An Omaha state senator says the city should be required to seek voter approval before imposing its proposed cigarette tax to help a university cancer center.
Sen. Bob Krist said Thursday he plans to introduce legislation in January to do that, calling the approach being taken by the Omaha City Council “clearly a misuse” of the city's authority to levy occupation taxes.
“A vote of the people is an important part of our obligation to insure transparency at all levels of our government,” Krist said in a letter to the council.
Also on Thursday, Sen. Abbie Cornett of Bellevue called on Omaha to double-check, by enlisting an independent accounting firm, its projected revenue from the proposed tax.
The projections are important, because if they are $6 million a year or more, a new state law requires voter approval before the tax could be enacted.
The city's latest estimate comes in just under that figure, but Cornett — who, like Krist, supports the cancer project — said she's skeptical.
That's because the city's initial tobacco tax proposal would have exceeded the $6 million limit.
She also noted that the city's occupation tax on restaurants and bars brought in about $8 million more than initially projected.
“If they're going to do this (cigarette tax), they better make sure the numbers are right,” Cornett said. “There's been way too much of a spotlight on the city and its occupation taxes.”
City Councilman Chris Jerram dismissed the concerns.
He said the city is following not only “the spirit and the letter of the law” as defined by the Legislature but also is confident in its projections of the revenue.
The projections, Jerram said, were done by the City Finance Department with the help of officials at the University of Nebraska Medical Center, which would receive the bulk of the tobacco tax revenue.
“We're very comfortable with our numbers,” Jerram said.
The exchange was the latest salvo in the debate over the tobacco tax, which has been labeled “double taxation” by Gov. Dave Heineman but praised by cancer center supporters as a worthy investment in saving lives and creating good-paying jobs at the medical center.
“We're investing in something that is transformational,” Jerram said.
He said Krist is channeling the wishes of tobacco companies and retail outlets that oppose the tax, which Jerram says has overwhelming public support.
“Sen. Krist and I have a difference of opinion,” the council member said. “I would hope that the majority of the Legislature would not feel that reactionary legislation is good public policy, particularly since the issue was resolved by the Legislature during the last session in a compromise with municipalities statewide.”
The original bill introduced in the Legislature last spring called for voter approval before any new or increased occupation tax could be imposed.
But lawmakers, thinking that was impractical, struck a compromise, requiring voter approval only on substantial increases. In the case of Omaha, it was $6 million a year.
That limit caused an amendment Tuesday to Omaha's cigarette tax proposal. It came after projections showed that the original proposal, a 7 percent tax, would exceed the $6 million-a-year trigger point.
Now the cigarette tax proposal calls for a 4.5 percent occupation tax, generating an estimated $5 million in the first year and $40.7 million over 10 years.
The medical center would receive $35 million of the revenue to help build a $370 million cancer treatment and research center.
Jerram said the methodology of the revenue estimates was fully explained at Tuesday's meeting. No additional review of the projections is necessary, he said.
Krist was among those testifying before the City Council, but he said he was cut off before he could deliver his entire testimony.
Thursday, he sent a copy of his full testimony along with a letter to City Council President Tom Mulligan, vowing that he will seek legislation.
Krist said that while he supports the cancer center project, the city needs to find another way to finance its share. His constituents oppose the tax. He suggested using excess funds raised by the city's occupation tax on restaurants and bars.
The senator, who represents northwest Omaha and some areas just outside the city limits, said he has been told by a lobbyist that even the slimmed-down tax proposal will exceed the state's $6 million trigger point for requiring voter approval.
Krist said his constituents not only oppose the tobacco tax but also wonder whether other occupation taxes are on the way.
“Where does this stop?” he asked.
Jerram said Krist left the council meeting before he could hear an explanation of the city's unsuccessful search for other funding options for the cancer center. City finance officials, he said, explained that all of the restaurant tax revenue is spoken for.
The city, Jerram said, is honoring the compromise reached in the Legislature by seeking a tax that comes under the $6 million limit.
He said Krist was doing the bidding of tobacco companies, convenience stores and supermarkets that oppose the tobacco tax. Those groups have provided campaign contributions to the senator, according to campaign finance reports.
Krist said the contributions play no role in his opposition.
“It's typical Jerram, he said. “Change the subject.”
The City Council is scheduled to vote Tuesday on whether to adopt the tobacco tax. Passage is expected because five of the seven council members, including Jerram, are co-sponsors.
Whether the Legislature could require a public vote in Omaha after the tobacco tax is adopted is a matter of debate.
A somewhat similar issue was raised after a “commuter tax” by the City of Omaha went into effect Jan. 1. State legislators, whose session began three days later, quickly moved to ban such a tax on nonresidents. The bill was signed into law in March.
The city decided to wait for the Legislature to act before starting to collect the tax. Once it was outlawed, no tax was collected.
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