing developers to use money that would otherwise flow into public tax coffers to pay off their development loans for improvements on blighted properties.

That TIF spending has increased 40% since 2015, from $31.6 million to $44.3 million in 2024, even as TIF obligations decreased more than 50% in Minneapolis, the state’s second-largest TIF user, which captures $21.5 million of taxable value in its TIF. districts.

The report calls on St. Paul to better publicize how much of the city’s tax base is wrapped up in TIF, as Minneapolis does annually. “The city of St. Paul should have the same transparency,” the report reads.

The Met Council redistributes business property taxes from the seven-county metropolitan area’s wealthiest cities to less wealthy municipalities through the tax disparities program, with St. Paul being the metropolitan area’s largest beneficiary.