It’s Not the Non-Profits that Keep Saint Paul Poor, It’s Their Parking Lots

A Saint Paul pothole.

It is a truth universally acknowledged that Saint Paul has a weak tax base. Compared to every sizable city in the state, a huge portion of Saint Paul’s city land is occupied, not by taxpaying residents or companies, but by state and county governments, colleges and universities, and non-profit institutions. For this reason, so the logic goes, the city is broke. Compared to Minneapolis or other peer cities (like Bloomington, maybe, I guess, or Duluth or Rochester or something), Saint Paul has to struggle to pay for basic stuff like city streets, humane bike routes, non-libertarian garbage collection, snow plowing, and rudimentary city planning (at least if it wants to keep its tax levy from being the highest in the land).

And so the tax base is our big problem over here, a tax-based not improved by a small-ish downtown struggling to keep higher-end office space leased, saddled with entrenched areas of concentrated poverty, and with a strong neighborhood character devoted to car-centric pushback against market-rate development. That’s what they say about Saint Paul.

Next year, all problems are about to get a lot worse thanks to former Mayor Randy Kelly’s fast-and-loose “street maintenance fee” policy, which was declared to be unlawful last year after a lawsuit by a few downtown churches (and a left-leaning media non-profit that relies on member contributions and is based in Saint Paul also). The successful suit, which the City did not settle and instead took to court, eliminated the municipal ability to levy a fee-for-service on non-profits and institutions to pay for road maintenance, blowing a not-insignificant $32M hole in the city budget. Instead of the fee, the city will figure out some kind of organized panhandling initiative, whereby (and I’m serious) city staff will beg and “shame” nonprofits into paying for the streets around them. (Apparently it worked to some degree in Boston, but color me skeptical.)

All this is to say that, next year, everyone who owns property in Saint Paul’s taxes are going up by a lot. And also, the level of city services will probably go down at the same time. Not good!

But what is to be done?

I had a thought about this crucial question because, the other day, as part of my new role on the Zoning Committee at the Planning Commission, I uncovered an unique dynamic to the Saint Paul tax-base problem.

Permit me to explain…

One Example of a Non-Profit Parking Lot

The vacant lot at Bates and 6th, soon to be paved.

Metro State University, where I have taught a few times, is a Saint Paul-baesd multi-campus commuter-oriented higher education school that caters to non-traditional students. For example, in my Geography classes, there were many people in their 20s and 30s, and compared to the University of Minnesota, many more students were people of color, returning from the military, or working their way through school. They have different needs than some other, more traditional colleges.

And parking is one of them, apparently, maybe. At a Zoning Committee meeting a month or two ago, we were asked to approve a parking lot expansion as part of the campus’s new building and long-range plan. Metro State had purchased and demolished two or three houses just outside the edges of their campus boundary, at the corner of Bates Avenue and East 6th Street. Metro State wanted approval for a rezoning from residential to institutional zoning, to build a new 42-space surface parking lot complex next to their existing three-story garage.

(For more on Metro State’s parking policies, see this post by streets.mn emeritus, David Levinson.)

Map of non-taxed parking on Metro State campus.

When the school administrators came before us, I asked them about their Travel Demand Management policies (described above). During the conversation, one of them admitted that their existing 900+ spaces of parking was only at 60-70% capacity. And this was during peak school times. Their brand new parking lot was (almost) never full, and yet they were purchasing and demolishing tax-assessable land in order to expand yet more parking spaces.

The testimony only drew one person to City Hall, a young mother who had just purchased a house across the street. She asked why the school was building a parking lot, and whether they could put in some sort of neighborhood amenity instead, like a park or garden or simply some non-asphalt living things.

It was a good question, but the answer was the same: city parking minimums required that they build more parking, whether they needed it or not. And – lo and behold – after one of the dogged city planning staffers consulted the code, the claim was true. Saint Paul’s zoning requirements did indeed demand that that the school school build far more parking spaces than they needed.

The new Metro State three-story parking garage, which is only at 60-70% capacity, according to administrator counts.

