St. Paul’s universities, museums, parks, hospitals, government buildings and countless nonprofits draw workers and visitors from across the state, but they don’t pay property taxes.
With an eye toward how things are done on the East Coast, the city is asking a committee to study whether that should change.
Taking a cue from the city of Boston, the mayor and the city council will ask a nonpartisan public policy organization, the Citizens League, to convene a committee of experts to explore the possibility of a “payment in lieu of taxes” program.
The program would encourage owners of non-taxable properties to agree to voluntarily contribute something toward the cost of everyday services such as police, fire, street maintenance, parks and libraries.
In a written statement, St. Paul Mayor Chris Coleman noted that one-third of St. Paul is effectively off the tax rolls, a reality that hits the city hard every budget season.
And that financial pressure is building. In reaction to a recent Minnesota Supreme Court decision, the city has heavily altered how it assesses $32 million in routine street maintenance fees, which will now largely exempt nonprofit institutions.
“This is a good time to ask the question about whether we could be a stronger city if the major nonprofit property owners and other stakeholders contributed financially,” Coleman said. “St. Paul’s colleges, hospitals and major nonprofits are part of the city’s DNA.”
City officials have already signaled that they likely will exempt small nonprofits, though definitions are in order. The “committee would need to determine which types of entities would be included in any potential program,” states the Citizens League website.
Sean Kershaw, executive director of the Citizens League, said “we’ve got a whole herd of people who are interested,” but the final committee makeup has yet to be determined. He expects to limit membership to 19 “residents, nonresidents, homeowners, representatives of nonprofits, business interests and people with specific expertise.”
“The outcome of this is not predetermined,” Kershaw said. “This committee might decide this is a bad idea. Or it might decide it’s a good idea. … Because this is not likely to lead to a new mandate, buy-in from the community is really important.”
He added, “The law on this is probably clear — These properties can’t be required to make a payment in lieu of taxes. This program is about their voluntary participation, not their required participation.”
Among the questions the committee will likely explore: What’s a fair rate for hospitals? Should that be the same rate for colleges and government buildings? Is it fair to ask for contributions based on property values, foot traffic or some other standard? Could payment be made some other way, such as through donated services?
The city found that in 2016, Boston’s largest nonprofits contributed $32.1 million to city coffers, based on each institution’s tax-exempt property value.
“They have very large participation, and enthusiastic participation,” said Council Member Jane Prince, who co-sponsored the resolution creating the committee with Rebecca Noecker and Dai Thao.
It remains to be seen how much St. Paul will attempt to raise, and whether voluntary contributions will be a reliable funding stream for the city budget.
The Citizens League, which is based in St. Paul, will oversee the committee’s work as they do outreach to leaders of tax-exempt organizations. Nine two-hour meetings, which will be open to the public, will likely begin in early May, and preliminary recommendations are expected in August.
The committee’s budget is $41,000, most of it funded by the St. Paul Foundation and Bigelow Foundation, though additional funding is still being sought.
More information about the committee’s work is online at citizensleague.org/SaintPaulPILOT.
