The requested two (2) year local option tax will add $1.50 per $1,000 assessed value to the City’s permanent tax rate. This tax revenue would go into St. Paul’s General Fund. This tax will be used to replace an existing local option tax due to expire this year.

What is the General Fund?

The General Fund pays for most city expenditures not covered by the City’s Sewer, Water, Street, and other dedicated funds, including such services as police, city council business, administration, finance, property management, record keeping, and planning.

Why does St. Paul need additional General Fund Revenue?

The City currently gets funding from a small permanent tax rate and a temporary local option tax to supplement the General Fund. The temporary tax will expire June 30, 2003. Without additional tax revenue, the City must rely on the permanent tax rate to support the costs of these services. Based upon FY 2002/03 budget information, tax revenue collected for General Fund purposes will be reduced from approximately $40,740 to approximately $11,500; unless, another local option tax is approved by the voters. Without additional funding the City will be required to reduce budget levels within the General Fund to compensate for the loss in revenue.

The City is legally required to carry out General fund functions relating to a variety of issues such as police service, property management, development, and City Administration. These issues are currently being addressed with one full-time employee, limited consultant assistance, and citizen volunteer contributions. The local option tax is needed as the City’s current Permanent Tax Rate provides insufficient resources to adequately address these issues and run the day-to-day business of the City.

How much tax revenue does St. Paul currently collect?

The current property tax rate for the City of St. Paul is a combination of three separate taxes totaling $3.6007 per $1,000 of assessed value. If voters approve the proposed local option tax, the City’s combined tax rate will be $2.6727 per $1,000 of assessed value.

Permanent Tax Rate $0.6157 $0.6157

Bond Rate $1.4850 $0.557

Local Option Tax $1.50 $1.50

Total $3.6007 $2.6727

What should citizens know about the requested local option tax?

Under state law, the City cannot increase its permanent tax rate. It may ask voters to approve temporary tax measures. The revenues from the measure must be put into a separate fund and can only be used for the purposes stated in the measure. If the recommended measure is approved, the City would collect the first year’s revenues beginning in fiscal year 2003/2004. If the local option tax is not approved, the City will only collect taxes at the permanent tax rate.

The impact of the proposed levy on an individual homeowner will vary by the value of the home. At the proposed combined rate of $2.6727, property taxes on a $150,000 home would be $400.91 per year.

Submitted by,

Ignacio C. Palacios