City calculations of parking minimum requirements for Metro State.

And that’s a problem because parking lots, especially surface parking lots, reduce the tax base, add to stormwater runoff, increase the urban heat island, have an opportunity cost, make walking less appealing, and provide no habitat for wildlife. They are also, to my eyes anyway, quite ugly.

And yet we, the zoning committee, approved it because the school had not asked for a variance. The whole situation was frustrating, not just because I dislike unnecessary paving, but also because of the way the situation clashed with a the “Saint Paul tax base is broken” narrative.

If Saint Paul’s tax base is so broken, why is the city requiring so much low-value (and in the case of non-profits, zero value) storage space for empty cars?

The Time Where I Pick on the Churches and the Government

The basic rule of thumb is this: for every non-profit or government building, there is also almost always a corresponding parking lot that is at least as large in surface area. For every lovely tax-free historic church, ivy covered classroom, or Brutalist bureaucratic office complex, there is a much larger (by surface area) tax-free non-historic asphalt slab nearby. And if we’re going to focus on a solving the tax-base issue, we should focus on the second part of that equation.

In other words, from a policy perspective I have less problem with letting non-profits and institutions build useful, well-people’d buildings that contribute to the street life and vitality of Saint Paul. Though I would like these organizations to contribute to the basic maintenance of the streets and infrastructures that they use, there is a case to be made to let organizations like these go without contributing to the city’s tax coffers that fund basic maintenance.

But the same cannot be said for their parking lots. These are vacant asphalt spaces, most of which were once taxable livable property in the city, that have been paved over and used for the storage of empty cars. And the city loses a lot of money when it allows these tax-free parking lots survive, year after year.

There used to be three homes here on this land by Metro State.

The Metro State parking lot case, as frustrating as it was, illustrates a larger problem. In order to expand the not-needed parking lot, the school bought and tore down three existing homes on Bates Avenue. Curious, I looked up the tax and sale history of the homes. It turns out that they were purchased for somewhere in the neighborhood of $150-200,000 each, but were assessed at far lower values.

By my back-of-the-napkin math, the three homes would have generated about $5,000 per year in property taxes for the city and the county (according to 2016 dollars). Instead, these three properties are permanently off the tax rolls.

That might not seem like a big deal, and it’s not. $5,000 in property taxes for three properties is absurdly low. But this is pretty much a least-worst-case scenario for the tax base, in that the small homes in Dayton’s Bluff are very low value.

Non-taxed “Lot C” in the wintertime, at the corner of Rice and University.

Let’s look at another example, my favorite state government-owned parking lot right at the corner of Rice and University, next to the new light rail stop. This surface parking lot is owned by the State of Minnesota’s Department of Administration (which, along with the Capitol Area Planning Board, has autonomy over a huge part of the downtown periphery surrounding the state capitol). As near as I could figure out, digging around in the historical documents, this parking lot formerly housed an actual used-by-people building, but was torn down in order to expand parking for government workers and others. Basically, half a city block was cleared for parking in this spot, in order to create a tax-free surface parking lot on a main intersection in the city.

How much money does that loss of revenue amount to for Saint Paul? I’m going to pull a page from the Strong Towns playbook (the old “Taco Johns'” maneuver) and look at the next block up the Rice Street, which is still in private tax-generating hands. The block is lined with old, dingy mixed-use buildings that are not well kept up: apartments, a cell phone store, etc., perhaps some of the worst maintained historic property in the entire city.

 

The neglected historic buildings on Sherburne and Rice street.

But they generate an amazing amount of property taxes. Adding together all six of the parcels between Rice, Charles, and Sherburne Streets, they generate (as of 2016) $50,000 in annual property taxes, ten times the three Bates Avenue homes. Every year. They also house ten times the number of people.

And keep in mind that these properties are not well maintained. On the contrary, they are probably some of the properties with the the lowest return on their potential in Saint Paul.

I have nothing against Presbyterians. There are a bunch of similar churches on Summit Avenue and elsewhere.

