St. Paul considers fee on students

By Eliot Brown

In a move that would skirt Macalester’s educational tax-exempt status, St. Paul councilmember Jay Benanav is proposing a fee of $25 per-student for all private colleges and universities in the city. Benanav proposed the idea in part as a response to a tight city budget, which would bring in over $40,000 a year from Macalester and over $800,000 from 11 citywide campuses. Macalester and the other colleges are openly attacking the proposal. The citywide fee would be a first in the nation, college officials say, and they have criticized it as insensitive to the benefits colleges bestow on the community and unfair given their status as educational institutions.

The idea is still far from a formal proposition, Benanav said, and is currently being researched by the city. If it moves forward, it would not become part of a bill for a number of months. In the next few weeks, Benanav said, he will try to create a task force to look at college-community relations and consider the idea of the fee.

Benanav, who proposed stricter regulations on students housing in 2003, has said that colleges use city safety services, and it is not necessarily fair for the other citizens to bear the cost of providing those. In 2004, between police and fire, the colleges and universities had “in the neighborhood of 1,000 calls,” Benanav said.

However, police and fire calls are nothing new, and in part, the idea for the fee has roots in the city’s budget problems. With increased cuts from the state and a variety of other factors, the city has been looking for different ways to increase its revenue. In November, the Star Tribune reported, St. Paul homeowners were hit with a nearly 25 percent increase in their property taxes.

“We have slashed our budget tremendously,” Benanav said. “We’re at the point where we are really struggling tremendously with funding our police and fire.”

That’s not quite the point, college officials say.

David Laird, president of the Minnesota Private College Council, said that he understands the predicament of the city, but a tax on colleges is not the right answer.

“Local and city governments are put in a horrible position by the actions or lack thereof by federal and state governments,” Laird said. “We need to be sympathetic of that, but that doesn’t mean students are the most appropriate place to fish.”

At issue, Laird and others have said, is the value of education to society. Throughout the country, educational institutions are tax-exempt–a status founded in the belief that education brings a tangible good to the local and greater communities. Though the preliminary proposal calls for a fee, many say it acts as a tax on the colleges, and thus they question its legality.

The 11 college and university presidents in St. Paul wrote a joint letter to mayor Chris Coleman, who has not yet taken a stance on the issue, raising a number of arguments against the plan.

“Perhaps the most important contribution we make is to educate future business, government and non-profit leaders for the city, the state and the entire region,” the presidents wrote.

The concern does not seem to center around the rather modest $25, but rather the door that the city would be opening.

“We fear the cost of such a fee would only escalate over time,” the presidents wrote. “$25 for the first year inevitably would turn into $50, $100, $200 and higher in the years ahead.”

On a more substantive level, Macalester disputed the notion that the college uses more than its fair share of public services. Tom Welna, director of Macalester’s High Winds Fund, said that Macalester students are far less likely to receive police and fire protection than most city residents.

“Mac students are 34 times less likely than your average citizen to require police services,” in part due to the college’s private security force, said Welna, who is studying the issue for the college.

Further, Welna said that Macalester already pays the city a substantial amount of money each year. Not only does the college pay for services such as streets and sidewalks, but it also pays in excess of $200,000 a year on the property taxes for its rented residences and commercial properties, he said.

The idea for the fee has attracted some larger attention, garnering articles in the two local daily papers and even an editorial in the Duluth News-Tribune.

“With all due respect for the health of local economies around the state, if any of Benanav’s colleagues are considering joining his quest, go for it,” the editorial read. “And to the students who will be socked with the fee, we say come to Duluth.”

While Duluth and other cities may scoff at the notion of at fee on college students, St. Paul is certainly not alone in turning to the nonprofit sector for increased revenue. In recent years, cities across the country have looked for more creative ways to raise revenue to cover budget shortfalls, often looking at tax-exempt colleges, hospitals, churches and other organizations to balance a budget.

Many local and state governments have seen their costs increase faster than revenue due to variety of circumstances including rising costs for Medicaid, ballooning pension obligations and cuts passed down from the federal government. In turn, the local governments have tried to get more out of non-profits, said Erica Greeley, director of strategic policy planning at the National Council of Nonprofit Associations.

“There is absolutely a trend that state and local governments are targeting the nonprofit sector for revenue,” she said.

Greeley said that the governments accomplish this in a number of ways including raising registration fees, narrowing the scope of what qualifies as a nonprofit organization and instituting programs of payment in lieu of taxes (PILOT).

Boston, the only city with more students per capita than St. Paul, has looked to PILOT programs for a number of years, in which the city asks nonprofits for a voluntary annual contribution. However, the amount of the payments is varied, and legislators often press for more from the colleges and universities.

Other cities have fared less well when trying to cover budget shortfalls by attempting to raise money from nonprofits. In Cleveland last year, the county treasurer suggested raising money each year through a PILOT program–an idea that does not seem to have gained much traction. And in Pittsburgh, desperate city government worked out a plan in 2004 to raise $6 million per year from nonprofits.

Benanav said that he is not committed to his specific proposal of a $25 fee, and other options could be considered in coming months.