Multifaceted tax credit package, a combination of nearly 30 bills, advances with little objection
Some questions raised about ‘corporate welfare,’ fairness of tax break for certain retailers, and impact on kid sports in east Omaha
The Nebraska Crossing outlet mall would expand by 1,000 acres and is projected to become a “destination” for shopping, youth sports and entertainment with help of a bill advanced Tuesday by the Nebraska Legislature. (Courtesy of Nebraska Crossing)
LINCOLN — An omnibus tax credit bill — an unprecedented amalgamation of nearly 30 proposals — breezed to initial approval Tuesday with only a few questions about whether it provided unwarranted “corporate welfare.”
Legislative Bill 727, as amended, would provide generous tax breaks for an expansion of the Nebraska Crossing shopping mall, help enhance convention centers in Omaha and Lincoln and allow — for the first time — bonding of freeway projects.
It would also end a “home equity theft” scheme and allow a $200 million expansion of a Clean Harbors waste incinerator complex near Kimball to qualify for state tax incentives.
LB 727, which combines at least 27 bills, was portrayed as a way to help keep young people in the state by enhancing shopping, tourism and concert venues via state tax breaks.
‘Huge investment in future’
“This is a huge investment in our future,” said State Sen. Lou Ann Linehan of Elkhorn, who led creation of the super-whopper package of bills.
A couple of senators, however, questioned the fairness of providing generous tax breaks that appear aimed at one project, Nebraska Crossing, in one area, Gretna.
Bellevue Sen. Carol Blood called it “corporate welfare” and proposed that a so-called “Good Life District” that gets state tax breaks publicly reports whether it is attracting out-of-state shoppers — and sales tax revenue — and drawing new-to-Nebraska retailers such as IKEA and Crate & Barrel, as is being promoted.
Under the bill, at least 20% of the mall’s customers must be from out of state, and a mall would have to invest at least $500 million to qualify for a state tax break. It would direct half of the state sales taxes (5.5%) generated within the district to help finance the expansion.
Blood proposed raising the out-of-state shopper requirement to 30%, requiring retailers in the district to pay a “living wage” to workers, about $17 an hour and extend the tax breaks to other retail locations.
Not an even playing field’
“We are giving a special offer to basically one community and one project,” she said. “This is not an even playing field.”
Some have estimated that Nebraska Crossing could receive more than $300 million over the 25-year life of the state tax benefits.
If passed, LB 727 would, for the first time, provide state economic benefits to a retail development. In the past, incentives for retail were discouraged because, typically, a new shopping mall just draws shoppers from other malls, and jobs there don’t pay well and don’t last as long as manufacturing or office jobs.
Too many tax exemptions
Bayard Sen. Steve Erdman decried that LB 727 provides more exemptions from sales taxes, which he said is exactly the opposite of what a fair tax system should provide: a low tax rate and broad-based tax. Now, he said, more than half of the state’s sales are exempt from taxes.
But Linehan and Elkhorn Sen. Brad von Gillern said Nebraska is risking little and stands to reap a great reward in terms of new state tax dollars that are now going to other states.
“If this development doesn’t happen, there’s no cost. If it does happen, there’s substantial benefits to the State of Nebraska,” von Gillern said.
Blood eventually withdrew her amendment but said later that she would re-introduce a similar amendment during second-round debate.
She said concerns about LB 727 came from three other communities in Sarpy County — Bellevue, Papillion and La Vista — that are also trying to attract shoppers.
Omaha Sen. Justin Wayne, who has also been a youth sports coach, questioned another aspect of the Nebraska Crossing development: the addition of sports fields to attract youth sports tournaments.
Families spend an estimated $30 billion to $40 billion a year on youth sports participation and travel, according to the Aspen Institute. It has spawned efforts in the Legislature to spur development of soccer and baseball complexes in Nebraska to keep families from traveling out of state for tournaments and to keep spending on meals and hotels here.
East Omaha youth sports
Wayne, however, said building another multisports complex in Gretna or the west Omaha area hurts youth sports in east Omaha, which lack such facilities. He vowed to seek an amendment during second-round debate to bring more “balance” to LB 727.
Would prohibit ‘home equity theft’
Four years ago, an elderly farm family in Cass County lost an 80-acre farm — worth nearly $500,000 — because it didn’t pay close attention to mail seeking payment of property taxes.
Such a windfall, known as a “home equity theft,” would be prohibited under one aspect of LB 727.
Lincoln Sen. Eliot Bostar said a pending U.S. Supreme Court ruling is expected to prohibit “takings” of property via the tax deed process without “just compensation,” and his amendment to the bill responds to that.
It will require personal service to property owners that their taxes are delinquent, making sure they know they are at risk of losing their home or land via the purchase of a tax deed.
That is where a third party can purchase a lien on a property that has an unpaid property tax bill. After three years, that third party can end up owning the property, if the owner doesn’t pay the taxes.
The amendment to LB 727 would require any windfall made from a sale of such property be returned to the original owner.
Elmwood Sen. Rob Clements said the elderly couple in his area eventually had to buy back the home they lived in, but they lost the rest of their 80 acres of farmland.
The bill advanced from first-round debate on a 44-0 vote. But Linehan said some aspects of the bill may have to be dropped after a fiscal note has been generated on the multi-amended bill.
The OpenSky Policy Institute has estimated the bill would cost $50 million over its first two years, which, combined with major income and property tax cut proposals, could put the state at risk of running short of revenue to finance other state functions, such as higher education and aid to K-12 public schools.
Linehan added that one aspect of LB 727 is already slated to be pulled out: a provision that would have allowed college savings plan funds to be used to pay for tuition at private, K-12 schools.
Because an endless string of filibusters during the 2023 legislative session has prevented debate on several bills, lawmakers have turned to combining several proposals into one measure, creating a “Christmas tree” bill of many “ornaments,” or bills.
But LB 727 may take the cake as far as the breadth of bills included.
Other aspects of the bill would:
- Apply a first-ever excise tax on vaping products. Sen. Jana Hughes of Seward said vaping has reversed decades of progress in discouraging teen use of nicotine, and implementing a tax — expected to generated $10 million over four years — would help discourage its use.
- Allow state tax incentives to help waste processing facilities. It would help Clean Harbors, which is looking at a $200 million, 200-job expansion of its facility south of Kimball, according to Erdman.
- Provide turnback tax benefits to Omaha’s new Steelhouse music hall and La Vista’s Astro Theater concert complex.
- Provide a tax exemption for baling twine, used in farming.
- Divert sales taxes paid on airplanes to help licensed airports provide a 10% match to federal funds available for runway improvements and other projects. It’s expected to leverage $30 million in improvements and take pressure off property taxes.
- Allow farmland annexed into a city to remain taxed as farmland. The issue pertains to Vala’s Pumpkin Patch near Gretna, which is looking at its property tax valuation jumping from $5 million to $18 million unless something is done.
- Extend a tax break on rehabilitation of historic properties.
- Allow bonding of up to $450 million on state expressway projects. Columbus Sen. Mike Moser said an amendment must be attached to get around the state’s prohibition on assuming debt.
- Increase a yearly tax credit program for the agricultural processing and livestock operations from $1 million a year to $10 million. Sen. Dave Murman said the proposal could help expansion of the dairy industry in Nebraska, as well as large livestock facilities, such as the 150,000-head Blackshirt Feeders feedlot proposed in southwest Nebraska.
- Allow tax-free purchases of materials to build a new Omaha library near 72nd and Dodge Streets.
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