Update: At its Wednesday, July 24 meeting, St. Paul City Council approved the expansion of the St. Paul Downtown Improvement District.
Who should pay additional dollars to keep downtown St. Paul safe and clean?
Since 2020, commercial and industrial property owners have provided the bulk of funding for the city’s Downtown Improvement District. But a plan to nearly triple the district’s footprint and double its operating budget would tap a new group of fee payers: downtown homeowners.
The St. Paul City Council, which could vote on the plan as early as Wednesday, was able to consider adding residential property owners to the mix because of a 2023 state law change, said Joe Spencer, president of the St. Paul Downtown Alliance, which manages the improvement district.
Minnesota law previously prohibited cities from applying mandatory special assessment district fees to residential property owners, placing the burden on commercial and industrial property owners. Other parties – including exempt property owners and city and county agencies – could contribute to the district voluntarily. Now, residential properties can be included in the assessment.
“The notion there (from the Legislature) is, if people are going to be affected by a fee, and they’re going to be included in this new district that is for the private sector, by the private sector, you have to include them in the process,” Spencer said. “So we started a new process for a new district with a new universe of participants.”
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While those who own homes or condos downtown — including Lowertown — would be included under the proposed plan, these owners would pay 40% less than what a commercial property owner pays for the district. Under this model, residential property owners would cover a little less than 25% of the expanded improvement district’s budget, which would increase from $1.3 million to $2.7 million a year. Commercial and residential property owners would cover about $2 million, and the city and Ramsey county would contribute $439,000 and $243,000, respectively.
There are two reasons residential property owners would pay less, Spencer said. First, this percentage breakdown of the fees is considered general best practice across the country in states where residential properties are approved in these districts. Second, there are fewer people per square foot in residential than in commercial properties, he said.
Downtown residents at the final public hearing for the proposal held last week said they would likely pay around $5 a month in assessment fees. Spencer said those comments were in reference to the cost estimated to be paid by the average condo, which totals around $65.50 per year.
Downtown improvement districts are a common model used across the country, Spencer noted.
For example, Minneapolis has touted its downtown improvement district for about a decade. Downtown Minneapolis residents don’t currently pay fees toward the district, and city officials did not respond to a request for comment before publication on whether the change in state law will lead to changes there.
Patrick Skinner, St. Paul Downtown Improvement District treasurer and chief management officer of Unilev Capital Corp., said at the hearing that his company, which owns the Wells Fargo Place office tower, has reaped the benefits from the improvement district.
Unilev Capital Corp. owns a total of about 5 million square feet across the country, including in cities like Billings, Montana; Knoxville, Tennessee; Cincinnati, Ohio; and St. Louis, Missouri, Skinner said. Some of these cities have downtown improvement districts while others don’t.
“I can tell you that a downtown improvement district is a key tool for downtown to be successful,” Skinner said.
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St. Paul’s downtown district was first created in 2020 via council ordinance. This year, a new steering committee was formed to include both commercial and residential property owners, including Skinner.
“I would challenge some of those who said this is still an experiment. It’s not. It’s a proven concept. And now it’s time to expand that to the rest of downtown as a best practice,” Skinner said.
Other property owners, however, are opposed to the district’s expansion.
In a July 10 public comment letter to the St. Paul City Council, an attorney representing Madison Equities, the company that owns the most property in downtown St. Paul, painted a bleak picture of downtown and questioned the idea that private property owners should pay an additional fee for the district.
“Any increased tax dollars would be better spent elsewhere, including the hiring of more real police officers to provide enhanced safety,” wrote the attorney, Kelly Hadac.
At the same time, Madison Equities is looking to leave downtown for good, as all of its properties there are up for sale.
Winter Keefer
Winter Keefer is MinnPost’s Metro reporter. Follow her on Twitter or email her at wkeefer@minnpost.com.
