Legislative Testimony for LB183: Change the valuation of agricultural land and horticultural land for purposes of certain school district taxes

Members of the Revenue Committee, I am here to testify on LB183 in a neutral capacity.

Nebraska currently has the 7th highest property tax in the nation and is in need of property tax reform that addresses the underlying problem of a local tax system that imposes too great a burden on the state’s economic growth.

LB183 seizes on an interesting issue that we’ve received a lot of feedback on since we began surveying Nebraskans on property taxes last year.

Many agricultural property taxpayers feel that they are at a disadvantage in their communities when school bonding for capital expenditures is voted on. Because their valuations are much higher than most residential and commercial property taxpayers, they feel they are paying a disproportionate share of the cost of the bond relative to the benefits they receive.  

Also, the tax increase an ag producer is likely to face if a school bond is adopted will be significantly higher than the relatively modest tax increases residential taxpayers face when bonds are approved.

There’s definitely some merit to the idea, along with Sen. Briese’s other bills that we need to give voters every opportunity to understand these votes, including the knowledge going into a bond about how much skin they will have in the game. Of course, even if this policy was adopted,  ag producers would still pay these bonds at the same level as anyone else on their residential or commercial properties.

But there are other some other difficulties with a policy like this, which the fiscal note identifies. It may be very disruptive for this change to occur as written because the bill has no grandfather clause for existing bonds that have already been voted on.

Also, like any shift of valuation from one class to another, the overall impact on levies broadly may set back property tax reform for other classes of taxpayers. While this bill doesn’t call for it directly, probably the most efficient thing to do if the Legislature decided it did not want ag land to bear the cost of school bonds is to make some kind of revenue replacement either at the state or local level that came from a source other than property tax.

Thank you and I would be happy to take any questions from the committee.