Here’s an even more extreme example: Summit Avenue’s House of Hope church has the nicest organ on Summit Avenue, and on a street lined with dozens of churches that’s impressive. They also have a huge parking lot across the street, that taxes up about one-third of a long Summit Avenue block. For a surface parking lot, it’s pretty nice with hedges and lighting. And they lease it out to Mitchell-Hamline I think, for some of the time when it’s not used as a car storage for church goers. The lot is assessed by Ramsey County at $1.3M, as of 2016.

But they pay no taxes, of course, and this is prime property. And this land could be tax-generating land used for all number of things on Summit Avenue, most likely high-end housing. If you compare this tax-free parking lot to the houses across the Grotto Street, you can do the same kind of thing. The five parcels that occupy a similar footprint have four single-family houses (one with a split lot and a carriage house) and two mansions that are apartments. Together they are assessed at millions of dollars and generate (by my back-of-the-napkin math) … [drum roll] … $78,800 per year in 2016 property taxes.

(One observation: Why does one of the shoddiest blocks in the city pay almost as much in property taxes as one of the nicest blocks in the city?)

 

These are just three examples of how tax-free parking lots cost the city money through the direct loss of opportunity costs, with a few examples that range from some of the best kept and worst kept property in the city. How much annual “lost revenue” is there if you add up all the non-profit parking lots in the city? It’d hard to calculate but it’s surely millions of dollars.

The debate over how Saint Paul should deal with non-profits, universities, and government institutions is difficult. But one thing I wish we could do is separate the institutional wheat from the chaff. Nobody is really upset about the buildings with people in them that are part of the fabric of Saint Paul, the churches, schools, and government offices that contribute jobs or social benefits in different ways. But their parking lots are another story, and Saint Paul should absolutely figure out ways to minimize the use of tax-free surface parking lots that have been eroding the fiscal and social viability of the city for decades.

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27 Responses to It’s Not the Non-Profits that Keep Saint Paul Poor, It’s Their Parking Lots

  1. cobo Rodreges June 27, 2017 at 8:17 am #

    Do other cities have the ability to collect revenue from non profits & their parking lots to pay for infrastructure, police, fire, etc?

    St Paul has a lot of institutions in it but does it have more on a percentage basis as Minneapolis or even Mendota heights? Or is it that the institutions occupy valuable property like downtown.?

    Just curious. I get the concept that removing productive property with empty parking lots is setting things up for failure, I’m just wondering if there is more too it.

    • Bill Lindeke
      Bill Lindeke June 27, 2017 at 9:27 am #

      I have heard many times that Saint Paul has the largest share of its land taken off the tax rolls because of non-profits, government uses, and parks. This is probably ignoring super-tiny cities…

  2. Katie McCaskey June 27, 2017 at 9:05 am #

    Great post. I don’t live in Saint Paul but I see similar issues in my small town in Virginia. Thanks for highlighting the parking vs. tax base issues. (And unpleasant walking environment, increased stormwater runoff, raised heat island effect and lack of wildlife habitat, etc….!)

  3. Kele June 27, 2017 at 9:36 am #

    I’m sure we can’t forget the loss of tax base and property values because of the interstates, right? (But this applies to Minneapolis also.)

    Does St. Paul get any sort of money for providing the service of being the state’s capital? I imagine not but maybe the city can make its case?

    • Bill Lindeke
      Bill Lindeke June 27, 2017 at 9:41 am #

      The cat’s out of the bag on that one, I’m afraid.

  4. Jeff June 27, 2017 at 9:43 am #

    Even today the decision to add parking lots is questionable, but what about in 5-10 years when, supposedly, driverless cars will start to penetrate the market. If the useful life of a parking lot is 50 years (that’s my guess), how can anyone justify the cash outlay with that kind of uncertainty in the future of transportation?

  5. Jim June 27, 2017 at 9:58 am #

    These parking lots are certainly a drain. But we’re forgetting the city itself holds a lot of real estate that could be privatized. In downtown the city and port authority own six ~1,000 space parking ramps. Imagine how much property taxes those structures would pay?

