New Nebraska property tax law may be prompting closer look at rates

New Nebraska property tax law may be prompting closer look at rates

It’s budget time for Nebraska local governments, and that’s when members of the public get to attend local hearings to share their comments regarding the spending plan of their communities.

Two local governments in Nebraska have recently announced their budget and held their public hearings on their spending plans: the City of Omaha and Douglas County. Each subdivision has taken different approaches to handling rising property valuations that shape their plan. One may mitigate the impact of rising values, while the other is in line with past property tax trends.

Omaha Mayor Jean Stothert proposed reducing the city property tax levy by 2% when the 2022 budget proposal was released. The 2% tax cut brings the total levy from $0.47922 to $0.46922 per $100 of assessed value.

On the other hand, Douglas County adopted its new budget on July 20 with no mention of any reduction in property taxes.

This is important because property valuations in Nebraska have been steadily increasing. From 2021 to 2022, there was an average increase of 4.73%, while the statewide 10-year annual growth rate for residential property was 4.25%. This means that without doing anything, many, if not all, local governments in Nebraska are receiving windfalls from their property taxes due to rising valuations.

It is because of these continued windfalls that the state enacted a Truth in Taxation law this year. Truth in Taxation makes local officials accountable to the public when they either sit on their hands and let taxes increase with automatic valuation increases, or propose small levy reductions that still result in a net tax increase on homeowners.

LB644 (2021), the Truth in Taxation bill, will require school districts, cities, counties, and community colleges to inform taxpayers, by a mailed postcard, about a special public hearing on proposed tax increases, when subdivisions seek a property tax increase above 2% plus real growth.

This requirement will apply whether an increase in property tax collections includes changes in the levy or valuations. Even though the law does not take effect until 2022, it is interesting to see how different levels of government may already be orienting their property tax asking toward the change in policy.

We don’t have the exact figures for Douglas County, or the City of Omaha’s real growth percentage. However, we can assume that the City of Omaha anticipated their valuation growth was above this allowable percentage and was a motivating factor for reducing their levy. Douglas County, however, chose to make no changes and took the entire windfall.

While residents went to these board meetings to voice concerns over the spending plans, next year they may get another opportunity to voice their concerns specifically about the property tax, since local governments will have to decide whether to make a request subject to the Truth in Taxation hearing process.

Hopefully we will see fewer windfalls in the coming years. Since some opponents of the bill claimed mailing postcards for the hearings would be expensive, local governments can simply avoid the cost and the need for an additional hearing by keeping down the size of their tax requests. If they decide they need a windfall next year, these local governments need to be sure they’re prepared to make a good case to the public when asking for a major property tax increase.

The Omaha City Council is scheduled to vote on the budget August 23 and the Douglas County Board voted and approved their budget on July 20.

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