Lincoln Aldermen amend tax levy increase to 1.5 percent

 

[December 28, 2020] 

On Monday, December 21st, the Lincoln City Council met for the final time in 2020. Among the action items on the agenda was a decision to increase the property tax levy for the upcoming payment year.

Property taxes are always paid a year after the fact so assessments for 2019 were billed and paid in 2020 and assessments for 2020 will be billed and paid in 2021. The increase voted upon on the 21st will be applied to the 2020 assessment and will be reflected in the tax bills issued in 2021.

Aldermen had originally entertained an increase of 2.3 percent but on Monday evening the increase was amended to 1.5 percent and approved with a vote of six in favor and two opposed.

The aldermen supporting the increase including Sam Downs, Ron Fleshman, Kathy Horn, Ron Keller, Steve Parrott and Tracy Welch. Kevin Bateman and Jeff Hoinacki voted in opposition of the tax increase, but for different reasons. Bateman was opposed to increasing taxes at all, while Hoinacki supported for the original 2.3 percent increase.

On Monday evening, Steve Parrott made the motion to approve the 2.3 percent increase and it was seconded by Sam Downs. When the floor was opened for discussion there was a comment made that the city of Lincoln’s 2.3 percent increase was reasonable and that other taxing bodies that impacted city residents were taking increase as well and some of them very significant increases. It was noted that for example, the Lincoln Community High School District 404 is planning an increase of four percent.

Parrot noted that it had been said two weeks earlier that the proposed city increase would go entirely to the city fire and police pension funds. Parrot asked how he could be assured that would be the case. City Treasurer Chuck Conzo explained that the tax levy is presented to the county clerk with that designation. Then when the tax is collected, the money is deposited by the county directly into the pension funds, so the money never makes it into the city’s general fund, thus it is guaranteed to go where it belongs.

Bateman said that he was opposed to any tax increase at all. He said that it wasn’t right to increase the taxes of Lincoln residents in such a difficult year.

At the same time, Bateman defended the tax assessments of the city in general, saying that the city’s share of the total tax bill was really quite small. He said that on the county website Treasurer’s Office, there is a location where residents of the county can look up their tax bills over the last several years http://loganil.devnet
wedge.com/. He said when one does this, and scrolls down to the very bottom of the page there is a pie chart that shows the distribution of the taxes collected from the specific property.

Bateman said that if you look at the chart the city collects a very small portion compared to the schools.

[Looking at a home in Lincoln with a total tax of $3,016.82; the tax for District 27 Schools and Lincoln Community High School District 404 equaled 59.7 percent of the bill. The city of Lincoln portion of that particular bill was 11.8%.]

Bateman said instead of collecting more taxes from the residents, the city should re-allocate the utility tax revenues and increase the percentage that goes into the pensions. The city currently puts 30 percent of the utility tax collection into the pensions. Bateman recommended increasing the amount to 33 percent or even 35 percent.

He said that he understood that would impact the general fund, but compared to the budget on the whole of about $7,000,000, he didn’t feel that the reduction would be all that significant. He said that surely the city could find a way to trim its budget by a few thousand dollars.

Hoinacki said he was torn on the topic because he did feel for those who are struggling right now. At the same time, he noted that the city is in trouble with the pensions and it is going to get worse. He said the state was in dire straits over their pension obligations and he did not want Lincoln to go down the same road.

Hoinacki also noted that regardless of the decision the council makes, when tax bills go up constituents will blame the city, and it will be the aldermen that get the calls.

Welch asked Conzo what an additional three percent from the utility tax would look like. Conzo said that the utility tax for the most recent fiscal year had seen a significant decrease from the year prior. For the year ending April 30, 2020 the city had collected $715,000, so an additional three percent of that amount would not be significant.

[The utility tax for May 1, 2019 through April 30, 2020 totaled $715,716. Thirty percent of that going into the pension fund would be $214,714.80. To increase the figure to 33 percent would add $21,471.48 to the pensions. An increase to 35 percent would add $35,785.80 to the pensions.]

Welch noted that in 2016, at the urging of then alderman Rick Hoelfe, the city not only did not increase the tax levy, but had cut it by $50,000. He said the city has still not made back that cut.

He said that maybe the answer was to compromise on the increase, reducing it from the recommended 2.3 percent to only 1.5 percent.

Downs said he was opposed to the compromise. He said that yes the increase might be tough, but without it the city is going to fall further behind in the pensions and that isn’t acceptable. Parrott asked if the 2.3 percent increase would help level the pensions. Conzo said that the full 2.3 percent would “possibly” level the account (revenue versus expenditure), but the city would still be behind.

Keller said the city has a responsibility for the pension funds and it cannot continue to do nothing about the issue. But at the same time, he noted that Lincoln’s tax rate is higher than other municipalities.

Keller said he didn’t want to do the 2.3 percent increase, but would go along with the suggested compromise of 1.5 percent.

Bateman said that the city could do more good with the utility tax. He suggested that the city put an additional $115,000 from the utility tax into the pensions. He said that the city could trim its general fund expenditures by $115,000 and “won’t feel it that badly.”

Downs said that perhaps the city should do both, take the tax increase and also increase the utility tax contribution. Fleshman supported doing both. He thought the city could take the 1.5 percent levy increase and also contribute more from the utility tax.

Parrott asked how the departments were supposed to address yet another decrease in their budgets. Would taking money from the general fund mean less sidewalk and street repairs?

Bateman said the city doesn’t have an issue with lack of revenue, it has an issue with spending. He noted a topic that had come up earlier in the evening where the city had approved a payment of $8,000 for planting 18 trees around the town. He said also the city could choose to reduce its squad car purchases by one vehicle, and there were other places where spending could be reduced.

Welch noted that the city is looking to receive money from CARES/Local CURES. CARES/Local CURES is the Coronavirus Aid, Relief, and Economic Security (CARES) Act (retitled by the state as Local Coronavirus Urgent Remediation Emergency (or Local CURE) Support Program) enacted by congress. Federal funds filter to state level distribution for coronavirus hardships. That grant will be about $100,000, so that would cover most of Bateman’s suggestion to add $115,000 to the pensions. He said that the city is also approaching the pay-off date on one of its long term bonds.

Bringing the discussion to an end, Welch said he would amend the current motion from a 2.3 percent increase to 1.5 percent. Keller seconded the motion and Welch called for the vote.

No decision was made about the allocation of the utility tax. That is a topic that is expected to come back to the council in the new year.

[Nila Smith]