If you look hard enough, you can still find a few signs of the blowback against Omaha's restaurant tax.
There are the legal filings in the court case taking on the 2.5 percent tax. But the lawsuit has been rejected, and the tax lives on.
There's the line item on receipts at WheatField's — five cents on a $2 cup of coffee — identifying the charge as the “Mayor's Tax.”
Then there's Terri Powley, who works in Omaha but lives on the other side of the river. She resolved not to buy a meal in Omaha after the tax went into effect almost two years ago.
She slipped up, once, when she went with other supervisors at her job to the Romeo's at 90th and Blondo Streets.
“Only because I had to,” the Missouri Valley, Iowa, resident said. “I didn't spend much, believe me.”
But Powley is very much in the minority. Despite the dire predictions that the new tax would cut into Omaha's restaurant traffic, business for the nearly $1 billion Omaha restaurant industry is up.
State records show that restaurants in Council Bluffs, which many people predicted would get a windfall, saw sales drop when Omaha's tax went into effect.
Omaha originally projected that the tax would bring in about $15 million a year. Early returns caused the city to increase projections to $19 million a year.
In its first full year, the tax beat both of those projections — collecting $23.8 million for the city.
The 2012 figures are on pace to surpass that total. And the figure for next year is expected to grow to $25.6 million.
“I have no explanation,” said Ken Kriz, an associate professor of public finance and economics at the University of Nebraska at Omaha. “Surprisingly, the restaurant tax has been very robust, even during the recession.”
Even Nicole Jesse, co-owner of La Casa Pizzaria and a vocal opponent of the tax who sued to overturn it, is resigned to the tax as a cost of doing business.
“We would like to see it repealed, but realistically, do you know of any taxes that were removed?” she said. “Any of the (mayoral) candidates are going to have a really hard time getting rid of the restaurant tax.”
A look at the city's 2013 budget, approved last week, helps explain why.
The budget lists 11 main revenue streams for the city, including property taxes and sales tax. Three of those revenue streams are performing as predicted this year. Seven aren't bringing in as much as hoped, falling short by about $4.7 million.
Then there's the workhorse restaurant tax.
The $24 million it's on pace to generate is more than enough to offset the lagging revenue from other sources.
For a time, Mayor Jim Suttle lobbied the Nebraska Legislature for the ability to levy a half-cent sales tax increase. The City Finance Department projects that such a tax would generate around $45 million.
The restaurant tax, when passed, included a provision that it would end if voters approved a sales tax increase. The mayor's interest in a sales tax bill made it seem that he was willing to trade the restaurant tax for a sales tax.
In April, the Legislature passed a bill that would allow cities to put the issue on the ballot, letting voters decide.
But the final bill contained clauses that make it less of a surefire benefit to the city, Suttle said, because it requires half the money raised to go toward infrastructure costs.
“It ought to be a simple authority — do you or do you not want to use this tool?” Suttle said. “We didn't quite stay with a simple authority, did we?”
The requirement that sales tax revenue go toward infrastructure costs would mean only $22.5 million could go toward the kind of things now funded by the restaurant tax.
That's less than what the restaurant tax is projected to produce this year, making the sales tax option less appealing to the city.
Suttle said pursuing the sales tax may make sense someday, but for now the city is in good financial shape.
“It's a tool in the toolbox. So we would have it for a rainy day, some other time,” he said.
The restaurant tax wasn't the only option city administrators explored for digging out of a financial pit two years ago, said City Finance Director Pam Spaccarotella.
They looked into implementing an occupation tax that would tax anyone who works in the city and their employers. That would have added about $12 million to city coffers.
Officials also looked into a sizable property tax increase, beyond the increase that was implemented. The property tax rate would have to climb by 9 cents to offset the restaurant tax's revenue, which would add about $135 to the tax bill on a $150,000 home.
“There were some other things we considered, but they wouldn't have had near the revenue impact,” Spaccarotella said.
Still, Spaccarotella said, the restaurant tax revenue hasn't made the city's budget a cakewalk.
Most of the restaurant tax revenue goes toward paying down the $573 million police and fire pension shortfall. Nearly $10 million will be paid toward the fund in accordance with the police union contract. Another $5.5 million will be set aside to pay into the fund whenever a contract with the city's fire union is reached.
That means the tax creates about $9 million in extra money that can go toward other city functions. While that sounds like a boon, Spaccarotella says the money doesn't go very far.
“I actually think this 2013 budget was the most difficult we've faced yet,” Spaccarotella, who will leave her city position in November, wrote in an email. “There are so many pressures for additional spending.”
Some 80 percent of the city's budget is dictated by union contracts. They generally call for wage increases.
Meanwhile, health care and utility costs have increased, while state aid has fallen by about $3.3 million, she said. All those factors combine to make repealing the restaurant tax a tall order.
City Councilwoman Jean Stothert voted against the restaurant tax. Now as a mayoral candidate, she said she'd try to repeal it, though she acknowledged that would be easier said than done.
“To repeal it, you're going to have to fill a $25 million hole,” she said.
To do that, she said she would try to cut back on benefits and try to find other areas for cuts.
David Nabity, who also is running for mayor, said he would look to privatize or streamline city services to get the tax off the books. He'd also look at overtime costs and other “things that can end up blowing the budget apart.”
Mayoral candidate Brad Ashford, who was instrumental in the passage of the sales tax bill, said he'd look to voters for guidance on the tax.
The Legislature passed a bill in the last session that would require large taxes — like the restaurant tax — to be approved by voters, he said. Ashford, a state senator, said he would go along with the spirit of that bill and put the tax to a vote if elected.
“I'd look at the spending side first. And if the restaurant tax is necessary, then I'd take it to the voters,” he said.
Former City Councilman Dan Welch, another candidate for mayor, did not return repeated calls for comment.
Spaccarotella doesn't think any future mayor would have much luck with a cost-cutting approach.
“It's easy to say those things, and they sound really good,” she said. “But having lived it for three years, if I could cut it, I cut it,” she said.
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