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Legislation to permit street fees riles property owners

Drew Kerr//April 24, 2013

Legislation to permit street fees riles property owners

Drew Kerr//April 24, 2013

A $23 million road project due to begin this year in Hopkins will widen and improve Shady Oak Road between Highway 7 and Excelsior Boulevard. City officials say collecting street fees from adjacent property owners could allow it to preserve the new infrastructure. (File photo: Bill Klotz)

Backers of state legislation that would allow cities to collect street fees call it an intuitive way to pay for long-term maintenance and soften the financial blow of major reconstruction projects.

Opponents call it a poorly disguised tax hike that flies in the face of lawmakers’ pledge to provide property tax relief.

A group of more than two dozen business associations, building owners and commercial developers — called the Coalition Against Municipal Street Improvement Fees — are fighting bills in the House and Senate that would allow cities to use fees as a new way of paying for roadwork.

The group includes the Minnesota chapter of NAIOP, the Commercial Real Estate Development Association; the Building Owners and Managers Association of Greater Minneapolis; the Minnesota Chamber of Commerce; and the Minnesota Retailers Association.

A bill sponsored by Sen. Jim Carlson, DFL-Eagan, limits how cities can use street fees and is included as part of the Senate’s larger transportation bill. A more expansive bill sponsored by Rep. Ron Erhardt, DFL-Edina, was to be debated Wednesday as part of a House tax bill.

Proponents who have spent the last decade trying to win support for the legislation say they are optimistic some form of street fees will be approved this year. But the coalition against the fees is hoping for another victory.

The coalition argues the legislation gives cities too much latitude to use what they describe essentially as a property tax hike and says the fees stray from a benefit test used when cities levy assessments for major reconstruction. With assessments, cities have to show a direct property value benefit before recovering costs from property owners.

“I just think it’s very disingenuous to say we want to provide property tax relief but then take it out of the other pocket and call it something else,” said Kaye Rakow, director of public policy for the Minnesota chapter of NAIOP, the Commercial Real Estate Development Association.

Cities now pay for road repairs through property tax levies and state aid — sources that fee supporters say are too unreliable to use as the basis of a routine maintenance plan.

Smaller, incremental fees would spread the costs more fairly while prolonging the need for costly reconstruction by tripling the life of a street, they argue. Assessments for large road projects can cost property owners thousands of dollars.

“This is called preventative maintenance that in actuality has the potential to save taxpayers money,” said Carlson, the Senate sponsor.

More than 80 Minnesota cities have passed resolutions supporting the legislation, including Brooklyn Center, Edina, Hopkins and Minnetonka. Minneapolis has not expressly backed the proposal but broadly supports “alternative sources of revenue for transportation improvements.”

Anne Finn, assistant intergovernmental relations director for the St. Paul-based League of Minnesota Cities, said it’s unclear how many cities could use street fees but that many are at least interested in the idea.

The legislation doesn’t compel cities to use street fees but gives them the option after adopting a maintenance plan that provides an estimate of how much would be collected.

“I think a lot of cities are just supportive of having another tool,” Finn said.

Alyssa Schlander, vice president of external affairs for the Minnesota Automobile Dealers Association, is among those worried about how cities will use that tool. Schlander has spent 15 years battling street fees and became involved when a previous proposal linked assessments to traffic counts.

The new proposals allow cities to decide how to set and collect fees, but Schlander said that ambiguity is equally troublesome.

“It’s a really scary thing for those of us who are worried about the bottom line,” she said.

Mark Maloney, Shoreview’s public works director, understands the resistance but says paying for street repairs with property taxes is a “failed approach.” Maloney said street fees shouldn’t be viewed any differently from sewer or water infrastructure, which is funded through fees.

“It’s just not intuitive to do long-range management with this year-by-year approach,” he said. “We have user fees and utility fees that pay for our other forms of infrastructure, but roads are just this odd duck.”

Shoreview will spend $300,000 on seal coating and another $50,000 to fill cracks this year. If street fees were collected to recoup those costs, city funds would likely be used to pay for a new kind of road repair that turns deteriorated asphalt into road base.

In Hopkins, city engineer John Bradford said the city will spend $80,000 on street maintenance this year but that he could justify spending 15 percent more. Like many cities, Hopkins is replacing decades-old roads and hopes to preserve new infrastructure as long as possible.

“If we can stretch these roads for another 40 or 50 years, that’s real value,” Bradford said.

Wayne Houle, director of engineering in Edina, said the more extensive House bill would help the city accelerate road reconstruction. Nearly half of Edina’s 220-mile street network needs to be rebuilt, but the city is now able to do just five miles a year, he said.

“If we’re going to do it, we want to do it right,” he said.


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