October Property Taxes. in Nebraska: Past, Present, and Future. BY Dr. John E. Anderson and Dr. Eric C. Thompson

Transcription

1 October 2014 Property Taxes in Nebraska: Past, Present, and Future BY Dr. John E. Anderson and Dr. Eric C. Thompson

2 About the Authors Dr. John E. Anderson is an economist and an advisor to public policymakers in the field of public finance, fiscal reform, and tax policy. He is currently the Baird Family Professor of Economics at the University of Nebraska-Lincoln. His academic research and policy advising has been published in more than one hundred journal articles, book chapters, and government reports. A new edition of his textbook, Public Finance: Theory and Policy, used by students around the world, was published by Cengage Learning in Dr. Anderson served as a senior economist with the President s Council of Economic Advisers in Washington, DC, in He has also advised state governors and legislatures, and numerous state agencies in the United States. In the international arena, Dr. Anderson has served as a technical advisor on fiscal reform projects and local government reform projects in Moldova, Montenegro, and Macedonia. He has taught and provided educational reform and curriculum advising to universities in Bulgaria, China, Russia, Mongolia, and Tajikistan. During he was a Visiting Scholar at the Peking University Lincoln Institute Center in Beijing, conducting research on Chinese municipalities and their public finances. He is currently a Visiting Fellow with the Lincoln Institute of Land Policy, Cambridge, MA, conducting research on property taxation. Dr. Anderson earned his B.A. in mathematics and economics at Western Michigan University and his Ph.D. in economics at Claremont Graduate University in California. Dr. Eric C. Thompson is an Associate Professor of Economics and the Director of the Bureau of Business Research at the University of Nebraska Lincoln. The Bureau conducts the monthly Survey of Nebraska Business and develops the monthly Leading Economic Indicator Nebraska. Dr Thompson also leads the Nebraska Business Forecast Council and his research on the Nebraska and national economy examines competitive factors affecting state and local economic growth and capital formation. His research has appeared in the the Journal of Regional Science, Regional Science and Urban Economics, and the American Journal of Agricultural Economics. 900 South 74th Plaza Suite 400 Omaha, NE platteinstitute.org

3 Property Taxes in Nebraska: Past, Present, and Future Executive Summary Review of Nebraska property tax evidence in comparison with other states reveals that property taxes are high in Nebraska, but not among the top tier of states in terms of property tax burden or property tax reliance relative to other sources. o o Property taxes as a share of personal income in Nebraska account for 3.98% of income, compared to the national average of 3.49%. Property taxes per capita in Nebraska are $1,584 per person, above the national average of $1,390. o Local property taxes as a share of local own-source general revenue account for 50.8% in Nebraska, compared to the national average of 47.4%. In most comparisons, Nebraska is similar to its neighboring states. This reflects a regional context with economic and fiscal conditions that have resulted in state and local governments relying on property taxes to a comparable extent. Nebraska does, however, gather a larger share of its own-source revenue from the property tax than Kansas and Iowa, reinforcing that the property tax burden in Nebraska is in part a policy choice as well as a response to the economic structure of the state. The residential class of property bears the greatest share of the property tax burden of 47% in 2013, with the agricultural class bearing the second highest share of 26%.

4 Platte Institute Policy Study Executive Summary CONTINUED The typical, or median, average tax rate (ATR) in Nebraska counties in 2013 was 1.58%, reflecting the property tax bill relative to the assessed value of property. o ATRs vary across the state with the highest 2013 ATR of 2.28% in Douglas County and the lowest ATR of 1.04% in Keya Paha County. o Over the decade of the typical or median ATR was 1.75%. Estimates of the local government policy offset in response to increased property value reveal that for every 10% increase in property value, local government tax rates have been reduced by 1.6% and property tax bills have risen by 8.4%. o This finding indicates that if the desire is for lower property taxes, the focus of attention by citizens should be at the local government level where tax rates are determined in response to budgetary needs and the property tax base. Budgetary spending analysis indicates that spending growth has followed growth in the property tax base over the period o o o The strongest budgeted spending growth was observed in county governments, with a median of 85%, which are most heavily reliant on property tax funding. School district budgets benefit from both growth in the property tax base and state aid, with budgeted spending rising 59% over the decade in the median district. City budget spending grew 37% in the median city. The property tax is the most important source of funding for local public schools, with revenues from this source increasing from $1 billion in to $1.5 billion in , a 50% increase in nominal terms. o o State aid, the second most important source of revenue for schools, increased from $640 million to $852 million over the period , a 33% increase. Federal aid to schools fluctuated dramatically over the period due to stimulus funds provided during the recession and then withdrawn. o Despite dramatic changes in federal funding over the period of 2008 through 2011, the revenue sources for schools in are remarkably similar to those in , 4

