St. Paul cannot keep charging individual property owners for routine maintenance of streets abutting their property, a Ramsey County district judge has ruled.
The decision Monday could leave the city with a multimillion-dollar hole in its budget, raising conversations similar to those that followed a 2016 Minnesota Supreme Court ruling that forced St. Paul to overhaul the way it funds street upkeep. That ruling led to a 20% property tax increase in 2018, when the city shifted about $20 million in street maintenance costs from assessment bills to tax bills.
St. Paul continued to charge property owners for a handful of services — lighting, sweeping, mill and overlay, and seal coating — based on how much of their land borders the streets receiving the work.
Dozens of residents, businesses and nonprofits filed legal challenges in response, arguing it is not fair to make owners pay to maintain streets worn down by public traffic.
"Raising money to pay for regularly scheduled maintenance that benefits the entire city equally is a function that falls under the tax powers," Judge Robert Awsumb wrote in his decision. He said the city's assessments are not valid without evidence that the street work provides a special benefit to the property owners being charged.
The plaintiffs argued that the city has been using legal maneuvers to avoid having to fully comply with the 2016 court ruling. One of attorneys' main arguments then was that assessments give the city the ability to collect revenue from tax-exempt properties such as churches and schools.
City attorneys responded that state statutes, including a 1967 law that gives St. Paul special authority "to provide for the collection of special charges" to cover some aspects of street work, authorized the city to continue charging owners for certain services.
They added that after the Supreme Court ruling, the city started waiting to bill property owners until street work was complete.
"There may be no other municipality in Minnesota that assesses costs in the same manner as St. Paul," Awsumb wrote.
Kamal Baker, a spokesman for Mayor Melvin Carter, said Tuesday that the city is still working through the details of the ruling. He did not address questions about the financial implications of the decision and whether St. Paul plans to appeal.
"We have received the ruling and are working to determine the best path forward," Peter Leggett, Carter's chief of staff, said in a statement.
According to its street maintenance program budget, St. Paul estimates it will collect an estimated nearly $17.9 million for assessments and charges for services in 2022. City officials did not respond to messages asking how much revenue would be affected by the ruling.
"We're obviously pleased with the ruling but recognize that there could be further legal proceedings," Ben Loetscher, an attorney for the plaintiffs, said Tuesday. "We look forward to seeing those unfold in our favor."
Attorneys had threatened to explore a possible class-action lawsuit on behalf of all property owners — a potentially costly outcome for the city if the court were to order payments to all those who have been charged assessment fees over the years.
Attorney Jack Hoeschler, who has represented property owners since the original case went to the Supreme Court, said lawyers would be less likely to go to such lengths if the city stops fighting the issue. Hoeschler, who is being treated for an illness at the hospital, on Tuesday said the ruling "energized me enough to get out of my sick bed and dance."