The Nebraska Department of Revenue says four now-closed beer stores in Whiteclay together owe more than $600,000 in state taxes after an audit determined they underreported sales by nearly $1.7 million in a three-year period.
But the owners of Arrowhead Inn, State Line Liquor, D&S Pioneer Service and Jumping Eagle Inn have mounted a legal challenge, asking a Lincoln judge to review Tax Commissioner Tony Fulton's Nov. 22 findings, which they say were based on flawed estimates.
It's just the latest setback for the controversy-plagued stores forced to close in April after decades of serving millions of cans of beer each year to the Oglala Lakota people of South Dakota’s nearby Pine Ridge Indian Reservation, where alcohol is banned.
This spring, the Nebraska Liquor Control Commission voted 3-0 to deny the renewal of the stores' licenses following a hearing at the Capitol on whether law enforcement in Whiteclay was adequate to let beer sales continue.
That decision, hailed by activists, led to a court fight which ended in September with the Nebraska Supreme Court rejecting the store owners' bid to reopen, citing a technical flaw in their appeal.
Now to reopen, they would need to reapply for liquor licenses.
But as the issue over their licenses raged, a second, behind-the-scenes fight was brewing over taxes.
On Friday, attorney Benjamin Moore, of Rembolt Ludtke LLP, filed nine petitions for review for the individual store owners after each was issued a notice of deficiency determination earlier this year. The notices reflected they owed additional income taxes, sales and consumer use taxes, as well as a litter fee (a tax assessed to those making gross proceeds of $100,000 or more in retail sales).
In the petitions, Moore said the Department of Revenue's decisions were not supported by evidence, were contrary to law and were "arbitrary, capricious and/or unreasonable."
The dispute boils down to how the state's auditors recalculated each of the businesses' gross receipts — and therefore taxes due — for the period from August 2013 to August 2016.
According to court records, department auditors first audited the books of the individual stores, then did on-site audits in September 2016 after the owners asked for re-determinations.
In the on-site visits, they were looking for documentation to support the stores' reported sales and use tax returns. But the Liquor Control Commission had taken their z-tapes, records from their cash registers, so the owners of Arrowhead Inn, D&S Pioneer Service and Jumping Eagle Inn couldn't provide them. State Line did not use a register, according to the state's order.
Instead, auditors subpoenaed the alcohol suppliers' records of all sales to the businesses for the audit period.
Department auditors reconstructed total sales with the help of price lists from the owners. But auditors had no way of knowing how many of the six-packs, 18-packs and cases delivered to the stores had been sold as singles, and made calculations assuming the largest packs were broken down and sold by the can.
The owners took issue with the new calculations, which they said didn't reflect wholesale price increases or an accurate number of individual can sales. They argued the Department of Revenue should have gotten their z-tapes from the Liquor Control Commission.
But Fulton, the tax commissioner, said that was the petitioners' job. Last month, he affirmed the numbers, saying the owners hadn't retained the records they were required to under Nebraska law, "which made it necessary to look beyond petitioner's records to calculate total sales."
In his order, Fulton said there may have been a more precise method of determining how much was sold as single cans, "but the taxpayer did not provide information that would allow the department to formulate that more precise methodology."
In the end, he upheld the department's findings that:
* Arrowhead Inn's taxes were deficient by $244,168, including $109,639 in sales and use tax, income taxes of $101,888, plus penalties, fees and interest.
* State Line Liquor's taxes were deficient by $142,908, including income taxes of $69,615, $59,930 in sales and use tax, plus penalties and interest.
* D&S Pioneer Service's taxes were deficient by $122,260, including income taxes of $56,008, $54,580 in sales and use tax, plus penalties, fees and interest.
* Jumping Eagle Inn's taxes were deficient by $92,449, including income taxes of $41,362, $40,150 in sales and use tax, plus penalties and interest.
Together, it adds up to $607,926.
Now, a Lancaster County District Judge will review the record to see if he or she agrees.
With its combination of new equipment and more sophisticated timing, Green Light Lincoln has shaved minutes off that O Street drive.
Mid-morning on a recent Thursday, Lonnie Burklund, assistant director of Public Works and Utilities, drove east from 25th Street to 70th without stopping at a single red light.