5 Property Taxes in Nebraska: Past, Present, and Future with local property taxes accounting for 49% and state aid accounting for 26% of the total in compared to 47% and 28%, respectively, in Important interactions between local property taxes and state equalization aid have altered funding for schools, making the property tax more important as a revenue source. o o o Equalization aid rose 8.9% over the period , but at the same time many school districts lost a significant amount of equalization aid, if not all such aid, due to rising property values per pupil. Equalization aid rose substantially faster in each of the four principal metropolitan school districts in Nebraska. At the same time, equalization aid fell for most rural school districts, with 60 districts losing all of their equalization aid over the period , and another 30 districts losing more than half of their aid. Nebraska s property tax system with assessments based on market value is exemplary. This provides for a fair and efficient tax system and should not be changed. If a new state mechanism for property tax relief is desired, the state should consider consolidating its current $66 million expenditure for the Homestead Exemption program and its $140 million expenditure for general property tax relief into a new circuit breaker program that provides targeted tax relief. o o Tax relief would be provided to any taxpayer whose property tax bill is high relative to the income of the taxpayer (measured broadly). Tax relief could be delivered in the form of a refundable credit on the state income tax. If experimentation in property tax reform is desired, a state program should be considered that permits local communities to implement a graded tax system, with land tax rate higher than the improvements tax rate (or a land value tax with zero 5

6 Platte Institute Policy Study Table of Contents I. Introduction and Background...9 II. Nature and History of the Property Taxes in Nebraska...12 A. Nebraska Property Taxes at a Glance...12 Highlights...12 Overview...12 B. Key Property Tax History and Recent Developments...13 Property Tax Limitations in Nebraska...15 Real and personal property...17 C. Property Tax Basics...17 Nominal and effective tax rates...17 III. Property Taxes in Nebraska Compared with Other States...18 Property Taxes Per Capita Property Taxes Relative to Personal Income...19 State and Local Property Taxes as a Share of State and Local Own-Source General Revenue...20 Local Property Taxes as a Share of Local Own-Source General Revenue...20 Summary...21 IV. Analysis of the Nebraska Property Tax System within Counties...24 A. Growth in Property Tax Base and Rates within Nebraska...24 Composition of the Nebraska Property Tax Base...24 Geographic Trends in Average Tax Rates (ATRs) and Property Tax Base in Nebraska...26 Average tax rates in Nebraska Counties...26 Discussion...31 B. Measuring the Local Government Policy Offset...33 C. Trends in County, City and School District Spending...34 Composition of Budgeted Spending in Nebraska Cities and Counties...34 Property taxes and state aid for schools...40 V. Policy Considerations and Recommendations...44 The Nebraska property tax system currently does some things very well Proposals for reduced reliance on the property tax...44 Relief mechanisms...45 A specific proposal for Nebraska...46 A potential experiment in property tax reform...47 References...49 Appendicies

7 Property Taxes in Nebraska: Past, Present, and Future List of Tables Table II.1. Description of the Rate Limit...15 Table II.2. Description of the Revenue/Expenditure Limit...16 Table II.3. Description of the Levy Limit...16 Table IV.1. Taxes Levied Table IV.2: Average Tax Rates (ATRs), Table IV.3. Ten Year Average ATRs, Table IV.4. Change in Agricultural Property Value, , percent...28 Table IV.5. Ten-Year Change in Total Property Value, , percent...29 Table IV.6. Ten-Year Correlation between Agricultural Property Value and Total Property Value, , percent...30 Table IV.7. Ten-Year Correlation between Residential Value and Total Property Value, , percent...31 Table IV.8. Tax Levy Elasticity and Policy Offset Estimates, Table IV.9. Change in Budgeted School District Spending Within Counties, , percent...37 Table IV.10. Change in Budgeted County Spending, , percent...38 Table IV.11. Change in Budgeted City Spending Within Counties, , percent...39 Table IV.12. Growth in State Equalization Aid, Overall and In Selected School Districts, Table IV.13. School Districts Which Lost All or Half of State Equalization Aid Between 2008 and Table V.1. Policy Options for Reduced Reliance on the Local Property Tax

