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

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

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.)

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.

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.

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.

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.

 

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.

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.