A Minnesota Judge Throws the Book at Immoral Tax Assessments

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In my time working as an engineer for cities across Minnesota, there were few practices I found as corrupting or immoral as the direct assessment of routine maintenance. In a recent ruling, a Minnesota District Court Judge agreed this common municipal practice is illegal. He chose different categories of questions to analyze in making his decision, but I’ll take it.

A direct assessment is a charge that a municipality levies against a property owner for something that disproportionately benefits that property owner. For example, when a city takes a dirt street and spends the money to pave it, that investment in pavement provides a direct benefit to the property owners on the street. The value of their property increases. 

The city is allowed to charge the property owner (through the assessment process) the cost of paving the street, so long as the cost doesn’t exceed the benefit accrued to the property owner (how much the property went up in value). If the city spends $10,000 to put a new street next to your property, and your property increases in value by $10,000, the city can legally charge you the entire cost of the project. 

This process is generally fair and, while it can be abused spectacularly, that abuse tends to be of the subsidizing-the-rich-and-well-connected variety rather than the predation-on-the-poor-and-disadvantaged type. Predation on the poor—as well as others more broadly—is what frequently happens when cities assess maintenance

Go back to the new street example. Your new street was built and you paid an assessment for that. Then you pay taxes to the city for, among other things, maintenance of the street. In states like Minnesota, where local governments are funded predominantly through the property tax, taxes will actually go up after the project because the property is now worth more with the new street. What happens when the street needs to be maintained? What happens when the city needs to spend money to seal cracks, replace the pavement surface, fill potholes, or even sweep the streets?

None of those maintenance services provide what in legal terms is called a “special benefit” or a “direct benefit” to the property owner. In other words, none of those maintenance services make the value of a person’s property go up. Without that direct benefit, the money spent must be collected through a tax, not an assessment. As the judge writes in this ruling, “Taxes which are not uniform to all property owners in a municipality are only legal where there is a showing of special benefit to the property owners charged.”

St. Paul, in this instance, was charging their residents an assessment to pay for basic street maintenance. They lost a similar case in 2016 and, in response, narrowed the parameters of the maintenance program and changed some of the language in their charter, but to the same effect. The exact wording of the judge is important here:

Whether it categorizes the charges as fees or taxes, the primary purpose of charging individual property owners in these cases for four of the same services remains to raise revenue to pay for regularly scheduled maintenance. Whatever a city’s charter may say, the municipality may not violate the state constitution. The City cannot merely recharacterize the same charges for services using different words to achieve a different result.

I’ve had this discussion with more local officials than I can estimate. They all insist to me, in one way or another, that they have the right to charge an assessment for routine maintenance. Courts have been very clear on this. As this judge reiterates, “…the Court finds that the phrase [“property benefitted”] indicates that a benefit must be shown to a specific property in order for a special assessment to be legally justified.” 

They can’t legally charge assessments for maintenance, but they still do. That is problematic enough, but it’s the next part that makes it corrupting and immoral.

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