8 Platte Institute Policy Study List of Figures Figure II.1. Sources of Nebraska State and Local General Revenue, Figure III.1. Local Property Tax Revenue Per Capita...21 Figure III.2. Local Property Tax as a Share of Personal Income...22 Figure III.3. State and Local Property Tax as a Share of State and State and Local Own-Source General Revenue...22 Figure III.4. Local Property Tax as a Share of Local Own-Source General Revenue...23 Figure III.5. Shares of Local and of State and Local Own-Source General Revenue...23 Figure IV.1. Share of Nebraska Property Taxes Levied Figure IV.3. Share of Nebraska Property Taxes Levied, Agricultural and Residential Property Figure IV.2. Share of Nebraska Property Taxes Levied Figure IV.4. Trends in Average Tax Rates, Largest Nebraska Counties, Figure IV.5: Average Tax Rates by County, Figure IV.6. Ten Year Average ATRs by County, Figure IV.7. Change in Agricultural Property Value, Figure IV.8: Ten-Year Change in Total Property Value, Figure IV.9. Ten-Year Correlation between Agricultural Value and Total Property Value. 30 Figure IV.10. Ten-Year Correlation between Residential Value and Total Property Value..31 Figure IV.11. Population Density Figure IV.12. Nebraska Cities Budgeted Spending Shares Figure IV.13. Nebraska Cities Budgeted Spending Shares Figure IV.14. Nebraska Counties Budgeted Spending Shares Figure IV.15. Nebraska Counties Budgeted Spending Shares Figure IV.16. Change in Budgeted School Districts Spending, , percent...37 Figure IV.17. Change in Budgeted County Spending, , percent...38 Figure IV.18. Change in Budgeted City Spending, , percent...39 Figure IV.19. School Funding Sources, Figure IV.20. Sources of School Revenue, Figure IV. 21. Sources of School Revenue,

9 Property Taxes in Nebraska: Past, Present, and Future I. Introduction and Background At the outset of any consideration of the local property tax in the United States, it is important to recognize the critical role this tax financing mechanism plays in the larger picture of public finance. One may ask why it is important to have a local property tax in the first place. The answer to this question is based on the concept of local autonomy in a fiscal system. In a decentralized system where many public goods and services are provided at the local level, rather than provided by the central government, it is essential that appropriate tax bases are available to support local governments. Gregory Ingram and Harold Wolman provide a clear motivation for a strong property tax system in their foreword to Bell et al (2010, p.vii), saying: The American political landscape is dominated by the belief that localities are critical to governance. Local autonomy the ability of local government to undertake activity that reflects the preferences of local residents requires a source of locally raised revenue that local government can use as it sees fit. Local autonomy is the underlying premise of the efficiency gains presumably derived from the theory of fiscal federalism It also stimulates civic engagement and is the basis of local democracy and accountability. Local governments could be financed using several tax sources, however. Income, sales and property are the three likely potential revenue sources. With the federal government relying most heavily on the personal income tax and state governments relying on a combination of income and sales taxes, the traditional thinking on fiscal systems is that local governments should primarily use their own separate source, the property tax. This issue has been debated in recent years, as reflected in Oates and Schwab (2004) who consider whether income tax reliance is a good replacement for property tax reliance, but the property tax is generally believed to be the most appropriate funding source for local governments in a decentralized fiscal system because it more closely aligns the interests of citizens with their local governments. Complications arise with property tax system interactions with state school aid formulas, as discussed in Kenyon (2007), are an important consideration. Role and purpose of the property tax system The underlying motivation of a property tax system is that the local public services provided to community residents are valuable and residents should pay to support the provision of those public services. Property taxes are used because they have both benefit and ability-to-pay aspects. The benefit consideration is that public services provided to residents increase the value of their property; hence they should pay for those benefits. A tax is based on ability-to-pay if the tax is greater for taxpayers with more ability to pay. In the case of a property tax which is based on property wealth, taxpayers with more wealth are asked to pay more tax. The key feature of a properly functioning property tax system is that it aligns the desires of local resident/voters with their willingness to pay for local public goods and services. In that way, local residents get the services they desire at tax rates they are willing to pay and an efficient allocation of resources can result. Property taxes are the primary source of own-source revenue for local government units, especially school districts, as well as cities, townships, fire and natural resource districts and others. They are an essential element of a decentralized fiscal system a system where local govern- 9

