Capitol District aerial

The under-construction Capitol District is seen from above on May 8, 2017.

Shoppers and diners going to the newest development in north downtown will be pitching in a little extra to pay for it.

The Omaha City Council voted 6-1 Tuesday to approve a special occupation tax for the under-construction Capitol District, making it the city’s first “enhanced employment district.”

The City Council voted in April to permit such districts, which allow taxes to be collected from consumers in a certain area to finance public infrastructure and other development.

The developers working on Crossroads Mall are also hoping to institute an occupation tax to help fund their project.

Councilwoman Aimee Melton was the only no vote in April, saying she couldn’t support a new tax.

At Tuesday’s meeting, Melton cast the only dissenting vote again but said she supported the Capitol District development.

“I’m just fundamentally opposed to the tax,” she said. “If one deserved it, it was going to be this one.”

The tax will apply to several aspects of the development north of Capitol Avenue between 10th and 12th Streets.

A 333-room Marriott Hotel, stores, restaurants, apartments and office space are slotted for the area.

The district’s ordinance outlines a .5 percent tax on retail purchases and .3 percent tax at some businesses south of the district. An annual 25-cent fee will apply to each square foot of office space, and a tax of $95 will be charged per year to each apartment.

Developer Mike Moylan has said he expects about $250,000 to be collected through the tax each year.

Around $225 million has been invested in the Capitol District, Moylan said. The plan for the mixed-used development, approved by the city, relied on the new tax.

But after approving the concept of such districts, council members delayed a vote on the Capitol District’s specific tax at their June 27 meeting. Council members Melton and Pete Festersen said they hadn’t been made aware of an amendment to the ordinance in time to make a decision on it.

Tuesday, Festersen said that the new amendment improved the ordinance but that the process could have been handled more smoothly.

“I think it’s a really bad message we send to the development community if redevelopment agreements that are previously committed to are not approved or not followed,” he said.

The June amendment made it clear that there’s a 20-year limit on the tax, removed one piece of property from the taxed area and allowed Mayor Jean Stothert to sign administrative agreements relating to the ordinance.

The City Council approved another amendment to the ordinance Tuesday. This one tacked on an agreement with the Capitol District developer about the terms of the tax.

Cassie Paben, the city’s deputy chief of staff for economic development, said a committee may be formed to facilitate future applications for the new tax.

Moylan said it was challenging to be the first area to apply for the tax but said he understood the effort to make sure the process went according to code. The development will also be the city’s first entertainment district, where patrons can take their alcohol outside to a common area.

The new taxes take effect Aug. 2, just in time for the district to start coming online.

The hotel is opening the first week of August, and the apartments around the same time, Moylan said. The rest of the district will follow suit in the coming months, with one building opening in 2018.

Councilman Rich Pahls said the ordinance was complicated for the Capitol District in part because of how new the tax is.

“Usually the first project is like the early pioneers,” he said. “They’re the ones that took the arrows.”

Councilman Brinker Harding, who was elected in April, said the timing of the ordinance put him in a “unique and struggling position.” While he was opposed to the concept of an occupation tax, he said he had entered the discussion late in its long process.

He said that he saw how the development could benefit Omaha and that the success of the ordinance depended on how the city and developers worked together.

“There has to be a level of trust during that process between all parties,” he said.

Omahans can vote with their feet, Councilman Chris Jerram said. If they don’t like the tax, they don’t have to go to the district.

He told Moylan that he’d been a supporter of the project, which lies a few blocks outside his district.

“What you’re going to do for the city in producing return on investment to the city’s bottom line is, and will be, spectacular,” Jerram said.

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