Utilities Section
Newsletter League of Nebraska Municipalities
August 2024
Legislature imposes new lid on municipalities By Lash Chaffin, Utilities Section Director On Aug. 20, the Legislature concluded their Special Session by adopting some budget cuts for state agencies and a bill that limits the ability of municipalities and counties to increase property tax. The 108 th Legislature, Special Session, lasted 17 “legislative days” beginning July 25, 2024, and ending on Aug. 20. There were numerous ideas discussed including the removal of over 100 sales tax exemptions and taxation of items previously not subject to sales tax. The Legislature failed to remove any sales tax exemptions and did not add sales tax to any additional items. Instead, the Legislature adopted LB 34 imposing property tax caps on municipalities and counties. This will impact many Nebraska municipal departments including public works and parks/recreation. The new lid on property tax levy request authority will take effect on July 1, 2025. This lid will replace the current lid on “restricted funds.” In general, for FY 25-26, a municipal property tax request will be limited by beginning with the prior year property tax plus an allowance for growth, plus an increase of zero percent OR the percentage of an inflation index known as the State and Local Consumption Expenditures and Gross Investment Index, which 206 S 13th Street, Suite 800 Lincoln, NE 68508 (402) 476-2829 Fax (402) 476-7052
typically averages around 4% although there are some years that it was much lower. The initial growth calculation includes increases in valuation from new construction, additions or other improvements to existing buildings, annexation, or changes in property use. There also are some provisions for tax increment financing valuation issues. There are several exceptions where property taxes may exceed the amounts included in the calculation described above: • The amount of property taxes budgeted for public safety services defined as crime prevention, offender detention, and firefighter, police, medical, ambulance, or other emergency services; • The amount of property taxes budgeted for approved bonds; • The amount of property taxes needed to respond to an emergency declared in the preceding year, as certified to the auditor; • Unused property tax request authority from prior years. This is limited to 5%. • The amount of property taxes budgeted in support of (a) a service relating to an imminent and significant threat to public safety that (i) was not previously provided by the political subdivision and (ii) is the subject of an agreement
2024
LEGISLATIVE SPECIAL SESSION or a modification of an existing agreement executed after the effective date of this act, whether provided by one of the parties to the agreement or by an independent joint entity or joint public agency; or (b) an interlocal agreement relating to public safety; • The increase in property tax request authority approved by the legal voters; and • The amount of property taxes budgeted for county attorneys and public defenders. The League and the Nebraska Association of County Officials strongly opposed LB 34 which included this lid. There are many legal questions that remain to be answered on the details of how the language of LB 34 will be interpreted. Although LB 34 passed with the emergency clause, the property tax caps on municipalities and counties will not take effect until July 1, 2025. Consequently, in FY 24-25, the “lid on restricted funds” in Chapter 13, Article 5 still applies to municipalities and counties.
Lash Chaffin Utilities Section Director Jackson Sash Utilities Field Representative