10 Platte Institute Policy Study ments are autonomous and have their own independent tax bases and ability to set their own tax rates. In designing a property tax system, the ideal tax base is the market value of property. By using market value, the property tax system can be made to be as fair and efficient as possible. Alternative measures of property value distort the tax system and provide incentives to alter behavior, thereby creating both inefficiencies and inequities. For example, since California adopted Proposition 13, its property tax system is based on acquisition value, not market value. The value of property at the time of acquisition is the basis of taxation, so properties acquired long ago pay much lower tax rates than similar properties acquired more recently. While this violates the usual view of horizontal equity where we would expect similar properties to be taxed similarly, the courts have upheld this tax system as constitutional despite the apparent inefficiencies and inequities. An acquisition value tax creates an incentive to retain ownership and avoid selling and moving to another property a so-called lock-in effect that is inefficient. Such a system also creates clear inequities, with long-time residents paying different effective tax rates than newer residents. Another alternative measure of property value is current use-value, as described and reviewed in Anderson and England (2014), often used for rural and agricultural properties. Property Taxation: The Ideal Tax Base If property is to be taxed in order to provide financing for local public goods and services, what is the ideal tax base? That is, how should the tax be applied? We can use basic economic theory to answer this question. A tax generally causes an efficiency loss in the economy that is over and above the amount of revenue generated by the tax. The reason for this efficiency loss is that the tax induces the owners of the thing being taxed to change behavior. The tax causes a distortion in the pattern of economic activity. This distortion is called a deadweight loss or an excess burden. According to economic theory, the size of this deadweight loss rises more than proportionately with the size of the tax. In particular, the deadweight loss generally rises with the square of the tax rate. So, if the tax rate is doubled, the deadweight loss is quadrupled. On the other hand, if the tax rate is cut in half, the deadweight loss is reduced to one-quarter of its former size. The policy implication of this theory is that it is important to keep tax rates as low as possible to minimize the distortionary effects of taxation. There is one special case where a tax causes no deadweight loss, however. That is the case of taxing a good that is fixed in supply. The primary example of such a good is land, which when taxed does not react. Since there is no supply response to the tax, there is no deadweight loss. Hence, a land tax is an ideal form of taxation because it is perfectly efficient, causing no deadweight loss to the economy. Advocates of efficient, non-distortionary, taxation have long advocated land value taxation. Dye and England (2009) provide the underlying theory and evidence on this issue. Economic theory also indicates that such a land tax must be based on market value in order to be neutral (see Dye and England (2009,60-63) on this point). If the tax is based on any other measure of property value, such as its value in current use, the tax will be non-neutral and it will have distortionary effects. Anderson and England (2014) review use-value assessment and 10

11 Property Taxes in Nebraska: Past, Present, and Future its effects. Hence, if the policy objective is to have the least distortionary property tax as possible, the ideal tax base is the market value of land. In this report, these perspectives from economic theory are used to assess the property tax base and property tax policy in the State of Nebraska. Property tax collections in Nebraska are compared with collections in other states, both on a per capita basis and as a share of income. Comparisons indicate that Nebraska, as a state with abundant agricultural lands, has higher effective property tax rates than many U.S. states, though effective tax rates in Nebraska are similar to those in surrounding and nearby states, many of which also have abundant agricultural lands. The report also examines effective tax rates and growth in effective tax rates between Nebraska counties. Effective tax rates are found to be higher among the more populous counties of the state. This pattern could occur for a variety of reasons. Possible explanations include the following: 1) because individuals and businesses found in more urban areas demand a greater level of public service, 2) the cost of providing local public services rises with population density, or 3) because the assessed property per person is lower in more densely populated counties. The same pattern is not evident when examining the change in effective tax rates among Nebraska counties from 2004 through 2013, or in the growth in budgeted spending from 2004 to 2013 among county, city and school districts in Nebraska. The next section of the report provides a summary background on the nature and history of property taxes in the State of Nebraska. Section III compares property taxes in Nebraska with those in other states. Section IV compares the level of property tax and changes in property tax rates between Nebraska counties. Section IV includes a careful statistical analysis of the policy response of property tax rates in reaction to growth in the property tax base, which has been solid in Nebraska over the last decade, and strong in many agricultural regions of the state. Section IV also examines the growth in budgeted spending among Nebraska counties over the last decade, including the growth in spending by cities, counties and school districts. Section V contains policy recommendations for the property taxes within Nebraska. 11

