Some on council leery of tax hikes

Several City Council members say they're not convinced Omaha needs to rely on tax increases, instead of spending cuts, to address the city's budget problems.

Council members offered a few ideas for cuts Tuesday but said will spend the coming weeks looking for more ways to trim the 2011 budget.

“That will be our job now,” Councilman Pete Festersen said Tuesday evening. “We now have a lot of additional work to do.”

Mayor Jim Suttle laid out his 2011 budget proposal Tuesday, which includes increases in the wheel tax and property tax and a new tax on dining. Together, the taxes would generate a total of $44 million in new revenue.

In presenting his budget to the council, Suttle stressed the need to “put the city's financial house in order.”

“We have some tough decisions facing us now,” he said. “It's time to face the music. ... We have to.”

The proposed tax increases wouldn't put a dent in only Omahans' wallets. Anyone who eats at the city's restaurants, drinks at a bar or hires a caterer would pay more.

So would motorists who live in Omaha or in most Douglas County subdivisions.

According to Douglas County Treasurer John Ewing, 426,000 vehicle owners have paid the wheel tax in the past year. Of those, 89,000 live outside Omaha.

Councilman Ben Gray said he's opposed to more budget cuts.

The city cannot be held together with “bubble gum and duct tape,” Gray said. “The mayor is being responsive and responsible.”

He said he generally supports the mayor's efforts to find a new revenue source, though he hasn't decided if the taxes proposed by Suttle are the way to go.

All three tax proposals require council approval and would bring millions into city coffers.

• The 4 percent restaurant tax would raise $23.5 million. That tax would apply on top of a 7 percent city and state sales tax, making the total tax on a restaurant bill 11 percent.

• A 4.44-cent property tax increase would raise $12 million a year. Last year, the city also raised the city property tax rate by 4.2 cents to finance city operations and repay debt on the Qwest Center Omaha.

• The $23 wheel tax increase would raise an additional $8.5 million for city street work. Finance Director Pam Spaccarotella said the number of lane miles being resurfaced annually is declining.

The council is scheduled to vote on the budget next month. If council members don't sign off on the mayor's plan, Suttle said all options would be on the table.

The city could lay off police officers — although Suttle says residents would oppose that. Firefighters could not be laid off because of provisions in their labor contract that mandate minimum staffing levels.

Suttle said he looked at, but decided against proposing, an increase in the city sales tax rate. That would require the approval of the Nebraska Legislature.

The mayor also could administratively implement an occupation tax that has been on the city books since 1983. It would place a tax on anyone who works in Omaha and their employers. A $2 occupation tax would generate $12 million in annual revenue, according to city estimates.

But Suttle said he's worried that an occupation tax would deter new businesses from setting up shop in Omaha, at a time when the city needs more jobs.

Suttle's 2011 budget plan would increase general fund spending by more than 11 percent, or $32.6 million, to $313.5 million. The biggest share of that increase — $13 million — would go to help shore the police and fire pension fund. That fund faces a long-term shortfall estimated at $500 million.

The mayor also wants to boost funding for the Omaha Convention and Visitors Bureau to $2.3 million. His proposal would allocate $1.5 million to the nonprofit Building Bright Futures for programs to prevent truancy among at-risk youths.

Omaha has struggled with how to deal with budget shortfalls in recent years. Lower-than-anticipated revenues — especially sales tax receipts — during the national recession have been the main culprit, but other general fund revenues also have been below projections.

The city faces other challenges as well, Spaccarotella said, including the condition of city streets and the shortfall in the police and fire pension fund.

“Nobody wants more taxes,” she said. “At the end of the day, we have a problem.”

What Suttle's 2011 budget proposal doesn't include are service cuts. Last year, the mayor temporarily grounded a police helicopter and announced plans to close pools and libraries, drawing strong public opposition.

The mayor said residents have told him that they don't want to see further cuts in city services.

“We have been cutting and cutting to the point that we can't cut anymore,” Suttle said.

Council President Garry Gernandt and Councilwoman Jean Stothert said they disagree with the notion that further spending cuts are not possible.

Gernandt said he believed that some programs, like the city's Sun Dawgs summer recreation program, could be cut. He also said he opposes the restaurant tax, which singles out one industry, but could support an occupation tax or a smaller property tax hike.

Stothert questioned Fire Department staffing levels and said she would push for a performance audit of city departments to ensure that “every department runs efficiently.”

“Until you can show me the data, don't tell me we've cut all we can cut,” Stothert said.

Councilman Chris Jerram said this year's budget debate will center on taxes versus cuts.

“It's now our responsibility to go through his proposal with a fine-tooth comb, sort out want versus need and decide on the best course,” he said.

The administration has made efforts to reduce spending at City Hall, Spaccarotella said.

Some civilian positions — officials wouldn't specify how many — will be eliminated as part of the 2011 budget proposal, and the Fire Department has been asked to cut nearly $5.5 million from its budget.

An assistant city attorney has been hired to watch police and firefighters' overtime for court appearances.

In addition, the Fire and Police Departments now both have accountants who look for savings and report to Spaccarotella.

Suttle said he will work to gain council support for his budget.

“It's time to step forward and not use the broken rhetoric of the past,” Suttle said. “If we believe in quality of services, then let's figure out together — the mayor, the City Council and the public — how we maintain quality of life.”

World-Herald staff writer Zack Colman contributed to this report.

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