B Kyle: The case for early childhood investment is compelling, but this St. Paul property tax isn’t the way

At the November election, St. Paul voters face a crucial decision: whether to approve a mandatory property tax increase for the next 10 years to fund early-childhood care and education initiatives. While I believe the goal of this ballot measure is commendable, its implementation raises serious concerns regarding prioritization of pressing municipal issues and fiscal responsibility.

As part of my own due diligence, I spent a good deal of time studying the initiative. The importance of this topic warrants serious consideration. I listened to the City Council presentation in September of this year; I read the 48-page report summarizing the plan and reviewed overviews of both the need as well as proposed financial projections; we invited Councilmember Noecker (the plan sponsor) to present the program to our Public Affairs Issue Forum; I spoke with Art Rolnick, whose professional work in the area of economics and early childhood development (and his support for this program) are very well known and respected. I do agree that investing in our children is critical to our future. And, at the same time, I can’t support the proposed program.

At the heart of this proposal lies a commitment to levy $2 million in property taxes in the first year, increasing by $2 million each subsequent year until it reaches $20 million levied in the 10th year. As I understand it, cost estimates to administer this initiative could far exceed the final year’s revenue. And then what?

Prioritization

I must agree with Mayor Carter in not supporting this ballot measure.

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

He estimated that it would cost millions of dollars just to build the infrastructure. He has been clear that not enough money will be raised to administer this program. And the City lacks the government structure and capacity to take on this new mandate.

In the September 2024 City Council meeting, Council President Jalali expressed that she was “very concerned about the City playing any larger role at all in taking this on.” She went on to say, “Our role should be to support other agencies and providers to access the funds they need.”

Fiscal responsibility

We absolutely must consider context. This is possibly the worst time to entertain yet another tax increase.

St. Paul is facing extraordinary challenges in the current fiscal climate of escalating tax increases and a shrinking tax base. This would be on top of a proposed city-wide 7.9% levy increase for 2025, a Ramsey County increase of 4.75%, a new metro-wide sales tax, and a new St. Paul 1% sales tax. Adding more financial strain on residents and businesses to fund a program that lacks a robust long-term plan only complicates the city’s already precarious budget situation.

Moreover, as the City of Saint Paul faces a $19.4 million inflation challenge, akin to a 10% increase in property taxes, there is growing concern about the sustainability of further tax hikes.

The city’s primary sources of revenue are commercial properties. And this sector is challenged. Many downtown buildings are experiencing declining value. Look at the Saint Paul Athletic Club for example, which recently failed to sell at auction with a starting price of less than it cost to build in 1915. Or the River Park Plaza, which saw its assessed property value plummet by 42.3% this year.

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

Compelling data, but not this way

I must say that the data supporting investment in our children is compelling.

The Legislature agreed last year and authorized funding for an expanded childcare plan. That said, addressing early childhood care and education is larger than any individual city can administer or fund through its property tax levy. And the City of Saint Paul already is stretched with its funding and delivery of its immediate responsibilities – infrastructure improvements, ensuring public safety, serving the unsheltered, improving its existing parks and recreation resources, and revitalizing commercial areas.

Given the above considerations, I believe it is financially irresponsible to support the program as it’s been presented. Voters in St. Paul must carefully consider the implications of approving an automatic 10-year property tax increase given a very uncertain tax climate 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.