Committee on Revenue LB 269
January 23, 1997
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substituted. But, for the record, we will begin this afternoon with LB 269, a Revenue Committee bill. To introduce the bill, our Committee Counsel, George Kilpatrick. George.
GEORGE KILPATRICK: Thank you. Senator Coordsen, other members of the Committee, for the record my name is George Kilpatrick and I'm Legal Counsel for the Revenue Committee here to introduce LB 269. This is a bill that is the product of a draft that we've worked on most of last fall and last summer that all of you... all of you, I believe, have seen at one time or another. It contains a number of clarifications or what I consider more minor modifications of the package of bills passed last year; namely, in this case, 1114, 1085, in particular, 299, and 1177. These... and I don't want to leave you with the impression that these are all technical cleanup and that you need not examine them individually. On the other hand, these tend to be things that are consistent with the package last year; as opposed to, in opposition, or modifying the package last year in some fashion; and how that fits within the proviso that Senator Coordsen stated to begin with, I don't know. But these, at least, are designed to be things that help or are consistent with interpreting and applying the package as opposed to altering the package in a substantive fashion. Let me ... there's five or six points that I do want to touch on and that some people may have some comments on. One thing that this pack ... that this bill does is change a number of the allocated levy entities from the county where all subdivisions, not otherwise mentioned in 1114, were to go for allocated levy authority amongst that allocated part that could be as high as fifteen cents in 1114. And a number of entities have said, you know, we are created by the city. It's to do city things. We use ... we budget with the city in mind, or budget along side the city, or include our budget with the city;' and would prefer that that allocation process take place from the city as opposed to from the county. And this bill does that for a number of entities. They are listed, specifically, in Section 39, if you want to page back in the summary to page ... back on page four, I guess. And the entities that I'm talking about are city airport authorities, community development authorities,
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off-street parking districts, library and museum, or home health agency when created by a city --- some of those can be created by either --- or a memorial which is later on --- also could be created by either --- but when created by a city. That doesn't necessarily mean that those authorities have more room under the lid within the city than they did if the current law were in place and they had to go seek allocation from the county. Those circumstances are going to vary from place to place, but the notion was ... or the request was that these be allocated and be the responsibility of the city to fund as opposed to the county and this bill does that. Section 2, or Section 5, talks about some revisions to 1177 which has been now codified back in 13-922 and following ... or no, I'm sorry 13-317 or so and following. One thing that 1177 did last year is provide that, for cities and counties to use the additional five cents of levy authority for interlocal agreements, that they would have to have an election, create a Public Safety Commission, and go through that particular process. And many have said that, you know, we can sign these interlocal agreements now, the lid is so, why do we have to go to a vote in order to access the interlocal agreement, in order to use an interlocal agreement in the way that the package seemed to want us to. That has been drafted in this bill as simply repealing two sections of 1177 that... one that required the county vote and one that required the city vote. So, as that legislation would sit, if this proposal were to pass, would be that for county sales tax, to fund a Public Safety Commission, would talk about law enforcement and some of those things which is an issue that's a couple of bills down the list in more detail; you would still have to have a county-wide vote to authorize the sales tax. You would not have to have a county-wide vote to go from forty-five to fifty, or a city-wide vote to go from forty-five to fifty, in order to fund that service; or, indeed, otherwise to qualify for the interlocal exemption in 1114. Section 7 amends the budget act. One of the things that we heard a lot over the last fall was that, even though 1085 provided that levies were to be set by the local governments by October 15, the state auditor, in filing the budget requirements, was requiring a levy to be set when the budgets were set, which was September 20, and that caused some consternation and some confusion. What this ... the approach that we've taken in this bill is to say that, on the 20th when the budget is due, all that's required is an