And he would have made it to 84th Street but for one driver, who lingered at the 56th Street light long after it had turned green. Texting, perhaps?
Along the way you could see the lights turning green at the intersections ahead, and the little platoons of cars -- as Burklund calls them -- moving together, down the street and through each intersection.
That’s a good sign. Vehicles smoothly moving in platoons along a corridor means the timing of the signals are appropriate, he said.
The O Street corridor, one of nine corridors in Phase 1 of the Green Light Lincoln program, is almost finished. There is just a little tweaking left as drivers and city staff give suggestions and consultants make changes, collect data and write a final report.
The report for O Street, covering the 2.6 miles from 25th Street to Skyway Road (between 70th and 84th) shows these savings:
* It used to take about 10 minutes for people heading west in the morning, to downtown or campus, to drive that 2.6-mile stretch. Now it takes a little over 8 minutes.
* The evening drive home, east from downtown, used to take an average of 11.3 minutes, now it takes around 9½ minutes, an almost two-minute savings.
* Drivers heading west during the evening commute will see the biggest savings, from an average 11.2 minutes to around 8.2 minutes.
And when you add it all up, the annual numbers are big.
Drivers of those 31,100 vehicles that travel O Street daily will collectively save 93,500 hours, 132,700 gallons of fuel and will avoid 6.7 million stops and 13,000 kilograms of emissions over a year.
That’s a total savings of $1.8 million, based on consultant calculations and using a standard dollar value for the time saved.
These successful changes mean less frustrated drivers and fewer crashes, according to city public works officials.
The 6.7 million fewer stops along O Street each year will most likely mean fewer rear-end crashes.
“If you can avoid stops or slowing down traffic you reduce the number of rear-end crashes,” said Mark Lutjeharms, manager of Lincoln's traffic engineering division.
Drivers are seeing similar improvements in drive time and fewer stops along other major arterials that are part of Phase I of Green Light Lincoln, said Lutjeharms.
Corridors for Phase I were O Street, North 84th Street, South 84th Street, South 70th Street, Vine Street, Capitol Parkway/Normal Boulevard, Antelope Valley Parkway, Nebraska 2 and Cornhusker Highway.
Signals on O Street, and most major arterials, have five separate timing plans — morning commute, midday, evening commute, off-peak evening and late night, where the goal is reducing time spent behind the wheel.
Consultants are reviewing the practice in peer cities of using flashing red signals late at night, instead of green light-red light cycles, to determine whether that is a good idea for Lincoln, Lutjeharms said. It may be that improving detection — 30 percent of the city's intersections had failed vehicle detection systems before the Green Light Lincoln initiative began — will eliminate long waits at intersections in the middle of the night, he said.
There are also special timing plans for big events, including Husker games, both before and after, said Burklund.
Green Light Lincoln includes equipment, software improvements and signal timing adjustments.
It incorporates better detection (cameras rather than coils in the pavement that are hard to replace when they fail); new signals with flashing yellow turn signals that help provide more left-turn flexibility; and changes in signal timing to help get more people through each intersection.
Three consulting firms — Olsson Associates, HDR and Iteris — have been hired to collect the data, develop new standards and recommend new timing plans.
Consultants use information on traffic volumes, which direction traffic is going, the speed limit, even driving habits of the Lincoln public to determine the most efficient cycle length for red lights, green lights, left turns, even for timing between intersections.
Improvements at 33rd and O streets include:
* A flashing yellow arrow signal in all directions gives greater flexibility.
* Revised timing — increasing the time the light is green for westbound traffic by 4 seconds and eastbound green time by 9 seconds.
"Now four seconds may not seem like much, but it allows you to get another three to five vehicles through an intersection in each cycle. That adds up over an hour," said Lutjeharms.
* Cameras detect vehicles waiting to turn left and adjust flashing and solid arrows accordingly.
* Engineers also adjusted the timing between intersections along O Street, as part of the mission to move more vehicles, more quickly.
The consultants' work,for the nine corridors, at a cost of about $550,000 this year, will continue as the city moves on to other corridors and intersections across the city. They'll tackle another 115 to 120 intersections next year, in Phase 2, Lutjeharms said.
Staff estimate the hardware changes for Green Light Lincoln will cost an estimated $2 million annually over the next three years as they work to complete all four phases, covering 430 intersections.