12 Platte Institute Policy Study II. Nature and History of the Property Taxes in Nebraska Any state economy can benefit from a property tax system which operates in a manner consistent with economic theory. To examine where Nebraska stands, this section reviews the current property tax system in the state of Nebraska as well as its history. The section ends with a discussion of property tax basics, which will help the reader understand the property tax data which is discussed throughout the rest of the report. A. Nebraska Property Taxes at a Glance 1 HIGHLIGHTS Nebraska has a classified property tax system that treats agricultural property differently than other classes of property. Agricultural property is assessed at 75 percent of market value while all other classes of property are assessed at full market value. A constitutional amendment was approved by voters in 1990 that distinguishes agricultural land as a separate class of property which must be assessed uniformly and proportionately within that class, but not in comparison with other classes of property. Nebraska assessed values are based on market values for all classes of real property. This valuation method is unique among agriculturally oriented states which generally apply use value standards rather than market value standards. With use-value assessment, land is valued in its current agricultural use, not its highest and best use which is generally much higher especially in urban areas. While Nebraska generally requires valuation based on market value for all classes of real property, an exception is permitted for agricultural land in relatively urbanized counties. In addition to classification for all agricultural property in the state, Nebraska permits use-value assessment for agricultural land in relatively urbanized counties. Nebraska has overall levy caps intended to provide absolute maximum property tax levies. Starting in 1998, property tax levy limits were implemented, limiting local governments to property tax levies of no more than $2.19 per $100 of property value. Caps have varied over time, especially with regard to school districts as there have been changes in the state school aid formula and funding. Currently, school systems are limited to $1.05 per $100 of property value. Cities, counties, community colleges, natural resource districts, and sanitary improvement districts are also subject to levy limits. The levy limits do not apply to levies for bond issues of any of these local government units. Voters may approve an override of the levy limit for a period of up to five years. OVERVIEW Property taxes account for a large share of local own-source tax revenue in Nebraska. While U.S. Census Bureau (2010) figures indicate that property taxes accounted for 18.4 percent of total general revenue for the State and local governments in Nebraska, that overall figure 1. Material in this section and the first part of section B is forthcoming in Significant Features of the Property Tax. Lincoln Institute of Land Policy and George Washington Institute of Public Policy. Reprinted with permission. 12

13 Property Taxes in Nebraska: Past, Present, and Future masks the importance of the property tax for local governments. For Nebraska local governments only, taxes accounted for 62 percent of their general revenue from own sources. Of that amount, 76 percent was from property taxes. Another 13 percent of local own-source tax revenue is derived from sales taxes. The remaining amount comes from motor vehicle license taxes and other taxes. Figure II.1. Sources of Nebraska State and Local General Revenue, 2010 Source: U.S. Census of Governments, 2010 B. Key Property Tax History and Recent Developments During the 1980s and 1990s in Nebraska, substantial changes to the property tax system took place. The result was a larger share of the property tax derived from residential property. The residential share was about 40 percent in 1980, whereas over the period the residential share of total property taxes levied has averaged 52.7 percent while the share for agricultural property (real and personal) was 22.3 percent. Recent dramatic increases in agricultural land values are changing this situation, however. Average farmland values have more than doubled over the period according to the survey data collected by the University of Nebraska-Lincoln Department of Agricultural Economics (2012). Nebraska s system of assessing agricultural land based on market value in general, but permitting use-value assessment in urbanized counties raises the question of the impact of that tax treatment. Anderson and Griffing (2000a and 200b) estimated the difference between market values and use values spatially around both Omaha and Lincoln and also estimated the tax expenditure involved with use-value assessment. Their evidence indicates that the difference between market and use value diminishes with distance as you move away from the urban area. Within the urban area, however, the tax expenditure (foregone tax revenue due to preferential assessment) associated with use-value assessment can be substantial due to the fact that use values are well below market values within the urban area. For an overview of additional policy issues and implementation practices related to use-value assessment, see Anderson (2012). In the 1980s the farm crisis hit Nebraska and other farm-oriented states, depressing agricultural land values and reducing the share of property taxes derived from agricultural land. That situation brought about changes in the State approach to property taxation. An important Supreme Court case in 1984, Kearney Convention Center Inc v. Board of Equalization, held that the State 13