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amount required to fund the budget stated as a property tax... as a dollar amount, and that later, when the levy is set, an additional statement is required to reconcile the levy that was set by October 15. Currently, this bill, incidentally, also delays it to October 31 and the property tax request made back in September 20 with the budget so it's an additional filing, but it's an additional...what amounts to almost six weeks in order to go through that process. There also was, in the budget act, a provision... or is, I should say, in the... a provision that says that you cannot set a levy that will generate more money than your budget request. And, at the suggestion of the Property Tax Administrator, what we've done is say that it can be greater or less, it just can't be more than one percent difference than what's in the budget so in setting a levy to a certain level of decimal places, YOU can err on either side, but it has to be close; or you can round either way, but it has to be close. Section 8 amends what was LB 299 last year in stating that subdivisions can estimate population growth through a variety of methods in addition to simply census data. As we discussed over the summer, the Census Bureau does estimates on county population growth and cities have a method of doing their estimation through... in a way that's approved through the Tax Commissioner. It has to do with city aid. But any other subdivision that may not have exactly the same borders as the county or exactly the same borders of the city, has nothing like that to rely upon. And the intention of 299 was to allow budgets of restricted funds to grow if population grows; and for a large number of subdivisions, that simply wasn't available because there wasn't any statistical record from the Census Bureau to point to, to demonstrate your population, before or after, in... in order to demonstrate growth. What this says is that you can use housing starts, you can try and apportion the county if you're approximately half the area of the county, maybe you can assume that half the population growth is contained within your boarders. Or... or, if there's so many cities, if you're a fire district, for example, that has three cities in it, and you know what the growth in those three cities are, then you can use that as your growth. That sort of thing. It's to provide some flexibility in figuring out what population growth really is in terms of 299, a bill which will be in effect for one more year, as currently drafted. Dealing with the consolidation of county offices and whole counties and consolidation
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within counties or so forth. That was part of 1085. Before that, it was part of 212, as Senator Wickersham remembers. That schedule was set up to coincide with county election cycles meaning that, in order to take advantage of those opportunities that 1085 provided, the issue had to be put on the ballot by August I of last year and what these sections of this do is say that this can also be done through a special election. So, if the county did want to do this, or if two or three counties wanted to merge their offices or otherwise merge within the county that they could if they were willing to bear the expense, have a special election to do that during '97, and still have those new offices be elected in '98 on a regular schedule. Section 24 begins a number of sections that I spoke to briefly earlier that deal with delaying the effective dates for a number of these things. As I said, the deadline for setting the property tax levy as subdivisions are required to do...or will be required to. do... or are required to do, I should say, has been put off until October 31. As a result, certain other dates had to be moved back as well. Section 24 strikes... and there are two sections repealed that strike the separate schedule for personal property tax and the impact of that is to put personal property on the same schedule real is. In other words, instead of being due on December 1 and then in May, I believe, it would be due and payable December 31, delinquent in April and May, August and September, depending on the size of the county and unify that schedule. That, I suspect, causes a cash flow problem for at least, in some instances perhaps, depending on great it is the percentage of the whole, but it enables us have more room at the beginning of the process for setting levies by the subdivisions and saves some notices and so forth. The levy-setting requirements that I just mentioned are altered by this bill beginning in 98 to restrict them to those who have the actual authority under 1114. In other words, cities, counties, school districts, NRDs, community colleges, sanitary improvement districts, and I probably ... ESUs, maybe I'm leaving one out but the ones that are named in 1114 would have the authority to set property tax rates and would be required, after '98, to set their own property tax rate as decided by 1085. The other subdivisions, what we called miscellaneous subdivisions before, which would include townships, fire districts, hospital districts, airport authorities, transit authorities and ... there's twenty some that we counted at one time, would
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no longer have that responsibility to set their own property tax rate. The reason being, the beginning of '98, that levy is the responsibility of the county, or, if the other provisions of this bill passed, the city or the county, to set for them; and, therefore, that duplicated effort is not... is not appropriate in that case. So, in other words, at the beginning of '98, we will focus that levy-setting responsibility on those seven or so entities that actually have their own levy... independent levy authority. There are some terms that are defined in here that it might be worthwhile to try and remember as we talk about these things. That's provided in Section 26-27, thereabouts. What the individual political subdivisions do when they determine what their property tax rate will be is they certify in a levy rate to the county board of equalization, which then actually levies the