St. Paul sales tax proposal stalls as MN House looks to regional tax for affordable housing

Frederick Melo, Pioneer Press
Updated ·5 min read
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St. Paul Mayor Melvin Carter’s pitch to voters to support increasing the city’s local sales tax for parks and road repair might not make it to ballot this November, given competing bills at the state Legislature.

When the Minnesota Senate Committee on Taxes convened last week, the St. Paul mayor testified alongside counterparts from 18 other cities and counties pitching individual proposals to increase their local sales taxes to raise funds for roads, parks, public safety facilities or other favored projects.

Don’t expect a similar showcase in the Minnesota House, at least not anytime soon. The House Committee on Taxes, chaired by state Rep. Aisha Gomez, DFL-Minneapolis, has declined to hear the same flurry of legislative bills, given somewhat clashing proposals for metro-wide sales taxes for housing and transportation.

“The local option sales taxes … in a sense they are competing,” acknowledged state Rep. Mike Howard, DFL-Richfield, a lead author of the proposal to install a new quarter-cent metro-wide sales tax for affordable housing.

Metro-wide sales tax

Rather than a piecemeal approach that would allow St. Paul and other cities to make their own case to voters for particular types of sales tax spending, Gomez recently told the Minnesota Reformer that “the quality of somebody’s life … (shouldn’t) depend on the accident of where they were born.”

A metro-wide sales tax would spread the burden across the entire region, she said, and could raise funds for two priority challenges — transportation and housing — that cross municipal boundaries.

Gomez, through a spokesperson, declined comment on Tuesday, but some still see a flicker of hope for the individual municipal proposals, which could resurface in the reconciliation process once the House and Senate roll out omnibus tax bills.

“If she decides not to hear it, it just remains to be seen, depending upon what either body does with their tax bill,” said Patricia Nauman, executive director of Metro Cities, the association that advocates for cities before the Legislature, the governor and Metropolitan Council. “They would have to be reconciled.”

Quarter-cent tax for affordable housing

Howard and state Sen. Lindsey Port, DFL-Burnsville, have proposed a quarter-cent sales tax throughout the seven-county metro to raise some $200 million annually for affordable housing. The majority of the funds would be split between the seven counties and metro cities, with a fourth of the revenue supporting a state rental assistance program.

Howard estimated the regional sales tax would create 1,000 new affordable rental units per year and 1,000 single-family homes per year. In addition, it would fund roughly 3,000 vouchers for low-income families throughout the metro.

“Right now, only one-in-four Minnesotans who qualify for a (federal) Section 8 housing voucher get one,” he said. “You have people who qualify who will sit on waiting lists for years, or decades.”

On Monday, 22 local elected officials signed a letter of support for his bill that was forwarded to the governor’s office and key state lawmakers. Among the signatories were St. Paul City Council Members Mitra Jalali and Council Member Nelsie Yang, as well as Brooklyn Center Mayor April Graves and Irene Fernando, chair of the Hennepin County Board of Commissioners. Three members of the Minneapolis City Council also signed.

“My first priority remains our St. Paul-specific sales tax for necessary infrastructure funding that modernizes our streets and parks,” said Jalali on Tuesday.

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Howard’s proposal has been met with opposition from Metro Cities, which has raised concern about burdening municipalities that have other local needs.

“Housing is an issue that is of statewide concern, and should be funded with state revenues,” Nauman said.

Yet another proposal originating from within the House Transportation and Finance Committee would impose a three-quarter cent sales tax to support regional transit spending. A coalition of childcare and early childhood education advocates have proposed asking St. Paul voters to raise funds for those priorities through the city’s property tax levy, another initiative that would have to go to ballot to be approved.

Thirty-six cities, counties seek local sales tax

Given the visibly deteriorated status of the city’s roads, Carter has proposed tripling St. Paul’s local sales tax to 1.5%, which would be the highest in the state tying with Duluth. The new tax would raise nearly $1 billion over 20 years, most of it going to arterial street reconstruction. Roughly $246 million would support capital improvements within the city’s Parks and Recreation facilities.

The proposal has met with opposition from the St. Paul Area Chamber of Commerce, which polled its members and found roughly three-quarters opposed.

“It’s a mystery to me why the chamber would oppose,” said state Sen. Sandy Pappas, lead author of St. Paul’s local sales tax proposal in the Senate. “I think this year they are opposing any and all tax increases, likely due to the budget surplus which is largely onetime (spending).”

A growing number of Minnesota cities in recent years have successfully sought to implement local sales taxes, which help capture revenue from tourists and other visitors. Minnesota taxes purchases at bars and restaurants, but not most clothing and groceries, so local residents are still shielded from paying increased costs on essentials.

City officials have noted that local government aid from the state has not kept up with inflation, population growth or general needs.

“It’s really about trying to manage infrastructure and other needs that are more regional in nature, without totally relying on the property tax,” Nauman said.

This legislative session, some 36 cities and counties have proposed creating or increasing their local sales tax, many of them with parks spending in mind. If approved by the Legislature, their proposals would then go before voters during the November elections.

Woodbury is seeking a half-cent sales tax to fund a new public safety campus. Cottage Grove wants a half-cent tax to fund improvements to Hamlet Park, the River Oaks Golf Course and the Mississippi Dunes Park project. Rice County is seeking a 0.375% tax to back a public safety facility.

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