Property tax gains that would otherwise flow into the capital city’s general fund could be redirected from 21 square blocks of downtown St. Paul into $38 million of construction improvements to the downtown RiverCentre, Xcel Energy Center and the convention center parking ramp through the year 2033.
On the eve of its scheduled expiration, state legislative bills in the House and Senate would extend a large downtown St. Paul “tax increment finance” district by another 10 years. The “Minnesota Events” TIF district, created under another name in 1978, was extended for 15 years in 2008 and otherwise set to run out this year.
“If the RiverCentre is the most important economic driver downtown, it’s in our best interest to make sure we have a revenue stream that is investing back into that space,” said St. Paul Deputy Mayor Jaime Tincher, in an interview Thursday. “Combined, over 1.7 million people attended events at the arena and RiverCentre complex for 2022. Last year, we were back to pre-pandemic attendance levels. We would argue we are still in recovery from COVID, and that convention center complex is just critical to our future.”
Alarmed, Ramsey County officials scrambled last week to negotiate a carve-out of sorts for the county with their St. Paul counterparts, with the discussion roping in Tincher and Ramsey County Manager Ryan O’Connor, among others.
With the Legislature adjourned until April 11, it remains to be seen if and when the proposed legislation will be amended.
TIF districts
TIF districts, a type of tax incentive for real estate development and redevelopment, shuffle property tax gains that would otherwise go to city, county and school district general funds and redirect the revenue into real estate projects on-site, effectively keeping tax increment within the district to spur development.
For developers, the negotiated TIF agreements typically offset the costs of environmental clean-up, sidewalks, sewer connections and other municipal obligations, though more than a third of some 1,600 TIF districts in Minnesota pay for affordable housing or other special projects.
Proponents say many of the proposed projects would not exist but for TIF, raising the hackles of critics alarmed by what they deem to be its overuse.
Minnesota has hundreds more TIF districts than any state in the nation other than Iowa.
Elton John, the Frozen Face Off and city sales tax
In St. Paul, officials hope to rely on the downtown “Minnesota Events” TIF district to generate $3.8 million per year, for a total of $38 million over the next 10 years, to pay for capital improvements to the city’s convention center, Roy Wilkins Auditorium and the adjoining Xcel sporting arena, as well as the public parking ramp across the street.
The funds probably won’t be enough to cover a full replacement for the poorly-aging parking ramp on their own, but they’d provide a dedicated funding source for roof repairs, technology upgrades and other mounting costs, Tincher said.
Until now, revenue from the downtown district has been restricted to paying debt service on the St. Paul Housing and Redevelopment Authority bonds that funded the creation of the RiverCentre complex.
To illustrate the importance of maintaining the X, Tincher pointed to March 2022, the highest month on record ever recorded for sales tax collection in St. Paul. The city returned $31.2 million in sales tax collection to the state in that month alone. Among the events drawing residents and city visitors that month, the X hosted high school wrestling and hockey tournaments, the National Collegiate Hockey Conference’s Frozen Face Off, 12 Minnesota Wild games, and crooners Elton John, Journey and Billie Eilish.
“This complex, with the athletic events, concerts, meetings and other events it attracts, is one of the most important economic development drivers in downtown St. Paul, and one of the most important in the region,” said Nicolle Goodman, director of Planning and Economic Development for the city, in an email.
“The complex and related events generate a great deal of sales tax, hotel occupancy tax and many jobs,” Goodman said. “It is critical that we have every tool available to continue to invest in the complex.”
Critics
TIF has its critics. For 2021, the St. Paul HRA reported $28.6 million in TIF revenues, on top of $6.9 million in TIF revenue through the St. Paul Port Authority. Taken together, that’s more than $35 million that isn’t flowing into city, county or school district general funds.
“We’re not big champions of TIF,” said Ramsey County Commissioner Rafael Ortega on Wednesday. “Whenever we’ve OK’d them, they’ve been for very specific things, and that’s very rare. You want to get whole eventually. It’s like any other instrument — (it’s good) if it’s used correctly. You invest up front, you build up the district, and then the hope is it becomes independent (of TIF funding). It’s like being 60 years old and having a child who never left home.”
Those concerns were echoed by John Mannillo, a former downtown property owner and chair of the community coalition St. Paul STRONG. Downtown St. Paul and the West Side Flats area south of the Mississippi River maintain nearly a dozen different TIF districts between them, some of them spanning a single property, and others stretching across multiple city blocks.
Mannillo pointed to mounting city priorities, from road repair to parks maintenance, which the city has sought to fund with a new sales tax rather than burden property owners with higher property taxes.
“The problem we have in St. Paul is we have no money to do what we need to do,” said Mannillo on Wednesday. “By extending a TIF district, it’s depleting our tax base. Usually, downtowns are the commercial tax bases for city. It’s not in our case.”
A 21-block downtown TIF since 1978
After its creation in the fall of 1978, the “Downtown and Seventh Place TIF District” covered certain costs related to development projects such as the World Trade Center/Wells Fargo Place, the Minnesota Children’s Museum and a Wabasha streetscape project.
From 1978 to 2007, the 21-square-block TIF district generated some $188 million in tax increment, drawing $477 million in public investment, according to the county.
In 2008, the city of St. Paul’s Housing and Redevelopment Authority sought to extend the TIF district by another 15 years, into the year 2023, in order to pay for bond obligations issued by the city in 2009 for the downtown RiverCentre Arena. The TIF district was renamed the “Minnesota Events” district.
Taken aback, Ramsey County officials at the time objected to the county being cut out from property tax gains within the district for another 15 years. They successfully lobbied for the county to be paid its share of property tax revenue moving forward, as well as $2.2 million in excess TIF that had been generated through the original funding agreement.
“The biggest concern is that’s money (that we would otherwise) use for our operating budget,” said Ortega, recalling the discussions from 2008. “It’s part of our taxes, the income, the revenue stream.”
Discussion resurfaces last week
Fast forward 15 years, and the same disagreement between the city and county has resurfaced.
A legislative bill authored by state Sen. Sandy Pappas, DFL-St. Paul, to amend the TIF language was introduced to the Senate Committee on Taxes on March 30. A similar bill in the House has six authors. If approved, the proposals would extend the life of the Minnesota Events district into 2033.
Tax increments from the district would be directed toward capital improvements within the RiverCentre, though the bills clarify that includes the Xcel Energy Center, Roy Wilkins Auditorium and St. Paul RiverCentre parking ramp, as well as adjacent areas controlled by the city.
Discussions between city and county leaders last week resulted in another arrangement, similar to that of 2008, to ensure Ramsey County is paid a sum equivalent to what it would net from property taxes generated within the district. “We’ve been through this before,” Ortega said.
County Commissioner Trista MatasCastillo, who chairs the county board, said she was confident the final legislation would include a carve-out for the county.
“We worked with the city last week to make sure the extension wouldn’t have negative impacts to the county,” MatasCastillo said. “TIF is hard to get your head around, and there’s a lot of moving pieces at the Legislature. This bill came in, they worked out the details in the city, and we’re in a good spot.”
