Limit on aggregate agricultural land valuation proposed

Annual increases in statewide agricultural land valuation would be capped at 3 percent under a bill heard by the Revenue Committee Feb. 4.

Introduced by Grand Island Sen. Mike Gloor on behalf of the governor, LB958 would limit annual aggregate agricultural and horticultural land valuation increases and tighten spending limits on local governments in an effort to slow property tax growth.

Beginning this year, if the aggregate statewide valuation for all agricultural and horticultural land exceeds the valuation of that land in the previous tax year by 3 percent or more, the assessed value of each parcel would be reduced using a uniform adjustment factor.

The bill would remove some exclusions from levy and budget limits, including the ability of a political subdivision—other than schools—to approve a levy in excess of its limit during a meeting in which more than 10 percent of the subdivision’s registered voters are present.

LB958 also would limit the use of restricted funds budgeted for capital improvements, qualified sinking funds and services subject to joint agreements. After July 31, 2017, the amount of unrestricted funds carried forward could not exceed 3 percent of the budgeted restricted funds for the fiscal year.

The 2013 Tax Modernization Committee, a joint interim study with the Education Committee and discussions with the governor all indicated that Nebraska relies too heavily on property taxes to fund K-12 education, Gloor said. The spending limits in LB958 are necessary to ensure that any increased state aid to K-12 results in lower property taxes and is not absorbed into local budgets, he said.

Gloor said the bill would not remove funding mechanisms for local governments and that the 3 percent annual aggregate adjustment is not a hard cap on individual valuations.

“This means individual property owners will see a variety of different increases or decreases on property valuations from year to year,” he said.

Gov. Pete Ricketts testified in support of the bill, saying that any plan that seeks to provide property tax relief also must include components that limit local government spending.

“I think it’s important that we get something done this year,” he said. “The people are mad. They are demanding property tax relief.”

Steve Nelson, president of the Nebraska Farm Bureau, also spoke in support of the bill. He said Nebraska farmers and ranchers pay a disproportionate amount of property taxes compared to residential and commercial property owners. From 2005 to 2015, Nelson said, the amount of state property taxes collected increased 176 percent on agricultural land, 35 percent for residential property and 49 percent for commercial property. LB958 would be a step toward bringing the tax system back into balance, he said.

“Agricultural landowners take the brunt of these tax increases,” Nelson said.

Lincoln Mayor Chris Beutler testified in opposition to the bill. He said the proposed spending limits would devastate some political subdivisions by removing flexibility in their budgets.

“We can’t provide the infrastructure and have growth and move ahead if you’re going to continually cut the means by which we do it,” Beutler said.

Douglas Kindig, mayor of La Vista, also spoke in opposition to the bill. His county is the fastest growing in the state, he said, but that growth would not have been possible without local governments’ ability to create interlocal agreements, which would be limited under the proposed bill.

“Although one of the stated intents of LB958 is to slow the growth of property taxes levied by political subdivisions, we would argue this is actually an antigrowth bill,” Kindig said. “It will prohibit responsible economic growth.”

Robert Post, president of the Nebraska Association of County Officials, opposed the bill. He said the proposed limits on sinking funds would prevent counties from making unforeseen but necessary purchases of equipment without going to a popular vote, which takes time and money.

“The fact that we can only grow 3 percent is so discouraging,” Post said. “This 3 percent will most likely be used up in operations and will not allow capital improvements.”

John Hansen, president of the Nebraska Farmers Union, also spoke in opposition. He said the 3 percent assessment limit could result in an overcorrection of agricultural land valuations over the next 10 to 15 years.

“That doesn’t seem right,” he said. “We’ve been drifting for way too long. There has to be a correction.”

The committee took no immediate action on the bill.