Tuesday, July 21, 2009

Omaha can't rely on cuts . . . or Erin Andrews

If you're running a mid-sized city and you're looking at starting the new fiscal year at least $11 million in the hole, you're pretty much looking at just three things you can do.

You can gut city services that already have been cut and cut again, thereby destroying your community's quality of life.

You can raise taxes.

You can sell nekkid pictures of Erin Andrews. And by that I mean not unclothed pictures of the ESPN sideline goddess, but rather pictures of the ESPN sideline goddess unclothed.

To his credit, Omaha Mayor Jim Suttle -- in a budget address that was anything but subtle -- rejected the first option out of hand, declaring it a supremely bad idea. Likewise, he recognized there's no way out of the second option -- that citizens face a choice between horrible and unpleasant, and sometimes you have to suck it up and fork over a little more to the community chest.

As for that last option (though it would be an exceedingly lucrative sideline for Omaha city government), the reality is that Erin Andrews' chest does not belong to the community . . . and neither do photographic representations thereof.

SO, IT LOOKS like the Omaha City Council will have to either like or lump what the Omaha World-Herald reports the mayor set in front of it this afternoon:
Omaha Mayor Jim Suttle wants to raise property taxes and impose a new tax on restaurant meals, movies and other entertainment to help the city climb out of a projected budget shortfall for 2010.

Both the property tax increase and new entertainment tax are part of Suttle's 2010 budget proposal, which he presented Tuesday to the Omaha City Council.

The 2 percent entertainment tax would affect anyone who sees a movie or goes out to dinner in Omaha. The tax would bring in an estimated $10.3 million at a time when the major revenue sources for city services — sales taxes and property taxes — are projected to remain essentially flat. Meanwhile, health care and other costs are projected to rise.

The proposed property tax hike would amount to an extra $36 a year for the owner of a home valued for tax purposes at $150,000. The $6.2 million in revenue would be used to pay off debt from the Qwest Center Omaha.

Whether either tax is approved ultimately will be up to the City Council. Omahans will get their chance to weigh in during a public hearing Aug. 11.

Suttle includes some new spending in his 2010 budget, including restoring the public safety auditor's position, as he had promised to during the campaign, and buying 44 police cruisers. His plan also includes some cuts to help address an $11 million shortfall, such as closing Westwood Golf Course and spending less money on street resurfacing.

Council President Garry Gernandt has said in the past that the council would be cool to the notion of increasing taxes and wants to look for further spending cuts.

But Suttle warned of the consequences if the council fights the tax proposals. The city would not open any pools next summer, he said, and libraries could close as well. He said both possibilities would be “a gross mistake.”

“If the council says no, then we've got problems,” he said. “There's just no place else to go (for cuts).”
LISTEN, tax hikes are going to be unavoidable. Not unless you relish life in a city remarkably less "user friendly."

But I have problems with the tax Suttle seeks to implement -- an "entertainment tax." Such a levy has the potential to hurt a local industry (encompassing everything from sports franchises to restaurants to concert venues) that's already being buffeted by people's lack of discretionary income amid economic hard times.

Obviously, the mayor wants to impose a tax that won't hit everybody . . . and one that has maximum "soak the out-of-towners" potential. There's three problems with that, though.

First, would it cause people to attend even fewer shows, skip the ballgame or decide to eat in rather than eat out? Second, would it make Omaha hotels and restaurants less competitive for the tourist dollar? In this tough economy, do you really want to roll the dice on that one?

And third, fiscal experts looking at Omaha's tax structure have said the city already relies too heavily on sales-tax revenue. That's what has bitten the city in the rear during this present downturn. Do we really want to increase that dependence, particularly on something as regressive as a sales tax? After all, an "entertainment tax" is nothing more than a targeted sales tax.

Better to just take the hit straight up, no chaser. Raise property taxes enough to cover both the shortfall and the Qwest Center debt -- the hike still wouldn't be exorbitant.

Of course, there's one thing Suttle could do tomorrow without council approval. He could implement the occupation tax on the books since the recession of the early 1980s. Denver and Kansas City already have.

Maybe that's Suttle's last-resort ace in the hole with the council. Or maybe an occupation tax is what's going to stave off municipal bankruptcy in the looming fire-and-police pension implosion.

Stay tuned.

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