LINCOLN -- State lawmakers made a surprising turnabout Tuesday by moving to rescind Omaha's authority to impose an extra half-cent of local sales taxes.
Similar efforts, aimed at all Nebraska cities, had failed twice earlier this session. But the 30-5 vote late Tuesday gave Sen. Ernie Chambers of Omaha a victory on his third attempt at repealing the taxing authority.
“This is a righteous and just vote that was taken today, and it removes a cloud from above the heads of poor and limited-income people,” Chambers said afterward.
The City of Omaha's official position was to retain the taxing authority, which the Legislature passed last year over the governor's veto. Omaha elected officials have not yet sought to increase the sales tax, which would require a vote of the people.
The amendment was attached to a bill providing incentives for wind energy that must now pass final reading and obtain Gov. Dave Heineman’s signature before it becomes law.
The combination of wind energy and sales tax makes the outcome of the bill uncertain.
Heineman has promised to veto the wind energy bill, but he also strongly opposed allowing cities to raise their sales taxes. Jen Rae Hein, the governor’s spokeswoman, declined to comment Wednesday about the sales tax amendment.
The repeal amendment represented an attempt to appease Chambers, who used filibusters Tuesday to goad his colleagues into supporting legislation that does more to help low-income Nebraskans.
Sen. Galen Hadley of Kearney said advancing the amendment was a way to get other legislation moving. Sure enough, after a painstakingly slow day of debate, lawmakers advanced 19 bills with Chambers off the floor.
The stance of Omaha Mayor-elect Jean Stothert, who opposes the half-cent law, also influenced Tuesday's surprising vote.
Several lobbyists, including Jack Cheloha, who lobbies for the city, said some lawmakers switched their votes after Stothert indicated the half-cent law was no longer needed by Omaha.
-Stothert said Tuesday she had not spoken to a single senator on the issue. But she is no fan of the added taxing authority.
As a member of the Omaha City Council, she voted against supporting the half-cent sales tax bill last year. She said she would not be saddened to see the taxing authority go away if the repeal ultimately passes.
“Raising taxes is not something I support,” she said. “I certainly don't have any plans to raise the sales tax in Omaha.”
The League of Nebraska Municipalities, which represents cities and towns across the state, opposed the repeal amendment because it treats Omaha differently from other cities. Those communities still will be able to ask voters to increase local sales taxes if the amendment ultimately becomes law.
Lynn Rex, the league's director, also said Stothert's support of the amendment was the reason some lawmakers switched their votes.
“If the mayor-elect states that, it's difficult to unring that bell,” Rex said.
The Legislature is planning a major study of state taxes, which would include a look at whether cities should be allowed to increase local sales taxes.
The league has argued that the law should stand, pending the results of that tax study.
Sen. Steve Lathrop of Omaha and others said Stothert did not lobby lawmakers but that it was clear that she didn't plan to utilize the half-cent law.
Smaller communities across the state, Lathrop said, still need the authority for special projects and to deal with federal mandates.
After the amendment was attached, Lathrop's wind energy bill advanced to final reading on a voice vote.
Legislative Bill 104 would help the state attract wind farms by providing sales tax exemptions for the purchase of turbines, towers and other components. States such as Iowa, Kansas and Oklahoma have used similar tax breaks to drive a wind energy boom.
Even though Nebraska has the fourth-best wind resources in the nation, it ranks No. 29 of 39 states that generate wind energy.
TradeWind Energy of Kansas wants to build a 200-megawatt wind farm near Allen in northeast Nebraska. The project would pay landowners annual royalties of $10,000 to $15,000 per turbine and would pay Dixon County $700,000 per year in local taxes.
The $300 million wind farm would create 200 construction jobs and perhaps 25 permanent positions, Lathrop said.
Heineman has said he opposes the legislation because it would give a tax incentive to an out-of-state company that would export the electricity.
He argued that lawmakers should provide relief to Nebraska taxpayers before helping out a Kansas company.
Joseph Young, a representative of the Greater Omaha Chamber of Commerce, said the chamber does not support increased sales tax authority for cities. But the chamber wants to see the wind energy bill pass.
Lathrop said he believes it will be hard for the governor to veto the bill given the economic development it would create in rural areas.
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