14 Platte Institute Policy Study 14 Constitution s uniformity requirement demanded that agricultural land be assessed similarly to other classes of property which were valued at full market value. An amendment to the Constitution was then adopted permitting a classified property tax system. At that time, an income approach was used to value agricultural property. A later amendment and legislation put in place the currently used system under which agricultural land is valued at 75 percent of market value. In the early 1990s, Nebraska experienced a personal property crisis. The crisis began when the railroads questioned whether Nebraska was complying with the federal Railroad Revitalization and Regulatory Reform Act of 1976 (the so-called 4-R Act). That Act was intended to save railroads from financial collapse and contained a provision (in Section 306(1)(d)) that prohibited imposition of any discriminatory tax on railroads. In 1988, the U.S. Court of Appeals in the Trailer Train v. Leuenberger case held that Nebraska discriminated against railroads because the State provided exemptions for agricultural and business inventories, livestock, and farm machinery which were not available to railroads with no such property. The State was prevented from collecting personal property tax from the railroads. Further complicating the situation, the Nebraska Supreme Court ruled in the Northern Gas v. State Board of Equalization case that the State constitution required pipelines, telephone companies and other centrally assessed entities to be treated equally and have their property equalized to that of the railroads, which were paying no tax. Later, in the 1991 case of MAPCO Ammonia Pipeline v. State Board of Equalization, the Supreme Court ruled that all prior personal property exemptions were unconstitutional, thus reversing earlier cases. As a result of this situation, the Legislature placed a constitutional amendment on the ballot in 1992, which passed, that separated real and personal property in the uniformity clause of the State Constitution, allowed personal property exemptions, allowed legislation to revise assessment methods applied to personal property, and created a distinct class of railroad personal property. In order to settle litigation with the centrally assessed entities, the Legislature added farm equipment back into the property tax base, valuing it at net book value. It also changed the assessment of business equipment from market value to net book value (cost minus depreciation). Education finance was reformed in 1990 with legislation (LB1059) to increase the state sales tax rate permanently and the state income tax rate temporarily to fund the Tax Equity and Educational Support Act. That Act shifted public school funding substantially from the local level to the state with the implementation of a new school aid formula distributing aid on an equalized basis. The State expanded the tax base of school districts by giving them a portion of the state income tax revenue collected in their districts and by increasing funding of the State equalization aid formula through an increase in the State sales tax rate. Anderson (1994) provides estimates of the impacts of these changes, finding that the effort to reduce reliance on the local property tax and reduce fiscal disparities among districts was at least partially successful. Property tax administration in Nebraska is conducted by the Department of Revenue. Changes in administration over the recent past, however, have been both substantial and vacillating. In 1995, the Tax Equalization and Review Commission (TERC) was formed to hear valuation appeals and exemption disputes (rather than district courts as in the past). The same Commission was authorized by Constitutional amendment to conduct Statewide Equalization proceedings (previously done by a State Board of Equalization consisting of elected State officials). In 1999, the Department of Property Assessment and Taxation was created as a separate State agency (distinct from the Department of Revenue) with an administrator appointed by the

