State could provide assistance for infrastructure improvements

Municipalities, natural gas utilities and water utilities undergoing infrastructure improvements could apply for state assistance under a bill heard by the Revenue Committee Feb. 24.

LB682, introduced by Omaha Sen. Heath Mello, would offer state assistance to finance the construction, acquisition or improvement of sewer, natural gas and water cast-iron infrastructure. Assistance would be calculated based on the amount of state sales tax collected from increased fees and charges to complete combined sewer overflow, natural gas and water projects.

The bill would take effect in fiscal year 2013.

Mello said the city of Omaha is undertaking a combined sewer overflow project mandated by the federal Environmental Protection Agency through the Nebraska Department of Environmental Quality that will cost $1.7 billion over the next 15 years. He said LB682 would provide a financing mechanism to Omaha and other cities with similar projects by turning back sales taxes levied on monthly fees or charges to complete the projects.

“Communities throughout the state will soon be forced to deal with their aging infrastructure,” he said, “and without some form of assistance, local taxpayers will be the ones bearing the brunt of this heavy burden.”

Mandatory infrastructure projects will lead to a “windfall” in state sales tax revenues, Mello said, so LB682 would not take away revenue that the state is currently collecting.

Omaha mayor Jim Suttle testified in favor of the bill, saying state sales tax revenues from increased sewer use fees will total $46 million in 2024 to fund the Omaha sewer project. He said the fees are a burden to ratepayers.

“Give us the tool necessary to get this federal mandate completed,” Suttle said.

Omaha environmental services manager Marty Grate also testified in support of the bill, saying federal support historically was provided for mandated projects but is no longer available. The typical monthly sewer fees for Omaha households will increase from $16 currently to $37 in 2014, he said, and this increased rate will be taxed.

Doug Clark, president of the Metropolitan Utilities District, said in his supporting testimony that natural gas and water infrastructure replacement costs will result in a 25 percent increase in gas rates and a 45 percent increase in water rates over the next five years. Turning back the sales tax levied on the charges to finance these projects would provide $1 million a year to the district, he said.

Julia Plucker, representing the Omaha Association for a More Competitive Business Environment, also testified in support. The 29 largest water users in Omaha will pay for 5 percent of the sewer and infrastructure project, she said, which has led companies to consider relocating. She said the rate increases facing these companies are untenable.

Lynn Rex, representing the League of Nebraska Municipalities, spoke in support of LB682. Fifteen to 20 communities are facing unfunded mandates similar to the city of Omaha, she said, and the list will continue to grow.

Jill Becker, representing Black Hills Energy, testified in opposition to LB682, saying the bill would not include investor-owned natural gas utilities. Restricting the bill to public utilities would exclude many projects in Nebraska, she said.

The committee took no immediate action on the bill.