    Or how about the US Bank office buildings on the west side. The parking ramp next to it.. city owned. How many people are aware that the parking ramp attached to the Spruce Tree Center is city owned? Seriously, what a joke. City officials cry about LGA cuts and having such a high percentage of tax exempt property, yet they’re sitting on tens of millions of dollars worth of property that could be sold to private entities.

    • Bill Lindeke
      Bill Lindeke June 27, 2017 at 10:01 am #

      Ramps are expensive to build, maintain and tear down. If we start developing surface lots, maybe expensive ramps will make marginally more fiscal sense.

    • Matthew Steele June 27, 2017 at 10:06 am #

      Great point. Parking is not public infrastructure. Cities should be selling these parking facilities and getting them back on the tax rolls.

      • Bill Lindeke
        Bill Lindeke June 27, 2017 at 10:15 am #

        As long as they don’t sell them under market value. I’d rather cities develop them and then sell the development, if they are going to shed these lots.

    • Benny June 27, 2017 at 1:37 pm #

      The thing is with the ramps, the city charges use fees when someone parks in em. That’s money directly to the city. If they sell them off to private companies, they can only collect tax on the property and maybe the generated revenue. Selling would cut down on city expense in maintenance, but it also cuts out a good sized chunk of the revenue. In this case, they’re pretty much cutting out the middle man from the revenue stream.

      • Jim June 27, 2017 at 4:03 pm #

        I’ve seen in HRA reports the city’s parking revenue streams net the city about $5 million in profits a year. The city could earn much of that back in property tax revenue, less maintenance costs, and less debt service.

        Not to mention the sale profits from selling the structures themselves. Minneapolis sold many of its ramps years ago and netted almost $90 million total.

  6. Quinn June 27, 2017 at 10:23 am #

    Damn fine research and analysis. What do you think the mechanism for lot reductions for these non-taxable entities would look like?

  7. Nat Case June 27, 2017 at 10:24 am #

    Is selling air rights/development rights an option? How possible is it for a non-profit to sell property while retaining the right to park X number of vehicles there? Seems to me like there’s opportunity, especially in high-value locations, to combine some kind of ramp or covered parking with development (cf much of downtown Minneaopolis…)

  8. Monte Castleman
    Monte Castleman June 27, 2017 at 10:39 am #

    When Grace Church was in Edina they were very close to a commercial area, so they ran their shuttles from the public parking ramps after they were denied permission to expand their parking lot. This worked well since the peak parking time for churches is one of the slowest times for commerce. (Eventually they decamped for Eden Prairie when it was clear Edina would no longer approve their plans to raze and rebuild their worship center and at any rate even those plans became inadequate. And the church that bought the building even sold off some of the parking lot for residential development). However most churches are in residential areas, far from parking ramps and have worship times when demand for street parking is greatest. My father was deacon of property for a Bloomington church and any time a worshiper parked on the street because the parking lot was full they got angry phone calls from neighbors.

    Also, some churches attract people from all around, so alternatives to driving are not workable. First Covenant Church considered moving both their church and school, Minnehaha Academy to the western suburbs due to having aging buildings on cramped lots with a high land value, but ultimately did not because while their base was largely not from the neighborhoods, moving to say Plymouth would make it ugly for people to come on the east side of the metro. (I understand Minnehaha Academy is still largely suburban, but First Covenant has become a neighborhood church and is redeveloping some of their property).

  9. Eric Saathoff
    Eric Saathoff June 27, 2017 at 11:02 am #

    At least First Covenant Church shares its lot with neighboring Farnsworth so the school district doesn’t feel the need to build a massive parking lot.

  10. Eric Saathoff
    Eric Saathoff June 27, 2017 at 11:07 am #

    parking lot st paul

  11. David Markle
    David Markle June 27, 2017 at 11:33 am #

    You’ve pointed to a definite problem, Bill, and it’s good that you have several podia (including streets.mn) to spread the news. I hope you also do the same for another of St. Paul’s big fiscal problems, actually a fault: the overuse of tax increment financing.

  12. cobo Rodreges June 27, 2017 at 12:38 pm #

    Here’s a thought experiment.

