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Priority: Taxes and Participatory Budget [Detailed]

Dear Citizens,

Our nation fought for independence on the principle, “Taxation Without Representation”. Currently, it is expected that property taxes may increase by 11% this year with 7% from the mayor’s budget. For those on the margin or on fixed income they may not be able to afford to live here. It is important for the public to understand:

  1. How is our taxes allocated where basic services/infrastructure are not funded?
  2. Why do taxes keep increasing, and will continue to increase?
  3. How much influence do citizens have on tax spending and how are they impacted?

To decrease property taxes and/or or keep them low  :

  • Responsible spending i.e. participatory Budget (get more for less)
  • Increased/build mixed commercial/ residential development, which has greater value per acre. Some residential ordinances can change to mixed development through some streets
  • Empower local entrepreneurs and incentivize hiring locally by giving subsidy (ex: one dollar subsidized on hourly rate)
  • No more spending millions on tax subsidies to developers that don’t need it  

My administration also would like to implement a participatory budget where a citizen can distribute a portion of their tax dollars to public proposals and have approval authority. The participatory budget is groundbreaking because it get all citizens involved, independent of electoral cycle,  and encourages wealthy citizens to give more if they choose.  The following graphic summarizes this:

Prior to getting into the details, it will be useful for citizens to have a broader understanding of the city’s tax profile and how the participatory budget seeks to amend this.

How is our taxes allocated? 

The mayor has the power of the purse (i.e. strong mayor system). They can draft the budget, which includes funding essential services and supplementary programs with some limited oversight from the city council. Taxes tend to be allocated cyclically (or in a pendulum fashion) based on “partisan” priorities.  Liberals want to spend money on social programs by underfunding essential services, while fiscally conservative want to fund essential services by reducing spending on social programs. 

In stage 1, liberal mayor(s) are in office, spend on social programs, and underfund essential services. The benefits are the social program recipients, and the consequences can be lack of infrastructure and public safety. For voters, when consequences overweighs benefits they will elect a fiscally conservative mayor(s). The fiscally conservative mayor(s) will now have to reallocate (or cut) funding from social programs to make up for underfunding of basic services. The benefit is that basic services are funded, and the consequences are those cut of social services. Since St. Paul’s voter base is liberal, they will elect a new liberal mayor to bring back those social programs like “the good old days”, though it will have to come from underfunding basic services, and thus we are back to Stage 1 again. Notice the following:

  • Funding basic public services and social programs are highly volatile making those directly impacted vulnerable to changes (increasing partisanship) 
  • In partisan politics, the budget is a zero-sum game and can be used to garner votes (ex: defund/fund the police)

Incumbent mayor Carter is a liberal mayor (stage 1) that prioritizes money to social programs, and policing alternatives  by underfunding routine infrastructure maintenance and the SPPD. This is an effective partisan/political maneuver, because Carter can bolster his legacy, in the present,  and let his successor (liberal or fiscally conservative) handle the funding crisis. The austerity measures will make the new mayor unpopular, while bolstering Carter’s even years after leaving office, which can be of great benefit if running for higher office, i.e. career politicians.

Why do our taxes keep increasing?

Aside from tax allocation, Saint Paul taxpayers will be paying nearly half a billion dollars in tax subsidies to developers for some affordable units, via tax-increment financing (TIF). The long story short is subsidizing new developers to designate some affordable housing units, which translates to a continuous steady increase in taxes to pay off subsidies for over the next two decades. I would like to highlight that TIF is supposed to be used to spark development in under-developed communities, and yet we are offering TIF in the most lucrative real-estate market in our city.

TIF is a popular tool around the country for politicians because there are short-term benefits i.e. affordable housing is being built, and the costs are distributed long-term to taxpayers. In addition, the money that is allocated from TIF funding is separate from the general budget, which allows for wasteful spending without much accountability [See ]. Even if I’m elected to office, the existing TIF agreements cannot be revoked, however, I can limit future TIF spending on future developments. In the graphic below, I explain how TIF works and summarize why we should be concerned. Also see housing policy for more details

How does high taxes impact citizens?

The city of Saint Paul mainly gets revenue through property taxes and/or business fees, so an increase in taxes will impact those parties. The following graphic/table summarizes the impact, in addition, for the long run, increased taxes will price out the middle class, and lower class who do not have protected housing status. If displeased wealthy citizens leave in masse, the city may experience urban blight.

How do we reduce taxes and/or keep taxes low?

For my administration, I take a “Yes AND” approach where we can fund basic services and community programs. To be able to support this without raising taxes, we would need to increase our tax base, which can be achieved with more tax-paying residents living in the city, higher property values, and more compact economic development. Overall, we need to increase the economic growth of our city, Saint Paul needs to be a cultural hub that can compete with Minneapolis. My specific economic policies will include:

  • Responsible spending i.e. participatory Budget (get more for less)
  • Increased/build mixed commercial/ residential development, which has greater value per acre. Some residential ordinances can change to mixed development through some streets
  • Empower local entrepreneurs and incentivize hiring locally by giving subsidy (ex: one dollar subsidized on hourly rate)
  • No more spending millions on TIF (tax-increment financing), for developers that don’t need it  

How does a participatory budget work?

A participatory budget is simply taking a portion of the budget (i.e. a lump sum) and giving citizens the ability to decide how to spend the money (i.e. participation). The basic services, maintenance, and operations, will be determined by my administration, and any supplemental programs can be covered by the participatory budget, which includes mayoral programs. The proposals are open to the public, so citizens and non-profits can come up with proposals. 

Traditionally, for participatory budgets is administered as the following:

  • Suppose the Park and Recreation department implements a participatory budget, where they put aside $1 million for citizen proposals and programs. The citizens then draft the proposals. A committee within Parks and Rec can choose what proposals to approve, and/or they can add an extra step to let citizens vote which of the final proposals are selected. Prior to building the digital infrastructure, my administration may implement it through traditional means.

My ideal implementation (2nd or 3rd year in office) is the following:

  • Citizens can individually allocate their tax dollars to programs of their choosing. The more taxes a citizen pays, the more they can allocate. Although renters do not directly pay property taxes, they are paying indirectly to property taxes from the landlord, so they will be attributed with a portion. Citizens also have the ability to approve and/or disapprove projects.
  • Citizens that are too busy and/or don’t have time to participate, their taxes will go into a pool fund. The pool fund can be distributed by the mayoral administration, and technologically permitting, it can expand to a democratic process  
  • All proposals need to fit certain criteria, including budgeting, staff, and performance metrics before it can be displayed publicly. 
  • A proposal is finalized if it has met funding goals, and there is approval from many citizens. The citizen approval is implemented to avoid scenarios where wealthy persons are just funding their own projects.
  • Finally, there can be an option for citizens to voluntarily put more money than their allocated share to fund more projects [capped at certain value]. This is appealing to those wealthy residents that want to pay more   

How will it be implemented for wide range of audience?

For the internet capable, there will be a digital civic engagement platform for citizens to engage and view proposals. For the non-internet capable, citizens will be given a hand printed paper copy of the available programs out there. The participatory budget default option is the funds will go to the general fund, which places less burden for less abled to participate. It’s citizen duty to participate if they choose to. There will be trainings available to specific elderly locations and in libraries in how to use the platform. See my digital infrastructure priority to learn about the prototype