Omaha, Lincoln seek expansion of turnback tax to bolster convention space

Proposal is part of omnibus tax bill that some worry grants too many tax giveaways and threatens state’s fiscal health

By: - May 16, 2023 5:45 am
CHI Health Center

State sales taxes paid at hotels and retailers near Omaha’s CHI Health Center help finance grants awarded every year to projects in communities across the state. (Courtesy of Metropolitan Entertainment & Convention Authority)

LINCOLN — Both Omaha and Lincoln are looking to the state to help them attract more, and bigger, conventions.

An omnibus tax bill up for debate Tuesday in the Nebraska Legislature would expand the state’s turnback tax law to help a possible expansion of convention space at Omaha’s CHI Health Center Arena and the construction of a convention center in downtown Lincoln.

There are also proposed turnback tax benefits to help finance and promote Omaha’s new Steelhouse concert venue and the Astro Theater concert complex in La Vista.

Right now, officials say, Omaha is losing out on larger conventions because the 20-year-old CHI Center has only 346,000 square feet of convention space and 16 breakout rooms for smaller meetings.

Larger space needed for larger conventions

“The majority of the cities we compete with have well over 500,000 square feet of convention space, so if we want to remain competitive, we need to expand,” said Deb Ward, executive director of the Omaha Convention and Visitors Bureau.

In Lincoln, a broader turnback tax law would be used to help finance a $60 million downtown convention center, possibly near the Cornhusker Hotel or at the current site of the downtown post office.

The state tax help for convention centers is part of Legislative Bill 727, into which 20 some other bills were amended.

The whopper bill — so comprehensive that a briefing for senators is scheduled Tuesday morning to explain it — includes some novel proposals for the state, including:

  • Providing tax breaks for Gretna’s Nebraska Crossing shopping mall and similar malls for expansion to attract new-to-Nebraska retailers and out-of-state shoppers to so-called “Good Life Districts.” State incentives for retail development haven’t been given in the past out of concerns that jobs at malls don’t pay well or don’t last long and that a new mall simply  shifts retail spending, it doesn’t increase it. But its main sponsor, State Sen. Lou Ann Linehan, said the goal is to attract “retail tourists” from out of state, creating new tax revenue.
  • Allowing bond-financing of highway construction. That would overturn decades of practice in Nebraska to “pay-as-you-go,”  and not borrow and assume debt, when it comes to state road improvements. The idea was opposed by past governors, but it is backed by Gov. Jim Pillen, whose hometown of Columbus has been waiting for years to get four-lane expressways that connect it with Omaha and Interstate 80 at York.
  • Allowing funds from state college savings plans to be used to pay for tuition at private, K-12 schools, another break from past practice.
  • Adding nicotine vaping devices to the tax rolls so they are taxed somewhat like tobacco.

Too many tax giveaways?

While promoters of the multi-faceted bill say it’s filled with job-creating, lifestyle-improving and, in the case of Nebraska Crossing,  transformational tourist-attracting proposals, others aren’t so sure.

The Lincoln-based OpenSky Policy Institute, in an analysis Monday, estimated that the many-faceted LB 727 could cost $50 million over the next two years, taking away funds that could be used for education and training programs to address the state’s workforce shortage.

Combined with income- and property-tax relief measures, OpenSky said the bill “could create challenges for future Legislatures tasked with passing a balanced budget in an economic downturn.”

Significant changes in the state’s turnback tax policy — which helped finance the CHI Health Center Arena in Omaha, Pinnacle Bank Arena in Lincoln and the Ralston Arena — are just a part of an amendment posted to LB 727 on Monday.

Currently, the turnback tax law allows state sales taxes paid at the arenas and at nearby hotels to be “turned back” to help finance the complexes.

But under LB 727, the turnback would be broadened in Omaha and Lincoln to capture state sales taxes paid on meals, drinks and other retail purchases within 600 yards of the arenas. (The Ralston Arena already gets this retail turnback, unlike Omaha and Lincoln.)

In Omaha, the expansion would capture sales in portions of the Old Market area, as well as at bars and restaurants in the “NoDo” area north of downtown Omaha.

Last year, the turnback law was expanded to allow financing of a possible new parking garage near the CHI Center.

This year’s bill expands the law further, permitting turnback funds to be used for “repairing” and “replacing” portions of the Omaha and Lincoln arenas.

Would help smaller, private facilities as well

Under LB 727, turnback funds could be used to finance bonds used to pay for smaller, privately owned concert venues, such as Steelhouse, and could be used for parking structures and promotional efforts at the Omaha concert hall and the Astro Theater.

LB 727 would also allow turnback funds for a new Lincoln convention center that is under discussion.

Lincoln Sen. Eliot Bostar, during a public hearing on the Lincoln convention center bill, said it is projected to host 200 events each year, generating new spending, personal income, job creation and tax revenues of about $18.5 million a year.

Kristyna Engdahl of the Metropolitan Entertainment and Convention Authority, which operates the CHI Center, said discussions about possible expansion of convention space are underway but not ready for public release.

But, she said, broadening the state’s turnback tax law would help such a project.

When asked about using turnback funds to upgrade existing facilities at the CHI Center, Engdahl said that about $20 million in improvements, including new seats, have been made in the past six years. The facility, she said, still gets rave reviews, but the bill would allow turnback funds for upgrades.

Jack Cheloha, who lobbies for the City of Omaha, said that the turnback law has been updated more than once since it was passed in 1999 and that LB 727 would help expand and keep the Omaha arena top-notch.

“We’re going on 20 years of hosting many millions of people through the doors. It’s time for remodeling and refurbishing,” he said.

Expanding the convention center in Omaha, Ward said, would allow the city to compete for larger conventions.

Expanding the turnback tax area, she added, would also help communities outside Omaha and Lincoln, because 30% of the taxes collected go toward community centers and other projects in those towns and cities.


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Paul Hammel
Paul Hammel

Senior Reporter Paul Hammel has covered the Nebraska state government and the state for decades. Previously with the Omaha World-Herald, Lincoln Journal Star and Omaha Sun, he is a member of the Omaha Press Club's Hall of Fame. He grows hops, brews homemade beer, plays bass guitar and basically loves traveling and writing about the state. A native of Ralston, Nebraska, he is vice president of the John G. Neihardt Foundation.