15 Property Taxes in Nebraska: Past, Present, and Future Governor for a six year term. Later, in 2007, the Department of Property Assessment and Taxation was returned to the Department of Revenue, and the Property Tax Administrator functions within the Department of Revenue. PROPERTY TAX LIMITATIONS IN NEBRASKA Nebraska currently has three forms of property tax limitations that apply to local government units. First, there is a property tax rate cap that applies to counties, cities and villages, and school districts. Table II.1 provides a summary of these caps, where the limitations take the form of rate limits (expressed in mills, one dollar of tax per $1,000 of property value, or tenths of a cent). Second, there is revenue/expenditure limitation for cities, counties and, political subdivisions. Table II.2 summarizes this limitation which curbs the rate of growth of restricted funds to 2.5% annually. School district expenditures are also curbed by this limitation. For FY 2012, the school limitation was temporarily lowered to 0.5%. Finally, there is a levy limit that can be adopted in any jurisdiction using the property tax. It takes a petition signed by ten percent of the registered voters of the political subdivision to put a limitation on the budget of the jurisdiction funded by property taxes. If approved by a majority vote of the electorate the limitation takes effect for up to two fiscal years, as described in Table II.3. Hence, any local government unit relying on the property tax may be limited by this process of the voters. Table II.1. Description of the Rate Limit Type of limit: Limit name: Description of limit: Override process: Footnotes: Sources: Rate Limit Property Tax Rate Cap The tax rate shall not exceed for municipal counties, 10 mills; for cities of the first class for allpurpose levy, 8.75 mills; for cities of the second class and villages, 10.5 mills; for incorporated cities and villages within the boundaries of a municipal county, 9 mills; for incorporated cities and villages not within the boundaries of a municipal county, 4.5 mills; and, for school districts and multiple-district school systems, except learning communities, 10 mills. Any political subdivision, other than a class I school district, may impose an excess levy for up to 5 years, if approved by a majority vote of the electorate, upon resolution of the governing body (66⅔% vote), or by petition signed by 5% or more of the voters. Only one resolution and one election for excess levy is allowed per calendar year. Learning communities, school districts that are part of learning communities, community colleges, natural resource districts, and sanitary and improvement districts also have rate ceilings for specific funds. Incorporated cities and villages not within the boundaries of a municipal county levy may increase an additional 5 mills to finance the municipality s share of revenue required under an agreement pursuant to the Interlocal Cooperation Act or the Joint Public Agency Act. In lieu of the listed override option, any political subdivision other than a Class I school district may impose an excess levy for 1 year. At least 10% of the registered voters in the political subdivision will constitute a quorum for exceeding the limits of the levy. Voting will be done by secret ballot. Significant Features of the Property Tax. Lincoln Institute of Land Policy and George Washington Institute of Public Policy. (Tax Limits; accessed: 7/17/2014) 15

16 Platte Institute Policy Study Table II.2. Description of the Revenue/Expenditure Limit Type of limit: Limit name: Description of limit: Override process: Footnotes: Revenue/Expenditure Limit General Revenue and Expenditure Caps Cities, counties and, political subdivisions must maintain a base limitation rate on the growth of restricted funds to 2.5%. However, the maximum growth rate for school districts for school fy is 0.5%. A governmental unit may exceed the limit for 1 fiscal year by up to an additional 1% if approved by at least 75% of the governing body. A higher percentage may be approved by a majority vote, by the recommendation of the governing body, or by petition signed by at least 5% of voters. Further, a higher percentage may approved by majority vote at a meeting of residents of the governmental unit after notice is published in a newspaper of general circulation. At least 10% of voters in the governmental unit constitute the quorum necessary to exceed the allowable growth percentage. Effective for school fiscal year the growth of restricted funds is 0.5%, in accordance with L. 2011, LB235. Sources: Neb. Rev. Stat (in effect for 2012); Neb. Rev. Stat (in effect for 2012); Neb. Rev. Stat (in effect for 2012); Neb. Rev. Stat ~ (in effect for 2012) Significant Features of the Property Tax. Lincoln Institute of Land Policy and George Washington Institute of Public Policy. (Tax Limits; accessed: 7/17/2014) Table II.3. Description of the Levy Limit Type of limit: Limit name: Description of limit: Override process: Levy Limit Local-Option Property Tax Levy Cap Upon a petition signed by 10% of the registered voters, any political subdivision may impose a limitation on the budget funded by property taxes, if approved by a majority vote of the electorate. Any limitation placed on budgets under these provisions remain in effect for only 2 fiscal years, unless voters elect to terminate the limitation after 1 year. Footnotes: Sources: Neb. Rev. Stat (in effect for 2012) Significant Features of the Property Tax. Lincoln Institute of Land Policy and George Washington Institute of Public Policy. (Tax Limits; accessed: 7/17/2014) 16

