Bill restricting city wheel taxes to residents advanced

Out-of-town commuters would not be charged municipal motor vehicle registration fees — also known as wheel taxes — under a bill advanced from general file Feb. 1.

Lawmakers began general file debate this week with LB81, introduced by Bellevue Sen. Abbie Cornett, which would prohibit metropolitan class cities from levying a motor vehicle registration fee on nonresidents. Cities and villages also would be prohibited from levying a tax on nonresident motor vehicles.

Discussion of the bill centered on an ordinance enacted by the city of Omaha in 2010. The ordinance requires an individual to pay a $50 fee if a vehicle is used more than 30 times a year to travel to a place of work within Omaha. The fee is collected by employers and — after subtracting 4 percent for processing — remitted to the city.

As introduced, the bill would have limited municipal licenses or occupation taxes to businesses and individuals living within city limits. This provision was removed by an amendment offered by Cornett.

The Cornett amendment also would phase out motor vehicle registration fees on Jan. 1, 2013, for those living in the extraterritorial zoning jurisdictions of cities and villages. Cornett said the amendment would give Omaha time to budget for the loss of the wheel tax revenue it has received since 2006 from those within its extraterritorial zoning jurisdiction, which is a 3-mile extension of Omaha’s city limits.

Cornett called her amendment a workable compromise in which nonresident motor vehicle registration fees can be discontinued without straining the city of Omaha’s budget.

“We compromised by taking away half of the money [Omaha] budgeted for [nonresident wheel tax revenues] … and giving them a year to transition,” Cornett said. “We are not allowing them past Jan. 1, 2013, to tax in their extraterritorial zoning jurisdiction.”

Omaha Sen. Brad Ashford said the Cornett amendment was needed to avoid putting Omaha’s budget in jeopardy. While the bill as amended would reduce city revenues by $2.9 million, he said, it would be better than the $5.9 million the city would lose if the extraterritorial zoning jurisdiction taxing authority were revoked immediately.

Omaha Sen. Beau McCoy spoke in support of LB81 but in opposition to Cornett’s amendment, saying it could create winners and losers among nonresidents who are paying motor vehicle registration fees. If state tax policy is unfair for one segment of society, he said, it should not stand.

Omaha Sen. Bob Krist also voiced concerns regarding the delayed action on extraterritorial zoning jurisdiction taxing. Sanitary and improvement districts (SIDs) in the metro area are included within the extraterritorial zoning jurisdiction and are taxed by local governing boards that are not elected by those taxpayers, he said.

“Taxation without representation has a name, and it’s called an SID,” Krist said.

The Cornett amendment was adopted 28-11, and LB81 was advanced from general file 43-0.