The case for investing in young children is compelling, but this St. Paul property tax is not the right solution

In the November election, St. Paul voters face a crucial decision: whether to get a mandatory increase in property tax for the next 10 years to finance early childhood care and education initiatives. While I believe the purpose of this ballot measure is laudable, its implementation raises serious concerns about the prioritization of pressing municipal issues and budgetary responsibility.

As part of my own due diligence, I spent a lot of time studying the initiative. The importance of this topic deserves serious consideration. I listened to the city council presentation in September this year; I read the 48 page report summarizing the plan and reviewing statements of both needs and proposed financial projections; we invited Councilor Noecker (the plan’s sponsor) to present the program at our Public Affairs Issue Forum; I spoke with Art Rolnick, whose professional work in economics and early childhood development (and his support of this program) is well known and respected. I agree that investing in our children is critical to our future. And at the same time, I cannot support the proposed program.

The heart of this proposal lies in the commitment to raise $2 million in property taxes in the first year, increasing by $2 million each subsequent year until reaching $20 million in the tenth year. As I understand it, the cost estimates for administering this initiative could far exceed last year’s revenues. And then what?

Prioritization

I have to agree Mayor Carter by not supporting this ballot measure.

Mayor Carter vetoed the ballot measure in July 2023 (the City Council later overrode that veto) due to his own concerns: one of which was that no office or department in St. Paul “could reasonably and effectively address this body of work absorb’.

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 implement this program. And the city lacks the government structure and capacity to take on this new mandate.

At the September 2024 City Council meeting, Council President Jalali said she was “very concerned about the city taking on a larger role in taking this on at all.” She continued: “Our role should be to support other agencies and providers to access the funding they need.”

Fiscal responsibility

We absolutely must take context into account. This may be the worst time to undertake another tax increase.

St. Paul faces extraordinary challenges in the current budget environment of escalating tax increases and a shrinking tax base. This would be in addition to a proposed 7.9% citywide levy increase for 2025, a 4.75% increase in Ramsey County, a new metrowide sales tax and a new 1% St. Paul sales tax. Increasing the financial pressure on residents and businesses to fund a program that lacks a robust long-term plan only complicates the city’s already precarious budget situation.

Additionally, as the City of Saint Paul faces a $19.4 million inflation problem, equivalent to a 10% property tax increase, concerns are growing about the sustainability of further tax increases.

The city’s main sources of income are commercial real estate. And this sector faces a challenge. Many buildings in the city center are experiencing a declining value. Consider the Saint Paul Athletic Club, which recently failed to sell at auction with a starting price lower than its construction costs in 1915. Or the River Park Plaza, whose assessed property value fell 42.3% this year.

This trend threatens to further erode the tax base, and there has been no study or discussion of how this decline in commercial property values and its impact on the city’s budget will affect the increases needed to support this proposed program to finance.

Interesting data, but not like this

I have to say that the data supporting investments in our children is compelling.

The Legislature last year approved funding for an expanded child care plan. That said, the approach to early care and education is bigger than any individual city can manage or finance through its property tax levy. And the City of Saint Paul is already struggling to finance and carry out its immediate responsibilities: infrastructure improvements, ensuring public safety, serving the unsheltered, improving existing parks and recreation opportunities, and revitalizing of commercial areas.

Given the above considerations, I believe that it is financially irresponsible to support the program as it is currently presented. Voters in St. Paul should carefully consider the implications of approving an automatic 10-year property tax increase, given the highly uncertain tax environment in our immediate future.

I urge you to vote “no” on question 1.

B Kyle is president and CEO of the St. Paul Area Chamber.