LINCOLN — In something of a surprise, state lawmakers pushed a bill to final approval Monday that would allow Omaha and other Nebraska cities to increase their local sales tax by a half-cent, with voter approval.
The vote was 29-14, which still leaves Legislative Bill 357 one vote short of the 30 needed to override a promised veto by Gov. Dave Heineman.
Heineman, a conservative Republican, has said the measure represents a tax increase that he cannot support.
But State Sen. Brad Ashford of Omaha and other supporters of the bill disputed that during floor debate. They said all LB 357 would do is allow local voters, via the ballot box, to have a voice on local tax policy.
Ashford said he hopes an amendment attached Monday will allow supporters to round up the needed 30 votes.
“We need to keep working hard,” he said.
There had been some doubt about whether LB 357 could generate enough support to advance from second-round debate, given the governor's stance and the ever-changing scope of the bill.
Omaha Sen. Heath Mello had proposed to earmark half of any new sales tax revenue in Omaha for the $1.7 billion sewer separation project, with the other half going to replace the tax on restaurant and bar bills. But that amendment was soundly defeated, 33-8, as lawmakers appeared to agree with the City of Omaha that it was too inflexible.
The bill, as now amended, would still require Omaha to use half of the expected $43 million in new revenue to replace the city's restaurant tax.
But there is more flexibility on how to use the other half of the funds. One-fourth must be used for infrastructure projects, but the city can decide what kind of project. It would still include the sewer work — which will require steep increases in sewer fees on residents and industry — but could also be used for street reconstruction.
The remaining one-fourth of the funds could also be used for infrastructure projects but would require Omaha to work with another public entity, possibly Douglas County or the Metropolitan Utilities District.
The City of Lincoln has supported LB 357. Under the amended bill, Lincoln would be allowed to use the funds for infrastructure projects, but the funds also could be available for an after-school education program run by the Lincoln Public Schools that is losing its federal funding.
Voter approval would be required, and a city council would have to agree, by a supermajority of at least 70 percent of its members, to place the issue on the ballot. In Omaha, that means a yes vote would be needed from five of the seven council members.
The City of Omaha had wavered in its support of LB 357 in recent weeks, saying it wanted more flexibility in how the money could be used. The last-minute amendment led to the city's support of the bill.
“This is probably the best we can do,” said the city's chief lobbyist, Jack Cheloha. “It appears to be sellable (to the full Legislature).”
The bill picked up an important ally Monday in Sen. Mike Flood of Norfolk, the speaker of the Legislature.
Flood had voted against the bill last year, when it gained the support of two fewer senators.
But Flood said that during a statewide tour of cities last summer, he became convinced that city officials supported the idea.
He also said his hometown could use the added taxing authority to help finance a much-needed natural gas pipeline to Norfolk, which has lost out on some business opportunities because of a lack of available natural gas.
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