- Associated Press - Thursday, February 4, 2016

LINCOLN, Neb. (AP) - Nebraska Gov. Pete Ricketts’ property tax plan faced a barrage of criticism Thursday from local government officials, pitting them against some of the state’s largest agricultural groups, who say it would help farmers and ranchers.

Mayors, county commissioners, community college officials and others argued against the proposal during a marathon six-hour hearing before the Legislature’s Revenue Committee, saying it would limit their flexibility.

The proposal seeks to address a top complaint of the state’s agricultural producers, who have seen their property taxes soar because of increased farm and ranchland values, even though farm incomes have declined.

The bill would prevent the combined taxable value of all the state’s agricultural land from growing by more than 3 percent annually. It also would eliminate exceptions in state law that let local governments exceed their levy and budget limits, allowing them to do so only with voter approval.

The proposal is one of Ricketts’ top legislative priorities of the year. The governor appeared in person at the hearing, arguing that lawmakers need to address property taxes before the session ends.

Ricketts said he was open to changes in the plan, but urged lawmakers “not to let the perfect get in the way of the good.”

“It’s a balanced approach. It’s an incremental approach. It’s a measured approach,” Ricketts said in testimony to the committee. “I think it strikes the right balance.”

The Nebraska Farm Bureau Federation and Nebraska Cattlemen Association announced their support for the plan on Tuesday, saying the recent surge in land values has led to unsustainable tax increases. In rural areas, farmers and ranchers have shouldered a growing share of the cost of K-12 public schools.

“Where we’re at today is not fair,” Steve Nelson, the Farm Bureau’s president, said at Thursday’s hearing.

Local government officials focused nearly all of their criticism on the proposed limits on their spending and taxing authority.

Lincoln Mayor Chris Beutler said the restrictions would have a “devastating” effect on his city’s ability to provide services and promote economic growth.

“The local political subdivisions are really working hard and really have their act together,” Beutler said.

La Vista Mayor Douglas Kindig said his fast-growing city wouldn’t have grown as fast without the freedom to spend more on infrastructure projects. Restrictions on the city’s taxing and spending authority could also raise the interest rates it has to pay when issuing bonds, he said.

In a brief interview during a break, Ricketts noted that nearly all of the criticism has come from local government officials. Ricketts said most of the people he hears from when traveling the state are taxpayers concerned that they’re paying too much.

Nebraska Property Administrator Ruth Sorensen said the bill would slow the statewide growth of property taxes, although some individuals could still see large increases.

If the state’s total taxable land value jumped by more than 3 percent, the bill would require state officials to reduce the values of each land parcel “uniformly and proportionally” until their combined value was just 3 percent larger than the previous year’s.

The impact on farmers and ranchers would vary. For those with property in the same county as a large city, the benefit would be greater because county governments could shift more of the burden onto residential homeowners and businesses.

For those in isolated areas with a smaller tax base, the benefit could be smaller or nonexistent because counties might raise their levies to compensate.

Some critics said the proposal could force local governments to cut services if they don’t have enough homes or businesses to shoulder the shifting tax burden. A Ricketts spokesman argued that those governments could still ask voters for the authority to raise their levies.

Had the cap been in place for the current year, schools, counties, community colleges and other local governments would have faced a combined $212 million revenue shortfall, according to the OpenSky Policy Institute.

“Our research shows using an assessment cap to address this scenario is likely to create more problems than it solves,” said Renee Fry, the group’s executive director.

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The bill is LB958.

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