Editor’s note: First of two parts on the upcoming Unicameral special session on property taxes. Part 2 will be in Wednesday’s Star-Herald e-edition and on starherald.com.
If a historic halving of Nebraskans’ local property tax burdens does emerge from the Legislature this summer, a lid on city and county tax requests seems highly likely to be part of it.
A Star-Herald analysis indicates that western Nebraska’s towns and counties would find it much easier than the state’s urban areas to live with the lid state leaders are outlining.
The tax-reform bill expected to be introduced when senators reconvene Thursday will focus on a three-year state takeover of day-to-day funding of K-12 schools — by far the state’s largest property tax consumer.
But it also would limit annual growth in city, village and county tax requests, with some exceptions, to the year-end inflation rate for the previous year. School districts faced a similar tax-request lid for the first time in 2023-24.
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A special 17-senator working group, including three of western Nebraska’s five lawmakers, held a final meeting Monday to polish bill details. Gov. Jim Pillen, who decried the Legislature’s failure to pass more property tax reform, vowed as they left in April to call senators into special session to try again.
Regardless of whether senators find the consensus that eluded them in the spring, any changes they might approve won’t affect the 2024-25 local “budget season” that hits high gear in August.
Metro areas grow most
Based on average tax requests and U.S. Consumer Price Index increases, western Nebraska’s cities, villages and counties have come closest statewide to meeting the proposed tax-request lid.
Statewide tax requests collectively grew nearly 6% a year for cities, villages and counties from 2009-10 to 2023-24, according to figures from the Nebraska Department of Revenue’s Property Assessment Division.
Year-end inflation averaged 2.4% annually over that time, even with spikes of 4.7% in 2021 and 8% in 2022, the U.S. Labor Department’s Bureau of Labor Statistics reported.
That means average tax requests the past 15 years outpaced average inflation by about 3½ percentage points for Nebraska’s cities, villages and counties.
Tax-request growth has averaged just 1.6 percentage points over average inflation for the region’s 33 cities and villages and 1.9 points ahead for its 11 county governments. Nine towns’ tax needs grew slower than inflation.
West central Nebraska towns (1.4 points over inflation) and counties (1.8 points above) were slightly closer to meeting the proposed lid in a similar analysis for the North Platte Telegraph.
But it was a much different story for Nebraska’s three metropolitan counties — Douglas, Lancaster and Sarpy — and their fast-growing communities.
Average tax requests for Omaha, Lincoln and the metro counties’ other towns have outpaced average inflation by 4 percentage points since 2009. Their county government tax requests have averaged 4½ points over inflation.
In Nebraska’s other 90 counties, average tax requests exceeded average inflation by 2.6 points for cities and villages and 2.7 points for counties.
Jacobson
North Platte state Sen. Mike Jacobson, part of the working group crafting the property tax bill on Pillen’s behalf, had a simple reaction to the tax-request data.
“Western Nebraska is not the problem,” he said. But “if we sit quietly enough, you can already hear the screaming from Lincoln and Omaha” over the prospect of tax-request lids.
Ibach
Sumner Sen. Teresa Ibach, another western member, said senators need cities’ and counties’ help in finding “an approach that is both doable and sustainable.”
Bayard Sen. Steve Erdman, who also has been part of working-group talks, did not return a Star-Herald email seeking comment.
Mixed results in county
Scotts Bluff County government’s average 3.4% tax-request growth was just 1 percentage point over inflation, second-best in the Panhandle. Cheyenne County’s 2.5% growth since 2009 barely exceeded average inflation.
Lisa Rien, Scotts Bluff County’s management accountant, said county commissioners have been striving over several years to lower their tax needs.
The biggest complaint from county residents is that “taxes are too high,” Rien said. “Our main dream for the constituents is to make the best use of our property tax dollars.”
The county’s tax rate has fallen more or less steadily from 43.4 cents per $100 of taxable value in 2012-13 to 37.4 cents per $100 in 2023-24. But the latter rate remained second-highest among Nebraska counties with one or more cities of 10,000 or more in population, the Star-Herald reported April 29.
Rien also took note of the steeper tax-request increases in the Omaha and Lincoln metros. “Their growth has increased a ton compared to some of us out in western Nebraska,” she said.
Tax requests for three of the county’s 10 towns — Mitchell, Lyman and Henry — rose at a slower pace since 2009 than the 2.4% average inflation rate.
Scottsbluff’s and Terrytown’s 15-year average tax requests went up 2.7% and 3.3% respectively, leaving them 0.3 and 0.9 points over inflation. But Gering’s city tax requests grew an average of 6.4%, 4 points ahead of inflation.
Kevin Spencer, Scottsbluff’s city manager and police chief, and Gering City Administrator Pat Heath were unavailable for comment on those figures and the property tax bill emerging for the special session.
Hardin
State Sen. Brian Hardin of Gering said the Star-Herald’s findings are small comfort to his constituents who are fed up with property taxes.
“It’s certainly meaningful data to look at,” he said. “But while we’re working on the patient, let’s not overlook the fact that the patient is dead. …
“One thousand out of 1,000 Nebraska property owners are so angry about these increased taxes that we definitely have gone beyond the point of no return.”
Hardin has favored Erdman’s plan to abolish property, sales and income taxes in favor of a “consumption tax” on new goods and services. Petition drives to put consumption-tax constitutional amendments on the Nov. 5 ballot fell short of gaining enough signatures.
Starting in the mid-1990s, state senators first imposed lids on local property tax rates and budget growth and then chopped taxable values on farm and ranch land to try to stop the growth in property tax bills.
None of those efforts — often accompanied by cuts in state support to cities, counties and especially schools — brought more than short-term relief before local tax bills climbed again.
Like last year’s new tax-request lid on schools, and other local lids before it, the proposed tax-request lid on towns and counties likely will include exceptions. Cities, villages and counties would need voter approval to raise their tax requests beyond those exceptions.
As described by Pillen and Jacobson, towns and counties still could collect property taxes based on new construction and improvements to properties. City and village tax requests also could account for properties newly annexed into their corporate limits.
That’s essentially the “pink postcard” standard in a 2022 state law that decides which school districts, counties and towns must explain their budgets at a state-mandated county “joint property tax hearing” in late September.
Pillen and the working group also are exceptions for needed property tax increases for “public safety and law enforcement.” A Thursday outline from the governor included police, fire, emergency medical services, county attorneys and public defenders as examples.
Rien said she was concerned about how the bill’s final details will affect Scotts Bluff County’s jail and Sheriff’s Office, Scottsbluff and Gering police and supporting departments such as the county’s enhanced 911 dispatch center.
“I’ll be curious to see how the governor tries to protect our public safety and who (he) considers our public safety,” she said.