St. Paul City Council seeks 1 percent increase to city sales tax

John Autey/Pioneer Press/TNS

The St. Paul City Council voted to officially add a penny-on-the-dollar sales tax increase to its 2023 wish list to lawmakers, setting the stage for a citywide debate over whether the new funding mechanism for heavily backlogged road and parks and rec maintenance would overly burden the city’s restaurants and retailers.

“We should walk into this legislative session looking for our full unmet need in terms of local government aid, state bonding and … the sales tax,” said St. Paul City Council President Amy Brendmoen, addressing the city council on Wednesday.

The council voted 6-1 in favor of seeking the tax increase, with Council Member Jane Prince casting the sole dissenting vote after noting 2023 will already be packed with high budget asks to state lawmakers. If approved by the Legislature, the tax proposal would go to ballot before St. Paul voters.

The increase would triple the city’s existing 0.5 percent sales tax to 1.5 percent, and raise the total state, county and city sales tax in St. Paul to 8.875 percent, tying with Duluth as the priciest in Minnesota.

Roads, maintenance backlog

Announcing his intention to pursue the sales tax increase last week, St. Paul Mayor Melvin Carter said the added revenue would raise nearly $1 billion over the course of 20 years, including $738 million to rebuild major segments of 25 of the highest-volume city-owned arterial and collector roads.

The other $246 million in anticipated funds would alleviate a major maintenance backlog in Parks and Rec facilities, and prop up a handful of new projects. Likely priorities include a new community center and aquatics facility on the East Side, as well as a tournament-ready municipal athletics complex.

St. Paul Public Works Director Sean Kershaw noted that clothing and groceries are not taxed in Minnesota, making the sales tax less regressive than other funding solutions. Beyond that, visitors to the city’s parks and other amenities put wear and tear on the city’s major roads but don’t pay city property taxes to fund them.

“Arterials and collectors are on a 124-year replacement cycle, and it should be 60 (years),” said Kershaw, addressing the city council.

“If we were to put this amount on the property taxpayers, it would be extremely inequitable, because so much property in St. Paul is tax exempt,” Kershaw said. “This is a much more equitable solution than any other that we have available.”

Concerns for hospitality industry

Liz Rammer, chief executive officer of restaurant and hotel industry association Hospitality Minnesota, said she understood “the mayor’s need to be creative in finding a solution for infrastructure needs” but she expressed concern about drawing major conferences, concerts and special events to the capital city.

“While a 1 percent increase sounds small, it can be a deterrent for event planners looking for places to situate events,” said Rammer, interviewed last week. “The pandemic is still very much with the hospitality industry. This is a long recovery. Many operators are still struggling.”

She also noted that restaurant visitors already feeling pinched by food prices could go to other cities.

“This is a fragile recovery and both downtown Minneapolis and downtown St. Paul are still struggling because of the lack of corporate travel,” Rammer said. “It’s getting better but we’re still lagging the national average. Contemplating any sort of additional fee is really tricky right now.”

Business community

Council members acknowledged that some members of the business community have complained to the St. Paul Area Chamber of Commerce that they have yet to be consulted by the city about a tax increase they would be required to impose on their customers.

In an interview, restauranteur Brian Ingram said that he and other industry leaders were still studying details.

“A lot of us just aren’t up to speed,” he said.

Prince noted that from 1994 to 2005, St. Paul’s mayors chose not to raise property taxes, a politically popular decision that resulted in heavily deferred maintenance. City roads and parks are paying for those decisions today, she said.

“It was a can that was kicked down the road by mayors for 12 years,” Prince said.

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