LINCOLN — A last-ditch effort for more property tax relief went down in flames Wednesday night, with rural senators vowing to get even by blocking a tax incentive plan for new and expanding businesses.

Legislative Bill 183 would have increased state property tax credits by about $100 million via new taxes on pop, candy, bottled water and several consumer services. But when it came time to shut off a filibuster of the tax increases and advance the bill, the measure fell far short, getting only 23 of the needed 33 votes.

Rural senators expressed disappointment and a sense of betrayal. Many had dropped their opposition to the incentive bill, the ImagiNE Act, in hopes that it would translate into enough support to advance the property tax relief measure. The idea was that both bills would advance. It didn’t happen.

“I feel a little bit used,” said Sen. Curt Friesen of Henderson, a key senator on tax issues. “I should have known better than to trust people.”

It now appears that the 2019 legislative session, which has only four days left, is headed for a rough landing, with several rural senators promising to now oppose the ImagiNE Act, the proposed replacement of the state’s current tax incentive program, the Advantage Act.

“I find it problematic to support corporate giveaways while we turn our backs on everyday property taxpayers,” said Albion Sen. Tom Briese, who offered up LB 183 after a more comprehensive tax relief proposal, LB 289, stalled.

He said the votes Wednesday demonstrated the Legislature’s “indifference” to the plight of Nebraska’s farmers and ranchers, who have seen property tax bills more than double in some cases over the past decade because of steep rises in agricultural land values.

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But first on Wednesday, senators needed to debate the ImagiNE Act, which would deliver about $150 million a year in tax credits for companies that add jobs and investment.

The state Chamber of Commerce, bankers and other business groups made passage of the ImagiNE Act their top priority for 2019, saying that such incentives are essential to keeping Nebraska competitive for new jobs and businesses.

Sen. Mark Kolterman of Seward, the main sponsor of the ImagiNE Act, said it was a big improvement on the Advantage Act, calling it simpler for companies and more transparent in reporting job gains and tax credits.

He said that since Nebraska first adopted business tax incentives back in 1987 — a move to keep ConAgra and Union Pacific from moving from Omaha — it has inspired $30 billion in business investment and the creation of 100,000 jobs.

But critics said the ImagiNE Act wasn’t much of an improvement over the Advantage Act, which drew fire for being fiscally unpredictable and much more expensive than originally projected. It was also criticized for granting tax credits for even low-paying and part-time jobs.

Comments to that effect sparked bawling out from the speaker of the Legislature, Sen. Jim Scheer of Norfolk, who told rural senators to stop “trashing” the ImagiNE Act and start looking out for the state of Nebraska as a whole.

“What this body needs is a little bit of trust,” said Scheer, who urged rural senators to advance the incentives bill to the second of three rounds of debate in exchange for a fair shot for the property tax bill.

The measure, LB 720, then advanced on a 29-5 vote.

But the good vibes didn’t last long. When debate began on the property tax relief proposal, it was clear that not even all rural senators supported it.

Sen. Mike Groene of North Platte, a key author of the stalled LB 289, slammed the alternative proposal for failing to change the state’s system for distributing state aid to K-12 schools, which sends very little aid to two-thirds of the state’s school districts.

“As a fiscal conservative, I will not vote for something that just throws money at something,” he said.

Groene and several urban senators, including Ernie Chambers of Omaha, said the new sales taxes in LB 183 would be paid mostly by urban residents, and then distributed to farmers and ranchers. They especially objected to the repeal of existing sales tax exemptions on hair cuts, veterinary care for pets and motor vehicle repairs.

Chambers also warned rural senators that they could be left empty-handed this year because Gov. Pete Ricketts is expected to veto the property tax measure.

Briese portrayed the bill as a make-or-break effort to boost property tax relief for Nebraskans, boosting the property tax credit program from its current $224 million to $375 million while leaving the thorny questions about revising the school aid formula for later.

“It’s straightforward, it’s effective and it’s simple,” Briese said.

With the death of LB 183, the main property tax relief measure of 2019 is a $51 million increase in the property tax credit program that was proposed by Gov. Pete Ricketts. It would translate into an extra $20 for the owner of a $100,000 home, and $24 more for every $100,000 worth of farmland.

There is also a citizen-led petition drive to get an initiative on the 2020 ballot to give Nebraska landowners a 35% refund on property taxes paid, a change many legislators have branded as too drastic. Senators also pledged to keep working on LB 289 for passage next year.

Meanwhile, debate on the business incentive bill is scheduled to resume later this week, likely on Friday.

During debate Wednesday, a package of amendments was attached to the ImagiNE Act to address some of its critics. One amendment ensures that only full-time jobs are used to qualify for tax credits and another creates a $2 million fund to grant to “high impact” businesses in small towns that don’t qualify for the act.

There were also discussions of placing a limit or cap on how much money the state would forgo in taxes every year in tax incentives. Neighboring Iowa, Kansas and Missouri all cap how much in tax breaks they give away, which makes the fiscal impact predictable.

Kolterman said he’s willing to consider that, but it would be difficult to do that in Nebraska because our tax incentives are open ended, based on the amount of investment and new jobs that are created.

He added that despite the vowed blockage by rural senators, he’s moving forward. “We’re going to continue to work my bill and make it happen,” Kolterman said.

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Reporter - Regional/state issues

Paul covers state government and affiliated issues. He specializes in tax and transportation issues, following the governor and the state prison system. Follow him on Twitter @PaulHammelOWH. Phone: 402-473-9584.

Martha Stoddard keeps legislators honest from The World-Herald's Lincoln bureau, where she covers news from the State Capitol. Follow her on Twitter @StoddardOWH. Phone: 402-473-9583.

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