Sales tax hike pitch may prove hard sell

Omaha Mayor Jim Suttle wants a sales tax hike to be the city's top legislative priority in January, though state lawmakers could balk at the idea.

The mayor is hoping the Legislature will support a proposal allowing Nebraska cities, including Omaha, to impose a local sales tax of up to 2 cents, if local voters approve.

The measure is at the top of the city's 2010 legislative wish list, which City Council members will take up Tuesday.

Suttle wants Omaha to raise the sales tax rate by a half-cent to generate revenue for the troubled police and fire pension fund, which had a shortfall of about $500 million this year.

Omaha's local sales tax is 1.5 cents, the highest currently allowed under state law. The state collects 5.5 cents for a total sales tax in Omaha of 7 cents.

A task force formed this year by then-Mayor Mike Fahey recommended a sales tax hike to help resolve the pension problems, which the task force chairman said could eventually bankrupt the city.

But State Sen. Abbie Cornett of Bellevue, who heads the Legislature's Revenue Committee, said lawmakers are likely to be wary of the tax proposal, especially because they will be immersed in statewide financial problems.

The Legislature will meet in special session beginning Wednesday to address a $335.5 million budget shortfall. Omaha should instead look at raising its property tax rate, Cornett said.

“We're not responsible for Omaha's mess,” she said. “We didn't have the pension fund that led to this. I think we'll have enough to deal with at the state level.”

Ron Gerard, Suttle's spokesman, said the sales tax proposal would allow any Nebraska city to place a local sales tax of up to 2 cents on the ballot, creating a way to find new revenue in tough economic times.

The council will vote Tuesday on whether to include the sales tax proposal on the city's legislative agenda.

Councilman Franklin Thompson, chairman of the Legislative Committee, said he thinks his colleagues will “support at least going forward and asking the Legislature for this change.”

But Councilman Pete Fester- sen said he was reluctant to support the sales tax measure until he knows how much police and firefighters will be expected to contribute to the pension fund.

Suttle and the police and firefighters unions are in contract negotiations that could include new pension rules.

“I'm not supportive of seeking additional taxing authority unless and until we know more about the status of negotiations and benefit cuts,” Festersen said.

Omaha city lobbyist Jack Cheloha said the council's legislative agenda most likely will be narrowed to three or four priorities, which could include a proposal to limit liquor licenses in Omaha.

Contact the writer:

444-3100, maggie.obrien@owh.com