Old News

Duluth's Downtown Waterfront District has been marketed heavily to Duluth and Downtown businesses as a way to clean up and keep safe the Downtown and waterfront area. This district was the brainchild of the Greater Downtown Council and they are now the beneficiaries of the taxes imposed on the various businesses enclosed within it's borders.

A public examination of the process undertaken to impose this district and the related taxes on the businesses included is overdue. A Constitutional review is also in order. The fourteenth amendment to the Contsitution guarantees equal protection. Case law with regard to this and the original intent was to cement the "one man, one vote" concept. This was done to grant equal status to non-property owners, small and large property owners alike.

The Duluth Waterfront District and the State Statute that was used to create it dismisses this concept entirely. In order for a municipality to create these special taxing districts, they must get a certain percentage of the owners of the "net tax capacity" to vote in favor of the district. What this does is effectively ignore the one man one vote concept. Owners of larger, more valuable properties have a more "valuable" vote.

Perhaps a way to simplify this concept would be to illustrate it on a much smaller scale. Imagine a city block with four properties on it. One of the properties is a high rise apartment building with very upscale apartments with a total taxable value of 10 Million dollars. The other properties are a small, family owned restaurant, a gas station and a small shoe store. If the owner of the apartment building decided he wanted to rid the neighborhood of the other properties, he/she could propose a special taxing district, making a shell organization for the purpose of "sprucing up" the neighborhood the beneficiary of the taxes. The tax could be set at 20 Percent of the taxable value of the property but would be capped at $25,000.00.

The owner of the high-rise would already own a greater share of the propertys' net tax capacity and therefore would be able to vote for it and effectively, make the votes of the other three properties, null.

For the three small businesses, this would be a death blow and would effectively put them out of business. For the high-rise, it would be a drop in the proverbial bucket. With such an incredible tax burden, the smaller properties would effectively lose most, if not all of their market value. The high-rise owner could then scoop up the properties. With the high rise being the only remaining property owner, the taxing district, when brought up for review would be subject only to the vote of the high-rise owner and he/she could vote it down.

This is a little more dramatic than what has happened in Duluth but the process was the same. It only took a handful of the largest property owners to achieve the level of support required by statute. The rest were forced into the taxing district with their votes becoming essentially worthless. If the one man one vote concept had been applied, the district would have failed as a majority, in numbers, of property owners opposed the district. However, the majority had less "net tax capacity" than the minority of larger owners. To add insult to injury, the largest property owners built in a "cap". Not only did their votes count for more, their burden, as a percentage of the "net tax capacity", was far less than that of the smallest properties.

This process was reviewed by the City Attorney's Office a number of times and challenged by a few of the downtown property owners affected. The City Attorney's position was based on the fact that in any review of the Constitutionality of a State Statute, the assumption the appellate courts abide by is that that States generally don't pass unconsitutional laws. While that may be the case, there are certainly exceptions and this particular statute is one glaring example. Taken to the extreme this statute is certainly subject to abuse and could actually result in the sample scenario I used as an illustration. Is this the example we want to set in Minnesota? Big Business vs. Small with the full backing of the force of government is a frightening prospect. Consider also, the use of imminent domain and special taxing districts already within the City of Duluth. The Government has already seized property from a small business for the benefit of a larger one, imposed a tax on smaller businesses for the benefit of larger ones. Does the constitution no longer apply in Duluth?