New cigarette tax could help fund UNMC cancer center - Omaha.com
Published Friday, September 7, 2012 at 5:59 pm / Updated at 12:59 am
New cigarette tax could help fund UNMC cancer center

The City of Omaha and Douglas County will consider contributing $40 million to help fund construction of a new university cancer center, in part through a new city cigarette tax.

The University of Nebraska Medical Center asked the city and county to help pay for the project.

The Douglas County Board could vote Tuesday on whether to funnel $5 million in inheritance tax revenue to the cancer facility.

Omaha officials are drafting an ordinance that would add about 35 cents on top of existing state taxes for a $5 pack of smokes. Millions of dollars in annual revenue would come from the cigarette tax during the next 10 years, enough to fund an anticipated $35 million city contribution to the project.

University officials approached local governments as part of a $200 million private and public fundraising campaign for the $323 million cancer treatment and research center. The NU Medical Center wants to start construction sometime next year and have the facility open in 2016.

The university also asked the Omaha Public Power District to chip in money, but an OPPD spokesman said Friday that the utility declined the request.

The local government funding would be on top of a $50 million pledge from the state.

UNMC's requests come at a tough financial time for both the city and county, and not everybody is on board with the proposal.

Supporters say the public funding is an investment in a project that would bring thousands of jobs and millions of dollars to Omaha. But even some supporters have reservations.

County Board member Clare Duda said he has mixed emotions about the county's proposed $500,000 annual commitment.

“It is such a fantastic project for Omaha coming up,” Duda said. “And I recognize we need to be a part of the team, yet it bothers me very much.”

City Councilman Chris Jerram, a sponsor of the cigarette tax proposal, said the idea emphasizes public health and job creation.

“It's taxing tobacco to care for those who would develop cancer from it and provide the best research possible, while at the same time having a huge economic impact,” Jerram said.

It's unclear how UNMC's request for funding developed into the cigarette tax proposal.

Aida Amoura, spokeswoman for Mayor Jim Suttle, was not available for comment.

Don Leuenberger, UNMC vice chancellor for business and finance, said the medical center asked the city to contribute money toward the entire project, as opposed to funding individual aspects such as site preparation or demolition.

“I would imagine that discussion is going to go on as to whether that's possible or not,” he said.

Dr. Kenneth Cowan, director of the university's Eppley Cancer Center, said the project will keep UNMC competitive in a highly competitive field and will be “transformational for our campus.”

“This is the largest project on the medical center campus, and probably the largest project at the University of Nebraska that's ever been undertaken,” he said.

Councilwoman Jean Stothert, a Republican mayoral candidate, said she supported the project but felt the city had other priorities to fund.

“If we have a city that's about $500 million in debt and we have a $600 million underfunded pension and we have a $2 billion sewer project to pay for and we have roads in bad condition, I think we need to take care of our own needs first before we impose a new tax to pay for a new building for the medical center,” Stothert said.

A new tobacco tax would work in a similar way to the city's controversial 2.5 percent occupation tax on restaurant and bar tabs. Jerram said the cigarette occupation tax would come out of retailers' gross tobacco sales.

Jerram said the new tax would generate close to $4 million in annual revenue, providing a cushion if more smokers quit and extra funds for a Finance Department auditor to monitor the tax's revenue stream.

The cigarette tax would expire after a 10-year period, Jerram said, though a future City Council could reinstate it. State taxes already add 64 cents to the price of 20-cigarette packs — the 38th-highest rate in the country.

A bill introduced in the Legislature last year would have increased Nebraska's tax rate to $1.99 per pack. Gov. Dave Heineman promised to veto the proposal, and it failed to advance to a vote.

Instituting a local tobacco tax wouldn't require voter approval. State law requires a public vote on new occupation taxes that would generate more than $6 million annually.

Omaha collected roughly $47 million from occupation taxes in 2011, amounting to 6 percent of the total city budget. Restaurant tax revenue, estimated to bring in about $25 million annually, is the largest such fundraiser.

County tax support for the project would instead come from inheritance taxes.

UNMC officials said Friday that Douglas County would be the first local government to make a financial commitment toward the project.

County Board member Mary Ann Borgeson submitted a resolution asking the board to provide $500,000 per year for 10 years.

Douglas County typically receives $8 million to $9 million annually from the inheritance tax. County Board members say the tax revenue is used for state-mandated services that support military veterans, the frail, elderly and children.

Borgeson said she supported the UNMC project because the county had a responsibility to public health and the health of the county's poor population.

Borgeson said the Nebraska Attorney General's Office has been asked for an opinion on whether the county can legally use its inheritance funds for the project.

The County Board will likely delay action if it doesn't receive that opinion before Tuesday's meeting, board Chairman Marc Kraft said.

“This is a fantastic project,” said Kraft, who plans to vote in favor of the resolution, if it's legal. “It is so good for so many aspects of the community.”

In January, University of Nebraska officials announced a $450 million initiative that called for four projects — two in Lincoln and one each in Omaha and Kearney.

The centerpiece is the $323 million cancer center: a $110 million research tower; a $63 million, 108-bed inpatient center; a $150 million outpatient center.

A $47 million ambulatory, or nonemergency, center would bring the total project cost to $370 million. That center would not be cancer-related.

UNMC representatives told the county that the new cancer center will add 1,200 new jobs by 2020 and bring an additional $100 million in payroll.

Duda said the issue has put the County Board in a tough situation.

“I think I have to vote for it, even though it really bothers me to put inheritance tax dollars toward economic development,” Duda said. “The county does not do economic development.”

World-Herald staff writer Erin Golden contributed to this report.

Contact the writer: 402-444-1068, johnny.perez@owh.com; twitter.com/PerezJr

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