New entertainment tax, property tax hike are tough sell

Mayor Jim Suttle's proposed tax increases were met with an outcry Tuesday from several Omaha City Council members, a restaurant owner and the president of the Qwest Center Omaha.

The mayor wants to raise property taxes and impose a new tax on restaurant meals, movies and other entertainment to help the city climb out of a projected budget shortfall for 2010. The 2 percent entertainment tax would affect anyone who saw a movie or went out to dinner in Omaha, whether they lived in the city or not.

In his remarks to the council Tuesday, Suttle said that with the entertainment tax, “each and every citizen helps to keep our libraries and pools open, the grass mowed in our parks and the yard waste collected at our homes.”

Both the entertainment tax and the property tax increase could be a difficult sell for council members, however.

Councilman Pete Festersen said it was a bad idea to raise taxes in a poor economy “when times are tough for families.”

The entertainment tax would bring in an estimated $10.3 million at a time when the major revenue sources for city services — sales taxes and property taxes — are projected to remain essentially flat. Meanwhile, health care and other costs are projected to rise.

In a letter to the mayor, Qwest Center President Roger Dixon said he was worried that the new tax could prove to be a “tipping point” for concertgoers, who might decide not to attend as many concerts.

Concert attendance already is down by 15 to 20 percent, he said. The tax would add $3.60 to two concert tickets costing $180.

In addition, Dixon said Tuesday, promoters might take concerts to other cities to keep ticket prices down. Convention business could go elsewhere in the metropolitan area, where restaurant food and drinks would be free of the entertainment tax, he said.

“We understand that there is a city shortfall,” Dixon said. “But we don't think this is the right place to do it.”

The mayor told the council that the city can't balance the 2010 budget and make its debt payments for the Qwest Center Omaha without additional revenues.

The proposed property tax increase would amount to an extra $36 a year for the owner of a home valued for tax purposes at $150,000. The $6.2 million in revenue would be used to pay off debt, primarily from the convention center and arena.

The property tax increase is critical, Suttle said, to help restore the city's AAA bond rating, which was reduced last fall by Moody's Investors Service because of the city's high debt levels.

The property tax rate increase would be Omaha's first since 2002.

If approved, the tax rate for next year would be 45.787 cents per $100 of assessed valuation. Even with the 2.4cent increase, Omaha's tax rate would still be lower than that in all of Omaha's suburbs except Papillion.

Suttle also includes some new spending in his proposed 2010 budget, including restoring the public safety auditor's position, which he promised during the mayoral campaign, and buying 44 police cruisers. His plan also includes some cuts to help address an $11 million shortfall, such as closing Westwood Golf Course and spending less money on street resurfacing.

Westwood, near 132nd Street and West Center Road, is one of the city's five nine-hole golf courses. Suttle said the city's nine-hole courses traditionally lose money and its three 18-hole courses turn a profit. He said the city plans to review all its golf courses and look at contracting out their operation.

The city also would eliminate seven civilian positions. As part of that, the city would reduce the number of housing inspector positions by four. The director of human rights and relations position would remain vacant, and those duties would be handled by the human resources director.

The city would add some positions under Suttle's budget, including four Finance Department employees who would focus on the entertainment tax.

Councilwoman Jean Stothert said the mayor should consider more cuts. “I just can't support (the tax increases).”

Council President Garry Gernandt said he was certain that Suttle and the council would reach a compromise.

“I've heard from individuals from the entertainment side,” he said, “and taxpayers, who say, ‘Please, please don't raise my property taxes.' ”

But Suttle warned of the consequences if the council were to vote down the tax proposals. The city would not open any pools next summer, he said, and libraries could close as well.

He said taking those actions would be “a gross mistake.”

“If the council says no, then we've got problems,” Suttle said. “There's just no place else to go (for cuts).”

The entertainment tax, if approved, would take effect in October. The new tax would apply on top of the existing 7 percent local and state sales tax. It would apply to restaurant meals, concert and movie tickets and other entertainment. How much the new tax would cost individuals would depend on how often they ate out or paid for other entertainment.

The tax is not a new idea. Mayor Mike Fahey proposed it in 2007 to help finance a new downtown ballpark but abandoned the plan after encountering strong opposition, mostly from restaurant owners.

Rick Fox, co-owner of Julio's restaurant near 132nd Street and West Center Road, said Tuesday that an entertainment tax “puts an unfair burden on a small segment of merchants.

The tax would probably push some people to patronize restaurants outside the city limits, Fox said. “Two percent is 2 percent.”

This is Suttle's first budget as mayor, and it comes as the city deals with fallout from the national recession. The $284 million general fund budget is up 1.4 percent over this year.

In recent months, Suttle considered other options to address the city's budget problems, including eliminating yard waste pickup and imposing an occupation tax on Omaha workers and their employers.

Those ideas are off the table for now, although Suttle said he wasn't ruling anything out.

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