OWH: Sewer tax spat continues; White even more determined to pass the bill

Paul Hammel, Omaha World-Herald
January 26, 2010

LINCOLN — Mayor Jim Suttle asked state legislators Monday to jump.

But instead of jumping away from supporting a controversial bill, as the mayor sought, yet another senator jumped on as the 16th co-sponsor of the measure.

The move added more fire to a political spat brewing between Suttle and another leading Democrat, State Sen. Tom White, who is running for Congress this year.

The issue: state legislation introduced by White that he maintains will end an unfair “double tax,” now estimated to raise $325.7 million, on Omahans in financing a federally mandated, $2.8 billion sewer-separation project.

Under current law, state and city sales taxes are assessed on the sewer fees and special infrastructure fees that Omahans pay through their Metropolitan Utilities District bills to finance the sewer work.

State law also requires that sales tax be levied on sewer and water pipes and other construction materials purchased to comply with the mandate by the federal Environmental Protection Agency.

White’s bill would exempt those fees and construction materials from being subject to sales tax, which he initially estimated would total $600 million over 20 years. Last week, he issued a revised estimate, $325.7 million, of which the City of Omaha’s share would be $46.5 million.

The mayor said in a press release Monday that White is dead wrong in calling it a “double tax.”

Suttle pointed to a recent e-mail from State Tax Commissioner Doug Ewald, in which Ewald stated the sewer surcharges for the massive project are not a “tax” but a “charge for services received.”

“Therefore, it is not double taxation,” Ewald stated.

The mayor said in the release that if White’s proposal, Legislative Bill 952, is passed, Omahans would be threatened with a property tax increase to make up for the lost sales tax revenue.

Suttle, in the release, asked senators to “withdraw their support” for LB 952 now that they know it’s not a double tax and had never been supported by the Mayor’s Office.

But White said he’s even more determined to get his bill passed, saying the unfunded federal mandate, the increased sewer fees and the sales tax on the fees really represent a “triple tax.”

“Politicians like Gov. Heineman’s tax commissioner and Mayor Suttle should not play word games with the public,” White said. “If it’s the government taking money out of your wallet, it’s a tax.”

Asked how Omaha would make up its $46.5 million if the fees and equipment were exempted from sales taxes, White said the city should be upfront and ask the Legislature for authority to increase the city sales tax.

That way, he said, Omahans would pay only a city sales tax on the sewer fees and pipe purchases, and not state sales taxes. Without a law change, Omahans will pay a 7 percent tax on those items — currently 5.5 cents in state sales taxes plus 1.5 cents in city sales taxes.

He didn’t say how the city would accomplish that in light of Suttle’s inability to find a senator to introduce a .5-cent increase in Omaha’s sales tax authority this session.

White added that the state should help Omaha pay for the unprecedented sewer project instead of “conspiring” with the city to reap a sales tax windfall.

He estimated the cost of installing new and separate sanitary sewer and wastewater pipeline at $1.8 billion. As part of the project, new drinking water and natural gas lines will be installed, for an additional $1 billion.

The cost of bond financing over 20 years to pay off all that work would be about $4.6 billion, White said, thus resulting in the $325.7 million sales tax bill.

Fourteen state senators — 10 are from Omaha and six are Republicans — joined White in introducing the bill two weeks ago.

Omaha Sen. Bob Krist signed on Monday as the 16th cosponsor.

Krist, a Republican appointed to fill a vacancy in northwest Omaha’s 10th District, said he wasn’t courted by White.

Omahans, Krist said, will pay billions to fix the sewers and satisfy the unfunded mandate. He said he can’t support charging them an extra $325 million for sales taxes.

“Although the mayor wants us to abandon (the bill), I haven’t heard any evidence to the contrary,” he said.

When asked about Krist’s move, Suttle spokesman Ron Gerard said, “Everyone is entitled to do what they see fit. We may not agree with it.”

Gerard acknowledged more lobbying work is needed.

A public hearing on LB 952 is scheduled for Feb. 11 before the Revenue Committee, of which White is an influential member.

White, who is seeking to replace Rep. Lee Terry, R-Neb., said if he loses the mayor’s support in that race, so be it.

“I’m not afraid to take on anybody if I feel it’s important,” White said.