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A property tax hike for Omaha homeowners now appears almost inevitable, despite public opposition and City Council objections.
Here is why: Omaha City Attorney Paul Kratz said Friday the council lacks the legal authority to remove a proposed tax increase from Mayor Jim Suttle's 2010 municipal budget.
Nor can Suttle himself remove the tax increase, or resubmit a budget in time to meet the state's statutory budgeting requirements, Kratz said.
Based on Kratz's interpretation of the Omaha City Charter, the council faces a Hobson's choice when it meets Tuesday to finish the budget. It can live with the proposed property tax increase, raise $6 million in revenue or cut millions more from a financially strapped budget.
A 2.4-cent property tax hike, or $24 on a house valued at $100,000, is locked in for next year because it had been designated to help pay the city's debts, Kratz said. The charter states that the council “shall not reduce appropriations for debt service.”
Suttle included the property tax increase to generate about $6 million in revenue to help pay debt from the Qwest Center Omaha.
City Councilman Pete Festersen disagrees with Kratz's legal opinion. He said council members are still looking for ways to avoid a tax increase.
“This is a policy decision about when to have that property tax increase, and many of us think now isn't the right time,” Festersen said. “We're all talking it over.”
The mayor and council already have a laundry list of proposals to work through to try to address a projected $11 million shortfall in the operating budget for next year.
But the $6 million for the debt is separate from that $11 million. If council members pass a budget without including the additional $6 million debt payment, they will violate the charter, Kratz said.
When sworn in to office this summer, the council took an oath to uphold the law, he said.
Most council members have said they are against raising taxes. At the same time, the city already has closed pools, cut library hours, delayed police recruit classes, laid off employees and made other budget cuts to deal with a shortfall in this year's budget.
City Councilman Chuck Sigerson is against higher taxes for next year, but he isn't getting his hopes up.
“If, in fact, we get down to the last items and we have to pass a budget, I will vote (for a tax hike) under duress,” he said. “This forces us into a very complicated situation.”
Omaha has not raised its tax rate — currently 43.387 cents — since 2002. With the property tax increase, the owner of a house valued at $100,000 would pay $458 on the city portion of property taxes.
The council could avoid a tax increase for next year by lowering the general fund levy and approving Suttle's tax hike for debt service, so that the two balance out. However, council members would have to find another revenue source or slash the budget to come up with the $6 million needed for the debt on the arena and convention center.
Omaha currently collects about $100 million in property tax revenue a year. About $40 million of that goes to pay off debt.
Earlier this month, Suttle issued a statement saying he would not unilaterally raise property taxes, saying he is committed to working with the City Council to address the city's budget woes.
Council members sent the mayor a letter last week, urging him to drop the tax hike from his budget proposal. Suttle responded with a letter saying he cannot legally drop the tax from his budget — a restriction Kratz confirmed Friday.
“Once he submits the budget to the council, it's off his table and on the council's table,” Kratz said.
Ron Gerard, a spokesman for the mayor, said Suttle didn't know he couldn't remove the tax from his proposal when he issued his earlier statement. “Nobody really knew this from the beginning,” he said.
Time is running short for Omaha to resolve its 2010 budget. A balanced budget must be sent to the state for certification by Sept. 20.
That means there's not enough time for Suttle to scrap his current proposal and submit a new budget to the council, Kratz said.
If he did, the council then would have to hold a public hearing, approve the budget, give the mayor 10 days to consider vetoes, then respond to any vetoes — all before the Sept. 20 deadline, Kratz said.
Sigerson said the council's options are “terrible.”
“With these choices, what real choice is there?” he said. “I've never seen anything like this before.”
Contact the writer:
444-3100, maggie.obrien@owh.com
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