taxes, so that's a certification and a levy. The entities that have to do this are those that received property taxes in the prior year. If it is alleged by someone, at least, that these procedures have not been followed or that someone has set a levy that is greater than the limits provided in 1114, that's what's called an unauthorized levy and then there's some provisions later on that describe the procedures for challenging unauthorized levy. Essentially, the appeal goes to the TERC, just to jump ahead a little bit, and that's how those ... those issues are litigated according to LB 269. There is also another provision that may receive some opposition here today that adds a penalty for failure to file the certificate of taxes levy to the Property Tax Administrator by the county assessor. The penalty is a hundred dollars and it's fairly similar to other penalties that are in existence in other places ... in other parts of the property tax process. Section 38 amends ... I suspect the question that I was asked more than any other during last summer was, what was intended by using the word, commenced, in the building levy exemption for schools. My answer generally was, well, you know, we didn't draft it. I don't know what it means. However, and I ... I still to this day, don't know exactly what was intended by that. But this is an effort to resolve that ... that dispute by saying that commence means that your governing body has taken some action that commits funds to... and it can be committing funds to planning or studying, but there has to be some action taken that is on the record and official. This morning I learned that the Department of Education or
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January 23, 1997
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Commissioner Christensen had issued... I don't even know whether you call it a... it's probably not a rule ... not even as official as a ruling, but an opinion at least as to what that meant for planning purposes and I've read it, I haven't studied it in great detail, but it doesn't appear to be a different interpretation at all in the sense that he talks about board action or, if there is no board motion, that there has to be some documentation of some kind that there is either an effort to set up a building levy for a project or for the project itself that will require money from the building levy. And what this section says, is that it is a formal action on the record committing expenditure funds for a project. Another approach that's taken in that section and then later on in a section dealing with the Class VIs resolves the issue of what happens in an affiliated system that has to fit both districts within the $1.10. The way that this bill approaches this issue is to say that the high school district... or the district that has the high school, determines what the levy is for the high school purposes and the levy remaining for the elementary purposes, whether that's that district's elementary school or an affiliated Class I, or all of the affiliated Class I's if you're talking about a I-VI system, is what is left and that it's essentially down... top down governance in the fact that the high school sets it first and the elementary lets what's left at that point. There are other ways to approach that and I know that the Education Committee has looked at a system based on weighted students and where they happen to be, allowing the districts to agree to a different number than what the weighted students would do and there probably needs to be some... some decision and some coordination between those two efforts in determining what the appropriate way to deal with the problem of fitting... fitting within a $1.10 levy in an instance where you've got different school boards in the same pocket. And, finally, there was a provision from a bill that ... that we did not take into 1085 last year, and probably should have, that dealt with the powers ... or what powers get to merge veterans' service operations. Currently, veterans' service committees in two counties can agree to combine their operations and have one veterans' service committee instead of two, or it could be three or more; and this proposal simply says that that's the responsibility of the county boards, not the veterans' service committees. So, there's a lot there and, like I said, I don't know that no one will
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have any objection to any of it but, at least from the standpoint of our office, they appear to be changes or suggestions that were consistent with the package and not in conflict with the package; and they are combined together here in 269. Are there any questions?
SENATOR COORDSEN: okay, questions for George. Starting with Senator Schellpeper.
SENATOR SCHELLPEPER: George, in Section 38, which you just discussed, how definite in the language is it about being commenced. Can the school board just say that the superintendent should look into a building and consider a bond issue. Is that commence? Or do they have to say, we shall put it to a vote or what kind of a motion are you talking about?
SENATOR HARTNETT:: That was my question, too.
GEORGE KILPATRICK: Well, what it says is that it is an action on the record to commit funds and, I suppose, if you ask the superintendent to look into it, that's not committing funds. If you asked an architect to draft plans, that would be.
SENATOR SCHELLPEPER: That'd be so. Just having the school board look into it is not commence. It has to be actual expenditure of funds.
GEORGE KILPATRICK: Of funds. That's what it says.
SENATOR SCHELLPEPER: Okay.
