School Property Tax Cap Blocked; Ban on Breaks for Casinos Heard

An attempt to limit school property tax increases was stopped Tuesday in the Legislature. And senators heard arguments for and against allowing property tax breaks to casinos.

It was the last day for debate on the proposal to limit school property tax increases to 2.5 percent a year or the rate of inflation, whichever is higher. Sen. Tom Briese of Albion, lead sponsor of the proposal, talked about a recent hearing in which farmers described how high property taxes are hurting them.

“We heard from a farmer from Kearney who said his family farm is being taxed into oblivion. We heard from another testifier talking about the loss of their family farm. We heard from a landlord who pays over a third of his farm rental income in property taxes – a third of it – his rental income, what he’s worked for all his life, to be able to retire and rent his farm out, he pays a third of that rental income in property taxes,” Briese said.

Sen. Megan Hunt of Omaha described what led her to try and kill Briese’s bill.

“I became frustrated hearing conversations on the floor about the plight of property owners and the plight of the wealthier people in our state, and how they’ve been begging us to do something for them, but time and time again on this floor we’ve been unable to do something to fundamentally help the most disadvantaged and the people who live in poverty,” Hunt said.

Sen. Matt Hansen of Lincoln said limiting education expenditures as the bill proposed to do is bad policy.

“I do not think these caps are appropriate…This is effectively a budget cap on schools that’s done through their property tax asking,” Hansen said.

Sen Lou Ann Linehan of Elkhorn said the state’s largest school districts get the most money from state taxpayers under the state aid to schools program known by the acronym TEEOSA. But she complained that efforts to limit property taxes are continually blocked by those same large school districts.

“They take all the property taxes, no matter how much the valuations go up. They get the vast majority – Omaha, Millard and Lincoln – the vast majority of the TEEOSA funding, and it’s fine. They like it,” Linehan said.

Actually, the three districts named by Linehan get about 44 percent of TEEOSA funding. But a full 77 percent goes to those districts plus 16 others in the Greater Nebraska Schools Association, which includes districts stretching from Bellevue to Gering. Those more urban districts rely on so-called equalization aid for districts whose property values don’t provide enough revenue to meet school needs. Of the state’s 244 school districts, 157, mostly rural districts with lots of property value in ag land, get no equalization aid. However, those districts also opposed the proposed caps on their ability to increase property taxes.

With opponents filibustering against Briese’s proposal, it would have taken a 2/3 vote, or 33 of 49 senators, to cut off debate and vote on the bill itself. Only 28 senators voted to end the debate, killing the proposal for the year.

Tuesday afternoon, the Urban Affairs Committee heard a proposal by Sen. Mike Flood of Norfolk to prohibit casinos from getting property tax breaks known as Tax Increment Financing, or TIF. Under TIF, property tax increases that would have occurred due to increased value from improvements, like building a casino, are instead turned back to developers to cover costs like roads and other needed infrastructure.

Flood said that was contrary to the wishes of voters who approved casinos in the hope of getting property tax relief.

“I think you are absolutely subverting the will of the voters by not making these casinos pay their property tax bill to the taxpayers, to the political subdivisions, and instead reassigning it to make a better looking casino. Las Vegas can afford to pay for a remodeling of a street or a parking lot or the public improvements that are connected with TIF,” Flood said.

Sen. Carol Blood of Bellevue questioned whether the Legislature should tell local governments they can’t offer tax increment financing to casinos.

“My concern is local control. It’s already in state statute and I’m not hearing anything compelling yet that tells me that it needs to be amended,” Blood said.

In July, the Omaha City Council approved TIF financing worth $17.5 million to the casino that is proposed for that city. State law says TIF financing can be used only if the project would not take place without it, under the so-called “but-for” test.

Testifying against Flood’s bill, Christy Abraham of the League of Nebraska Municipalities said she thinks the Omaha proposal meets that test.

“What that TIF funds are going to be used for are really some really critical infrastructure projects that have been needed for long time in Omaha. And with this project, they’re sort of making the casino say ‘Look, you want TIF, you’re going to have to do all this public infrastructure for us.’ So I think they have met the but-for test,” Abraham said.

Flood said he looked up the casino’s application for TIF funding, and found they expect a profit of $45 million a year.

“You cannot tell me that revenues of $45 million would not allow this casino to pay for the infrastructure needed to make it work. These are very profitable enterprises,” he said.

Nevertheless, Flood said he doesn’t want his bill to apply to the Omaha casino, since the city council approved it under the law as it now stands. However, he said he wants TIF prohibited for future casino proposals.

Sen. Justin Wayne, chair of the Urban Affairs Committee, said he expects the committee to discuss whether or not to advance the bill next week.