OWH: White leads effort to repeal sales tax on pricey sewer work

Will we pay sales taxes on pricey sewer work?
Fifteen senators join in seeking an exemption.

Paul Hammel, Omaha World-Herald
January 15, 2010

LINCOLN — Some state senators, mostly from the Omaha area, are trying to head off what they consider an unfair “double tax” on metropolitan area residents paying off a $1.6 billion sewer project.

Omaha Sen. Tom White, chief sponsor of the bill, estimated that Omahans could pay up to $600 million in sales taxes on new sewer and infrastructure fees being imposed to finance the work.

Such a tax would be particularly unfair, White said, because the sewer separation project has been mandated by the U.S. Environmental Protection Agency.

“On an unfunded federal mandate, the state is kicking the metro ratepayers when they’re down already,” White said. “They ought to give the governor and the revenue guys a mask and gun, because this is just robbery.”

Fourteen senators joined White Thursday in introducing Legislative Bill 952, which would exempt the extra sewer and infrastructure fees from being taxed.

The overall debt, with interest, could total nearly $8 billion over 20 years, according to White, who said that could result in up to $600 million in state and city sales taxes.

State Tax Commissioner Doug Ewald said the state is following a longtime state policy that calls for taxing extra fees, such as occupation fees, on things such as hotel and cell phone bills.

“Obviously (White is) entitled to his opinion,” Ewald said. “But this is a policy that’s been established by his predecessors. If senators want to change that, that’s their prerogative.”

The tax commissioner added that the City of Omaha would lose out on tens of millions of dollars in city sales tax receipts if LB 952 passed.

Tom Wurtz, president of the Metropolitan Utilities District, which will replace its water and natural gas lines as the city replaces and separates its sewer lines, said he hopes the tax will be removed.

“A lot of customers have complained to me personally that this is unfair,” Wurtz said.

MUD bills include three additional fees that will pay for the sewer, water and gas lines that are being replaced: two infrastructure fees to pay for the drinking water and gas lines being replaced by MUD and a sewer fee that reimburses the city for its costs of installing new, and separate, sewer lines for storm water and sanitary sewage.

The tax-exemption proposal might become a hot potato because money is short, and some senators might not want to forgo an anticipated windfall in tax revenue for the state and city.

In the Republican-dominated but officially nonpartisan Legislature, it also might provide fodder to go after White, a Democrat who is seeking election in Omaha’s 2nd Congressional District.

Six of the bill’s co-sponsors, however, are Republicans, and three are members of the budget-writing Appropriations Committee, including Omaha Sen. John Nelson, a fiscally conservative Republican.

Nelson said it sounds like the state is imposing a “double tax” but said he plans to look more closely at the measure.

White said he realizes that the city is short of cash and would forgo sales tax revenue if LB 952 passed.

But, he added, “I don’t think the city ought to be planning its viability on an unfunded federal mandate that is going to crack its taxpayers in the first instance.”

The state, White added, ought to help Omaha finance the project instead of “trying to suck” the tax revenue out of the metro area.