GEORGE KILPATRICK: Now, again, there are other ways to look at this. This is a way of handling that ambiguity.
SENATOR HARTNETT: But, and that also, George, a thing in the bill, it's a date that we're already past, isn't that right? Some sort...
GEORGE KILPATRICK: Well, the date was set in the legislation last year, of April 1 of 1996, which is a date past. The notion being that, gee, if you're going to set a date, it'd better be one that's already passed to avoid... Yeah, whatever might occur between now and that date, from
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occurring.
SENATOR COORDSEN: Other questions? George, back on Section 24 where we reference changing the due date on personal property tax and again change some of the... some of the dates that the county officials have to comply with various budgeted option levy setting situations. Have ... was there input from the various county officials associations? That is, the treasurers and the clerks and those as to how that may affect their ability to comply. Is there any....
GEORGE KILPATRICK: There was a lot of concern expressed to us about the tightness of the deadlines as they were...
SENATOR COORDSEN: As they were, yes.
GEORGE KILPATRICK: ... and their ability to comply.
SENATOR COORDSEN: Uh-huh.
GEORGE KILPATRICK: Yes.
SENATOR COORDSEN: But other than the ... the probably relatively minor change in cash flow, depending on the...
GEORGE KILPATRICK: It depends on where you are.
SENATOR COORDSEN: ... due date of the personal property.
GEORGE KILPATRICK: Yes.
SENATOR COORDSEN: But the rest of it, we've created for county government for quite a number of years, on almost an annual basis, some problems in compliance because we kept changing dates ...
GEORGE KILPATRICK: Yes. I agree.
SENATOR COORDSEN: ... and we ... we had some overlap, apparently, and I'm not that familiar with what happened but, between what we did and what was the requirements of the state auditor, apparently there was some difficulties in getting everything put together last year. So, this ... I don't see any problem with this but I'm beginning to get a little sensitive whenever we change any dates that have to
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do with local governments' responsibilities for that due date.
GEORGE KILPATRICK: Yes.
SENATOR COORDSEN: Thank you. Any other questions?
GEORGE KILPATRICK: Paul, I thought, had one.
SENATOR HARTNETT: I was going to ... no, Stan asked my question about what commence means. Because I also think... I think there's a bill ... I think... I don't know whether it goes to this committee or not, but to allow some ... that takes out for school, their building fund or something.
GEORGE KILPATRICK: That bill's here, yes.
SENATOR HARTNETT: Is that here?
GEORGE KILPATRICK: Yes, at least, there is one that is here, yes.
SENATOR HARTNETT: That was ... I met with my school administrators and school board and they ... cause we're kind of growing a little bit, they had some concern about, you know, the building.
SENATOR SCHELLPEPER: A little bit or a lot.
SENATOR HARTNETT: A lot. (laughter)
SENATOR COORDSEN: Okay. Any other questions by the Committee? Seeing none, thank you, George. Is there anyone here who would like to testify in support of LB 289? Is that was I said? (LB)269. Well, heavens, I was within a hundred. That's pretty close. (LB)269? I'll plead trifocals. Does that give me any kind of leeway? Anyone here to provide testimony in opposition to LB 269? Seeing none, anyone to provide neutral comments? Okay, Mr. Kemper, please come forward. Sign in. I guess I forgot to announce, in the event that there's someone here who has not appeared before a legislative committee before, we have a witness pad that we ask for you to sign in, print your name, and then state your name for the record because there are
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employees of the Legislative Council that transcribe everything that's said here; and to ensure accuracy, if you have a name that might be difficult to determine the correct spelling, if you would spell it for their purpose, it would be helpful for accuracy in the future. Mr. Kemper, it's all yours.
