ST. CLOUD — Mary Hall got an unexpected $6,300 bill from the city three years ago. It was her share of the neighborhood project to resurface the road and replace underground utilities.
Hall thought the city was charging too much based on what her neighbor told her about state law: that a city can't assess someone for more than their property value increases due to project improvements. But her husband had just died and she didn't have the heart to fight City Hall.
Meanwhile, Hall's neighbors Kevin and Julianna Carpenter sued the city in district court, and the city ultimately lowered the Carpenters' $14,000 bill to $4,000. So the Carpenters — who live in a historic $330,000 house — paid less than the widow in her $100,000 house for the same road project.
"How does the city possibly think that's fair?" asked Kevin Carpenter, a retired lawyer who is trying to get the city — or state — to change how it assesses property owners. Carpenter has spent hundreds of hours tackling the issue with city staff and through the state court system.
Cities around the state routinely charge property owners for improvements to roads and sidewalks. But in the past few years, a number of cities — including Duluth, Rochester, Edina and Northfield — have changed the way they pay for road projects in an effort to be more equitable and stay within the law.
Despite the state law, many cities do not consider market value at the front-end of a project. Instead, some cities, such as St. Cloud, assess property owners based on how many feet of the property touches the street being improved. Minnesota case law has determined this so-called "front footage" method is valid because it is a fair approximation of the market value increase.
Carpenter calls the policy regressive because it doesn't take into account a homeowner's income or ability to pay.
But St. Cloud City Administrator Matt Staehling argues special assessments are an important funding source that allow the city to obtain bonds to finance the street improvement projects.
What other cities are doing
"It's an issue people care about. It's hitting their pocketbooks," said Tyler Niemeyer, assistant city engineer for Rochester, where a task force recently spent more than a year drawing up a new assessment policy. Now simple road resurfacing projects are funded through a tax levy instead of assessments. And larger projects proportion the cost based on people's property values, resulting in assessments that likely will be lower than using the front footage method, Niemeyer said.
In Duluth, the city has entirely moved away from assessments for road projects, instead using proceeds from a sales tax that voters approved in 2017.
"We haven't given up the ability to assess. We're choosing not to at this time," said City Engineer Cindy Voigt, who added it's easier to manage the projects when residents "know they don't have to pay for it on top of the dust, the dirt and the inconvenience."
Northfield charges a gas and electric franchise fee that residents pay on their utility bill, which helps spread out the cost. An Edina task force spent eight months crafting a policy that transitions from funding road projects with assessments to funding projects with property taxes over about two decades. The Edina City Council approved the policy in July 2021.
"So instead of just the neighborhood paying for their streets, the entire city is paying for city streets," said Chad Millner, engineering director for Edina.
Millner said the long transition is to placate residents upset after paying recent assessments. Their logic was, "I had to pay the fee so everyone else should, too," Millner said. "We never solved the fairness problem."
Burden is on property owners
Another complicating factor is that the onus is on residents to prove the assessment is greater than the increase to their property value.
So homeowners have to use time and resources to contest the assessment with the city and file a lawsuit in district court, which costs about $300.
"I don't think the burden should be on the resident to know the back-channel law and have to fight it," said Jason Theisen, a St. Cloud resident who fought his $16,500 assessment for a 2018 road project. "I think [the city] should just be following what the law is."
Kevin Carpenter helped Jason and Kathryn Theisen filed an appeal in district court. The city then obtained an appraisal of their property and reduced their assessment to $5,000.
"In our opinion, the work needed to be done. Infrastructure is important. We had no issue paying something," Jason Theisen said. "Just when we got the sticker shock of the initial amount, it was like, holy moly."
After hearing Carpenter's complaints about his assessment, longtime Council Member George Hontos asked city staff and other council members to consider simplifying the process for residents to re-examine their assessments before needing to go to court. But it never materialized.
"I just feel uncomfortable thinking [suing the city is] the only recourse," Hontos said. "It just doesn't seem to be user friendly or considerate of the residents."
Do road projects even affect home values?
Voigt, the city engineer in Duluth, said residents often are concerned their taxes are going to increase with street projects.
"I tell people at those public meetings that it's not going to increase their taxes," she said. "Because the value didn't increase."
Jake Pidde, Stearns County assessor, oversees the office that assigns values and classifications to taxable property. He said many elements go into appraised value but his office usually doesn't consider street projects unless the road was improved from gravel to asphalt.
"A new street may give the property more curb appeal but not necessarily more value," Pidde said. "If anything, it may help the house sell sooner."
After Carpenter sued the city and his house was appraised, the lawsuit was dismissed by both parties because the appeal on the $14,000 assessment became moot once the city lowered the bill. However, Carpenter sought clarity on the law by filing an appeal — trying to force the court system to rule on the legality of the assessment process.
The appeals court ruled in favor of the city, saying the lawsuit was moot. But neither court made a determination on the legality of the assessment process so Carpenter asked the Minnesota Supreme Court to review the case. In September, Carpenter learned the court denied his request.
Although unsuccessful so far, Carpenter is talking to neighbors and elected leaders to build momentum for change. He's also spoken with a lawyer who is considering a class action lawsuit, which hopefully would bring clarity to the thousands of property owners in the state who could be getting assessed for far more than is legal.
"My hope would be the city is embarrassed by the situation," Carpenter said.