Just 60 miles down Interstate 80, officials in Lincoln are pushing a typically politically unpopular idea to fix a big problem: raising taxes to help fix more city streets.
But they’re gaining traction across the community, including support from a business association that’s historically opposed to tax hikes.
Lincoln’s proposal, which will go to a vote of the people in April, raises the question: Would such a pitch ever work in Omaha?
Omahans often complain about the condition of city streets, and officials acknowledge that the need to catch up with repairs is great. The city has almost 5,000 lane miles.
The city estimates that it has about $800 million in needed street improvements. To put it in perspective, that’s nearly the size of the city’s entire annual budget.
Omaha Mayor Jean Stothert said Lincoln’s plan wouldn’t work in Omaha without a change in state law. While smaller cities can raise their local sales tax rate as high as 2 percent, Omaha is restricted to keeping its at 1.5 percent.
The Nebraska Legislature made it so in 2013 under an amendment by State Sen. Ernie Chambers of Omaha. His view is that sales tax hurts low-income people because it’s considered regressive, taking a greater share of lesser incomes. (Local sales tax is charged on top of the state’s 5.5 percent sales tax.)
Stothert said she wouldn’t support increasing taxes to put more money into streets, even if she had the authority to do so. And she said the city has been able to prioritize streets through careful budgeting and by broadening the tax base through annexation.
“We are putting more and more resources into roads, but to raise sales tax? That is not anything I would advocate for,” she said.
The City of Omaha budgeted $117 million for transportation-related expenses in 2019. It’s to cover everything from filling potholes and building and designing roads to plowing snow and maintaining traffic signals.
Omaha budgeted an additional $19 million from federal funds.
Chris Jerram, who chairs the Omaha City Council’s public works committee, said he’s not inclined to raise the local sales tax, either, even if that were an option.
He said Omaha’s wheel tax is “substantially” lower than Lincoln’s. The standard wheel tax on Omahans is $50; it’s $74 in Lincoln. The wheel tax in Omaha brings in about $20 million a year and goes toward roads and roads-related expenses.
Still, Jerram said, it’s obvious that Omaha has not kept up with years of neglect when it comes to streets.
“So in the past I’d advocated for raising our wheel fee,” Jerram said. But “there’s really no support I can engage at this time to raise our wheel fee any further.”
Stothert, Jerram and Omaha Public Works Director Bob Stubbe noted that the city has increased its streets budget in recent years. Stubbe noted that just last year, a record $18.5 million went into street resurfacing. And a fund for brick street repair started at $150,000 a few years ago and is up to $600,000 now.
Stothert said increasing the resurfacing budget is key because resurfacing a street is a longer-term fix than simply filling potholes. But she said she thinks the city does a good job at addressing potholes; she said it takes the city about 3½ days to fill a pothole after it’s reported.
The push for raising the local sales tax in Lincoln started when a coalition of 27 community leaders were convened and met for months, said Miki Esposito, Lincoln’s public works director.
The group, which was appointed by Lincoln Mayor Chris Beutler and included representatives from the city, neighborhoods, business and other various interests, reached a few conclusions. Among them:
- Lincoln has a $33 million gap in annual transportation funding. (The city, which has about 2,400 lane miles, currently budgets about $60 million on operations and maintenance, new capital projects and paying off old debt. The revenues come from local, state and federal sources.)
- To fill the gap, the city can make management changes to cut spending. For example, the city was building streets wider than what national best practices called for. Reducing the width would save hundreds of thousands of dollars per mile.
- The city could also try to generate more revenue. After considering lots of options, they landed on recommending to raise the local sales tax a quarter-cent, from 1.5 percent to 1.75 percent. It’s estimated to cost the average household an extra $31 a year. Esposito pointed out that roughly one-third of local sales tax in Lincoln is paid by out-of-towners.
“(The coalition) just thought, what a fair and equitable way to fix a big problem, to close the gap and to get us from spending even more money in the future,” Esposito said.
Raising the sales tax in Lincoln is expected to bring in about $13 million a year. Most of that money will go toward fixing up neighborhood and residential streets.
“That’s where we’re bleeding,” Esposito said, because the city has generally prioritized main streets. She estimated that 50 percent of residential streets are in serious need of resurfacing or reconstruction.
While $13 million won’t fix the entire $33 million in annual streets needs, it’s a start, she said. The Lincoln City Council still has to vote on whether to ask voters to raise the sales tax to 1.75 percent.
Esposito said there’s a lot of support for the idea. If approved by the council, it would go to voters during the city’s primary election on April 9.
The Lincoln Independent Business Association typically opposes raising taxes. But the group, which represents 1,350 members, is on board for a few reasons, said Coby Mach, the group’s president.
First, he said, it’s a tax that will go away after six years. Plus, he said, it has to be used strictly for streets, and voters will get a say in the final decision. Raising the local sales tax has to get voter approval.
“It’s not going to be the neighborhood groups or the business groups who decide it. It’s not going to be the elected officials,” Mach said. “It’s going to be the entire community who gets to go and vote.”
Adam Weinberg, communications director for the Platte Institute, a conservative-leaning think tank based in Omaha, said his group also stands behind letting voters decide whether to raise revenue at the local level.
Omaha right now can’t ask voters to exceed its local sales tax; Nebraska legislators would have to act and change state law to allow Omaha to raise its sales tax to more than 1.5 percent.
Nicole Wheeler, a board member of Mode Shift Omaha, a group that advocates for various transit options, said Omaha’s street needs won’t go away without thinking about finding additional revenue.
But she doesn’t think there’s the appetite to raise taxes to pay to maintain the city’s current roads. She said annexation exacerbated the problems and argued that the city can be more efficient with the dollars it has by building new streets that are narrower and more pedestrian-friendly.
Weinberg said his group would support letting cities have more flexibility to raise revenue from sales tax if it’s part of property tax reform or used as an alternative to raising property taxes or other local taxes.
“It really should be a voter-driven decision,” he said. “If voters have a chance to weigh in, that gives them an opportunity to decide if it’s worth that extra tax to get that extra service.”