ConAgra Foods, the Omaha company that plans to file for a $6.5 million refund of sales taxes paid to the city, informed Omaha officials on Thursday that it is willing to spread its refund requests over more than a year to avoid placing greater strain on Omaha's budget shortfall.
“As we work through Omaha's financial crisis, their willingness to spread payments over more than one year is a testament to the spirit of cooperation that is the hallmark of our City,” Mayor Jim Suttle said in a statement.
City officials don't yet know how they would overcome the shortfall if more local companies file for sales tax refunds under state business tax incentives.
This year, the city projected that companies would seek about $7.5 million in sales tax refunds under either the Nebraska Advantage Act or Legislative Bill 775, Ron Gerard, Mayor Jim Suttle's spokesman said.
ConAgra recently notified the city that it intended to seek a $6.5 million refund, which the city announced this week. The city already had paid out $1 million in other refunds, said Gerard.
Had ConAgra followed through with its refund request, that would've taken nearly all of the remaining funds, Gerard said.
“There is really no way you can budget what private industry is going to be doing,” Gerard said. “It's a crapshoot.”
Omaha already faces a $9.8 million budget shortfall this year, due primarily to lower-than-expected sales tax revenues and unbudgeted comp time payouts for firefighters.
Gerard said the city hasn't decided how it would handle a bigger hole in the budget including what services would be cut.
Former City Finance Director Carol Ebdon said annual sales tax refunds have ranged from $8 million to $13 million over the last decade. She said they tend to swing over a wide range.
“There could be a year where the refunds are really small each month, but then there could be a $4 million refund in the last month of the year,” she said.
State Tax Commissioner Doug Ewald said the $6.5 million refund is “a large number for one company to claim. But have we seen it in the past?
“Yes, we've seen it before.”
Companies that meet job creation requirements earn the tax credits. They can be redeemed in two ways either as a credit against corporate income taxes or as a credit against sales taxes paid on purchases.
From 2002 through 2008, ConAgra invested more than $286 million into its Omaha locations and hired more than 800 new employees, a company spokeswoman said via e-mail.
Ewald said companies often seek sales tax refunds because sales taxes remains more constant for businesses, while income taxes can fluctuate.
To get an income tax refund, “you have to be profitable,” Ewald said.
World-Herald staff writer Juan Perez Jr. contributed to this report.
Contact the writer:
444-3100, maggie.obrien@owh.com
Copyright ©2012 Omaha World-Herald®. All rights reserved. This material may not be published, broadcast, rewritten, displayed or redistributed for any purpose without permission from the Omaha World-Herald.
