An August 24 MN Supreme Court decision may, eventually, open the door for nonprofits to challenge the pass-through utility Franchise Fee schemes that have become popular ways for cities like Bloomington and Edina to fund road, sidewalk and trail repairs without constraining discretionary budgets or increasing property taxes.

While the cities of Bloomington and Edina have made no comment on the court decision, the City of Duluth is wisely not waiting for someone to file a separate lawsuit on their Franchise Fees that are directed towards general city services like road repair.  Instead Duluth is responsibly and proactively making plans to adjust tax levies and their budget priorities to ensure non-Franchise Fee funding for such core city services.

Here’s why:

The MN Supreme Court unanimously decided against the City of St. Paul and for two churches that appealed their right-of-way (ROW) fee assessments. The judgement stated that these fees were actually taxes and so must be administered as such.  Constitutional limits on taxes exempt churches and other nonprofits.  The case is now back In District Court for final resolution.

As reported in the St. Paul Pioneer Press 

“In the ruling, Justice David Lillehaug wrote for the court that the right-of-way charges are taxes aimed at benefiting the public as a whole, and not fees issued in exchange for special benefits awarded to individual property owners.

As a result, Lillehaug said, the charges are subject to a city’s constitutional limits on taxing authority. The opinion did not elaborate on those limits.

The case will be sent back to Ramsey County District Court, which could issue an opinion on the city’s right-of-way system even before 2016 assessments are published in early October.”

This Supreme Court decision could, if broadly applied, force cities to follow the regulations regarding tax increases rather than utilizing the unfettered imposition of Franchise Fees to gather money from residents.  It’s not yet clear whether a court case will need to be filed for each city and/or fee, and we’ll continue to monitor and report on this issue.

This article at Center for the American Experiment gives additional details on the Supreme Court decision

And they also highlighted Duluth’s proactive planning .

The formal text of the decision is at the court’s website. Click Here.