Nebraska constitutional amendment revived on owner-occupied property valuations

State Sen. Tom Brandt of Plymouth. Dec. 6, 2023. (Zach Wendling/Nebraska Examiner)

LINCOLN — It’s too soon to tell whether Nebraska voters can weigh in this fall on a constitutional amendment that would let future Legislatures set the valuations of owner-occupied residential properties differently from commercial.

But Gov. Jim Pillen’s office expressed openness to the idea, in response to a reporter’s question, and legislative leaders who had been searching for more pathways to property tax relief embraced the approach as giving the Legislature a future “tool” in its property-tax cutting toolbox.

If eventually approved by voters, the measure, proposed by State Sen. Tom Brandt of Plymouth, would eliminate a section of the state constitution that requires uniformity in how the state values residential and commercial properties.

Lawmakers cast aside colleagues’ questions about whether it was too late in an election year and wrong under their rules to revive the proposed amendment on residential valuations. Legislative Resolution 2CA advanced 32-14.

Some embraced comments by State Sen. Steve Erdman of Bayard, a longtime advocate of scrapping the state’s current tax system and replacing it with the EPIC Option Consumption Tax. He said senators can pass what they want if they have the votes.

“Who cares? Special session,” Erdman said, chuckling.

Odd allies

The approach made unusual allies Friday out of State Sen. Lou Ann Linehan of Omaha, a staunch Republican and defender of Pillen’s, and State Sen. John Cavanaugh of Omaha, a staunch Democrat and frequent Pillen critic. Both backed LR 2CA.

Linehan, chair of the Revenue Committee, said senators have tried throughout her eight years in the Legislature to address the state’s property tax problems. But she said they run into the same constitutional roadblock: how to help homeowners at a reasonable cost.

The state constitution and state laws have been changed to allow agricultural land to be valued at a lower percentage. It’s currently valued at 75% of market value. Residential and commercial property currently must be valued by counties at 92%-100% of market value.

Because of how property tax rates work, increased valuations often result in higher property tax paid by homeowners because rates are not always reset low enough to offset the typical year-over-year increases in property values.

“Please take a very serious look at this,” Linehan said. “Because this could move the ball far down the court.”

John Cavanaugh, who proposed addressing property taxes with an expansion of the homestead exemption to more homeowners, called the amendment “a tool that will allow future Legislatures to be more dynamic” in how they address the issue.

State Sen. Mike Jacobson of North Platte joined State Sen. Julie Slama of Dunbar and other agricultural-district senators in questioning whether the amendment was moving too quickly and needed more vetting before going to the voters.

“This is way too early,” Jacobson said. “It’s not ready for primetime.”

Concerned about ag impacts

Slama repeated her criticism that such an amendment, without some tweaks, could pose a long-term risk to ag land valuations by putting them in competition with homeowners for relief. She also wondered what the proposal might do to commercial buildings on ag land.

“The tool in the toolbox is not just going to sit there and do nothing,” she said. “I’m opposed to rushing CAs (constitutional amendments) to the ballot in the middle of August.”

State Sen. Brad von Gillern of Omaha, vice chair of the Revenue Committee, acknowledged having voted to advance the constitutional amendment out of committee. But he said he now “softly” opposed it because he said it needed more time to be examined.

Lawmakers are still deciding whether the measure can get onto the November ballot. It would need to pass a third round of debate with 40 votes to spur a special election at the same time as the statewide general election this fall.

Or lawmakers could change state law to allow later amendments to reach the ballot. If senators can’t find a way to put it on the ballot then, but still pass the resolution, the amendment would go on the 2026 statewide general election ballot.

Brandt made light of Slama’s push against his bill, saying that she was right to say it may or may not be needed, but he said the Legislature should still pass it now.

State Sen. Wendy DeBoer of Omaha agreed.

“This bill will get some property tax relief,” she said.