    What if all parking was required to be private, and was subject to moderate to high taxes depending on density and use that money to fund mass transit? Couldn’t market forces balance supply and demand?

    Rates wouldn’t necessarily be too outrageous. But all of the surrounding communities would need to do the same to prevent business fleeing to the suburbs.

  13. Jonathan Lord June 27, 2017 at 2:54 pm #

    Seems like we’re missing the point. The number of required spaces the city is demanding is out of proportion with the number of actual users. Let’s adjust the required space count.

  14. Margot June 27, 2017 at 6:12 pm #

    Bravo! Great framing and research. And yes! We also need to reduce the # of required parking spaces, the lack of use of which must exceed other cities too.

    • Bill Lindeke
      Bill Lindeke June 28, 2017 at 2:26 pm #

      I am hoping to help the city do this.

  15. Juvenal June 27, 2017 at 9:46 pm #

    Great article. The city really needs a rationalization of its property tax structure. Perhaps even we could do something really progressive like slowly implement an LVT and ratchet down the traditional (and badly broken) property tax system.

    Good luck spreading the message.

  16. Chuck June 29, 2017 at 7:13 am #

    Hello all,
    This is my first post to streets Mn. I read it all the time since I live in Saint Paul and work in the transportation industry and just want to give a shout out to all the people that contribute to the transportation conversation, most articles I have read have been well thought out. Anyways to get to the point. I could not agree with you more about the vital need to shore up this big non-profit hole in our property tax base. My idea to tackle that is this. First Saint Paul has to have the adult conversation of…… is it ok to tax non profit? They pay their power bills don’t they? They don’t get a pass on any of that stuff why should they get a pass on road maintenance taxes? Does Xcel say ” since you are non-profit you don’t have to pay any utility bills” ? Of course not they charge them. Our transportation infrastructure is a basic utility needs by all so no I don’t think they should get a pass on road and sidewalk taxes. Now I am willing to go out on a limb, and say that I am ok with not taxing churches and their parking lots, but it is high time that our major universities and ( Macalester, St Thomas,St Kate’s,William Mitchel , etc…….most of these schools are sitting on some pretty hefty endowments and I know they are not going to go bankrupt to provide their fair share. Another area of. On profits to tax are hospitals. I know people that have been put into the poor house because of obscene hospital bills Do you mean to tell me they can’t afford it either? It is time we have this conversation to say “it’s ok for some nonprofits (universities,hospitals etc…) to be taxed.
    Lastly I want to end with this………..I have never heard this mentioned before as an alternative to find more taxes. Saint Paul has the legal ability to create a 0-2% sales tax that is DEDICATED to road and sidewalk construction only. I am a property owner in Mac-Grove , so to me by taxing not only property owners (a guess but property owners are maybe only 40% of the actual population of Saint Paul) but the rest of the infastructure users it is a much more equitable way for all users to pay. It seems like Saint Paul only answer to get more money is to raise more property taxes. If we applied this sales tax we could start to actually see progress and maybe other cities (Minneapolis ) would envy us and copy our great idea instead of the other way around.

    • Eric Saathoff
      Eric Saathoff June 29, 2017 at 9:03 am #

      Just a reminder that everyone who has a home in St. Paul pays property taxes, whether they rent or own. The owner of an apartment complex doesn’t pay property taxes out of his/her own pocket. That comes out of rent, and as I understand it apartments are taxed more than single family homes.

      Also, someone please correct me if I’m wrong, but 501c3 status is a federal thing. Our city doesn’t have the choice to just start taxing non-profit organizations. There have to be other means, one of which was just struck down as a tax by the Minnesota Supreme Court.

      http://www.twincities.com/2016/08/24/st-paul-minnesota-right-of-way-taxes-supreme-court-rules-assessments/

  17. Mitch Grussing
    Mitch Grussing June 30, 2017 at 1:06 pm #

    I’ve seen this issue of St. Paul parking minimums mentioned before. Is there any hope of either repealing or amending this? Seems like an out-of-date policy for a city that should be pivoting toward transit.

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