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Ending city occupational taxes would mean higher taxes or cuts in service

Ending city occupational taxes would mean higher taxes or cuts in service

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Lincoln would have to almost double its property tax rate or make draconian cuts in services if the Legislature ends state aid to cities and stops them from collecting occupational taxes, according to Lincoln Mayor Chris Beutler.

During a Thursday morning news conference, Beutler criticized several legislative bills that would cut city revenue and urged state senators to reform the public union negotiating system.

One bill (LB165) that would eventually eliminate the city's tax on telecommunication companies equates to a $7.8 million cut in revenue to Lincoln, Beutler said.

That's the equivalent of a 20 percent increase in the city's property tax bill or the end of Lincoln's city libraries -- "all eight of them" -- Beutler said.

The two bills relating to the city's ability to collect occupational taxes do nothing to improve the state's budget, so it is difficult to understand the motivation behind the measures, Beutler said.

The city has a 6 percent occupational tax on all telecommunications gross revenues, which includes telephone service and equipment.

But state telecommunication-related taxes are even higher, according to Beutler. His own telephone bill had at least three state taxes that together were more than double the city tax, he said.

Beutler also suggested the state consider cutting state aid to cities by 10 percent, not end the aid as proposed. A 10 percent cut is proportional to what is happening with state agencies, he said.

Lincoln would lose about $1.8 million, or 1.5 percent of its general fund revenue, if state aid were eliminated. The state provides state aid to help reduce the local property tax burden.

Ending the city's authority to have occupational taxes would be a more draconian cut than ending state aid, he said.

All Lincoln-based occupational taxes bring in about $20 million, about 18 percent of the general fund budget, according to Beutler.

If all the bills affecting state revenue are passed, the city would have to raise the property tax from 28 cents per $1,000 in valuation to 42 cents, or make deep cuts to make up occupational tax revenue and state aid.

The owner of a $150,000 home would see an increase from $420 a year in property taxes to $630 under that scenario.

Occupational taxes include new arena-related taxes on restaurant and bar bills intended to help pay for the arena and related street improvements in the West Haymarket area.

The city administration is more worried about the telecommunications occupational tax (LB165). The bill applying to all occupational taxes (LB562) is not likely to pass in a form that would completely eliminate occupational taxes, according to Rick Hoppe, the mayor's chief of staff.

State senators do need to reform the state's collective bargaining system for public employee unions to give cities more power over wages, Beutler said.

"With no legislative action, city employees will continue to receive considerable salary increases and benefits at a time when private sector firms are watching every penny," he said.

But, the mayor said, he does not support eliminating the collective bargaining system as some senators suggest, because of the chaos that would result.

The union system in Nebraska requires government employers to negotiate with public unions, and, in exchange, prohibits strikes.

Reach Nancy Hicks at 402-473-7250 or


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