TIM KEMPER: (Exhibit 1) Chairman Coordsen and members, thank you. I appreciate the opportunity to appear today. I am appearing neutral in that there are some items of concern that we have about LB 269 and these are neither comments in support of the bill or in opposition to them, but things that we want to express to the committee. My testimony, folks, is on three main aspects of the bill, one of which George has already covered fairly well. We, along with other school districts, do... are interested in the Committee's view of how the amendment in 269 squares with Commissioner Christensen's advisory letter. Boards such as ours have used that information in planning budgets for the future and building projects are the kinds of things that you do plan over a long period of time. So, we would just urge the Committee to make clear whether or not we can continue to rely on the understanding that was expressed in that advisory letter as we plan our building funds into the future. The second issue has to do with the process as set forward last year in LBs 1085 and 693 for setting levies in affiliated school systems, in particular. As the law was passed, there was a very short time frame for holding a certain hearing. It had to be done between the tenth and the twentieth of September and then, as George alluded, because of an interpretation by the state auditor, we only had until the twentieth to actually set that levy; and I think that was something Senator Coordsen was making reference to. In some areas that caused considerable concern. We certainly support the initiative to move the levy setting clearly back into October to give us the time to do those functions that we learned this last year how to do in setting the levies for affiliated school systems. We do, however, still have a concern about the September 15 deadline for holding the hearing in an affiliated-system to set that levy; and we would simply urge that the Committee reconcile that fifteenth deadline with the October 31 deadline to allow our boards to have that hearing in conjunction with regularly scheduled board meetings. it just so happens that the five-day period this coming year
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will fall mostly over a weekend and we want the Committee to be aware that we would urge them to reconcile those dates. And, finally, the third item has to do with the administrative feasibility of setting the affiliated levies or setting the Class VI levies under the provisions of LB 269. The Committee has heard debate in the past and concerns in the past about setting those common levies on budgets that are adopted by multiple boards and the problem is certainly exacerbated when Class I's are affiliated partly with one district, partly with another. As you know, there are two separate sections of 269 dealing with Class VI systems versus affiliated systems; and, unfortunately, there are ... unfortunately, from an administrative standpoint, there are Class I's that are partly in a Class VI and partly in an affiliation. So, you can see that the complexity grows. There are questions and I have provided written testimony to the clerk. I don't want to get into all the examples but we have raised some examples of scenarios that look to us to make it very difficult to know what that levy should be set at, interactions with votes by one board and so on. We would just urge the Committee to continue to pursue means of making the levy-setting process under the limitations imposed by Section 77-3442 administratively feasible for all school districts in the state. And, that concludes my testimony.
SENATOR COORDSEN: Questions? Senator Hartnett.
SENATOR HARTNETT: Yes, you talked about you got a letter from Christensen, an advisory letter?
TIM KEMPER: That is correct and I attached a copy to the...
SENATOR HARTNETT: Okay, just part of that. Okay.
TIM KEMPER: ... materials I presented to the clerk.
SENATOR HARTNETT: Cause I ... you know, with the date, I'll then move to the second question. With the date, do you have any ... you said that you were bothered by the ... was it the September 15th date, was that right? Do you have any recommendations to the Committee?
TIM KEMPER: I would suggest that that hearing needs to be held no later than the date of actually setting the levy
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which is going to be under these provisions, October 31. Is that correct, George? In other words, the deadline for the hearing would coincide with the deadline for setting the levy, where now the hearing had to be held no later than September 15; and, depending on whose interpretation you went with, the levy had to be set no later than September 20 as interpreted by the state auditor, or October 15th as the date was specified in LB 11 ... or excuse me, (LB)1085?
GEORGE KILLPATRICK: Yes.
TIM KEMPER: (LB)1085. But we would just recommend that if you have until ...
SENATOR HARTNETT: Sometime in October, you mean... is that what?
TIM KEMPER: Right. If we have until October 31 to actually set that levy, then it would seem prudent that we would have until very near that time or even that day, to have the hearings without the levy.
SENATOR HARTNETT: Yeah. Thank you.
SENATOR COORDSEN: Other questions? Thank you, Tim.
TIM KEMPER: Thank you.
SENATOR COORDSEN: Anyone else to provide neutral testimony? Seeing none, Mr. Kilpatrick, did you wish to close? That opportunity is declined. That closes the hearing on LB 269. We move then, on our agenda, to LB 115 ... 115. Senator Vrtiska is here to introduce that bill.. Senator Vrtiska.