In the November election, St. Paul voters face a key decision: whether to approve property tax increases over the next 10 years to fund early childhood care and education initiatives. While I believe the goals of this ballot measure are laudable, its implementation raises serious concerns about local government prioritization of urgent issues and fiscal responsibility.
As part of my own due diligence, I spent a significant amount of time researching this initiative. Given the importance of this topic, it should be seriously considered. I listened to a City Council presentation in September of this year. I read the 48-page report summarizing the plan and considered the overview of both the needs and the proposed financial projections. We invited City Councilman Noecker (plan sponsor) to present the program at the Public Affairs Forum. I spoke with Art Rolnick. His professional research in the fields of economics and early childhood development (and support for this program) is very well known and respected. I agree that investing in our children is important for our future. And at the same time I cannot support the proposed program.
At the heart of the proposal is a promise to impose a $2 million property tax in the first year, increasing by $2 million each year thereafter until it reaches $20 million in year 10. My understanding is that the estimated cost of managing this effort could far exceed the final year’s revenue. So what?
Prioritization
I have to agree with Mayor Carter that he does not support this ballot measure.
Mayor Carter vetoed the ballot measure in July 2023 (the veto was later overridden by the City Council). One reason is that no office or department in St. Paul “can reasonably and effectively absorb this body of work.”
He estimated it would cost millions of dollars just to build the infrastructure. He has made it clear that not enough money will be raised to operate the program. And the city lacks the government structure and capacity to take on this new task.
At the September 2024 City Council meeting, Council President Jalali expressed “very concern about the City taking a larger role in addressing this issue.” She continued: “Our role should be to support other agencies and providers to access the funding they need.”
financial responsibility
Context absolutely needs to be considered. This is probably the worst time for another tax increase.
St. Paul faces extraordinary challenges in the current fiscal climate of increased taxes and a shrinking tax base. This is on top of a proposed citywide 7.9% tax increase in 2025, a 4.75% increase in Ramsey County, a new sales tax across the metropolitan area, and a new 1% sales tax in St. Paul. It will be done. Placing additional financial burdens on residents and businesses to fund programs without a solid long-term plan will only further complicate the city’s already precarious budget situation.
In addition, the city of St. Paul is facing a $19.4 million inflation challenge equal to a 10% increase in property taxes, raising concerns about the sustainability of further tax increases.
The city’s main source of income is commercial real estate. And the field faces challenges. Many buildings downtown have declined in value. Take St. Paul Athletic Club, for example. It recently failed to sell at auction with a starting price below its 1915 construction cost. Or look at River Park Plaza, where real estate valuations have plummeted 42.3% this year.
This trend threatens to further erode the tax base, but how will this decline in commercial real estate values and the impact on the city’s budget affect the increases needed to fund this proposed program? There has been no research or discussion on whether to give
The data is convincing, but this method won’t work.
It must be said that the data supporting investing in children is compelling.
Congress agreed last year, approving funding for expanded child care programs. However, early childhood care and education efforts are beyond the scale that individual cities can manage or fund through property taxes. And the City of St. Paul is already committed to meeting and financing immediate responsibilities, including infrastructure, ensuring public safety, serving unsheltered populations, improving existing parks and recreational resources, and revitalizing commercial areas. We are reaching our limits.
Given the above considerations, I believe it would be fiscally irresponsible to support the program as presented. St. Paul voters should carefully consider the impact of approving 10 years of automatic property tax increases given the highly uncertain tax environment we currently have.
Please vote “No” on question 1.
B. Kyle is the President and CEO of the St. Paul Regional Chamber.
First published: October 27, 2024 at 5:19 p.m.