17 Property Taxes in Nebraska: Past, Present, and Future REAL AND PERSONAL PROPERTY The total assessed value of property in a jurisdiction is the sum of both real and personal property. Real property consists of land, buildings, and other improvements that are permanently affixed. Personal property generally consists of machinery and equipment that is not permanently affixed to the real property. In most of what follows in this report the sum of real and personal property will be used and called assessed value. C. Property Tax Basics Like any tax system, a property tax system is characterized by its tax base and tax rates. The property tax base is a measure of property value. In this respect, it is important to distinguish between stock and flow measures as they are applied in taxation. Consider the difference between property and income taxation. With a property tax the tax base is property value, which is a stock concept (i.e. a stock of wealth). In contrast, with an income tax, the tax base is annual income, which is a flow concept (i.e. a flow of income per year). Tax revenue can be derived from taxing either the stock of wealth or the flow of income, and the two are related in a precise way. Consider the simple perpetuity formula that relates the value V of an income generating asset to the annual net rent generated by the asset R: This formula indicates that the annual net income can be divided by the discount rate i (an interest rate reflecting the opportunity cost of capital) to obtain the value of the asset. (1) A tax can be applied to either the value of the property property,. An equivalence relationship exists, or the income generated by the, (2) indicating that a tax on annual net rent is equivalent to a tax on property value divided by the interest rate. Because the property tax applies to the value of the property, not its annual net income stream, it can create a liquidity problem for some property owners. The property owner controls a valuable asset that enhances his wealth, but his income stream may be modest in comparison. Yet, it is not correct to say that there is no link between wealth and income, as is often claimed. Wealth is the discounted stream of future income that the property is capable of generating. NOMINAL AND EFFECTIVE TAX RATES The property tax liability T for a given property is given by the relationship,, (3) where is the nominal tax rate that is applied to value, and AV is the assessed value of the property. In general, assessed value is related to market value MV by the assessment ratio r:. (4) 17

18 Platte Institute Policy Study In Nebraska, state law requires that the assessment ratio r be unity (1.0) for all classes of property with the exception of agricultural property where the assessment ratio is Differences in assessment ratios lead to differences in effective tax rates. The effective tax rate, denoted of the property:, is given by the ratio of the tax liability to the market value. (5) Hence, the effective tax rate is the product of the assessment ratio and the nominal tax rate,. For a given nominal tax rate, the lower the assessment ratio the lower the effective tax rate. In Nebraska, the reduced assessment ratio for agricultural property results in an effective tax rate that is 25 percent below the nominal tax rate, and also 25 percent below the effective tax rates for all other classes of property. Hence, for given nominal tax rates applied in a local government jurisdiction, the effective tax rate on agricultural property is reduced by 25 percent due to the lower assessment ratio. The state equalization system is designed to assure that assessment ratios are approximately uniform across jurisdictions, and thereby assure that differences in effective tax rates are due to differences in nominal tax rates only. Furthermore, the equalization system also plays a crucial role in assuring approximately equal assessment ratios to provide equity in the school aid formula, which depends on property value per pupil. In Section IV of this report, we will use the Department of Revenue reported average tax rates (ATRs) for all of the properties in each Nebraska county, which is the average (nominal) tax rate computed as the ratio of the tax levy (TL) divided by the total assessed value (AV). Hence, it should be noted that these reported ATRs are average nominal tax rates, not effective tax rates as in equation (5). The next section, however, compares property taxes in Nebraska with those of other U.S. states. III. Property Taxes in Nebraska Compared with Other States Comparing property taxes in Nebraska to those in other states, there are several metrics that can be used depending on the purpose of the comparison. To examine the property tax burden on a per-person basis, total property taxes collected in the state are divided by population to obtain a per capita measure. This measure reflects the tax burden relative to population. A second way to examine the property tax burden is to scale total property taxes collected by personal income earned in the state. This measure gives an indication of the property tax burden relative to the ability of the state s citizens to pay the taxes. Dividing property tax payments by personal income indicates the share of income paid in tax, which is an average tax rate. Third, a comparison can be made by considering state and local property taxes as a share of state and local own-source general revenue. This method of comparison considers how important property taxes are relative to all of the taxes collected by the state and its local government. Finally, a comparison can be made focusing on local governments only (leaving the state government out), computing local property taxes as a share of local own-source general revenue. This measure indicates how important the local property tax is, relative to all sources of tax revenue 18

19 Property Taxes in Nebraska: Past, Present, and Future collected by local governments. In the following section, each of these measures is used to examine the role of property taxes in Nebraska, compared to other states. Property Taxes Per Capita Figure III.1 illustrates local property taxes per capita in By converting local property taxes into per capita terms, the chart shows the tax burden on a per-person basis. Nebraska s property tax per capita is $1,574, somewhat above the national average of $1,390. At the national level, the highest property tax states by this measure have taxes that exceed $2,000 per person and include: Connecticut ($2,582), District of Columbia ($2,920), Massachusetts, ($2,028), New Hampshire ($2,220), New Jersey ($2,901), New York ($2,344), and Rhode Island ($2,158). Nebraska is not among this top tier of property tax states, by this measure. Rather, Nebraska is among a second tier of states with property taxes per capita of approximately $1,500. All of Nebraska s neighboring states have property taxes in this range. Neighboring states are illustrated in green bars in Figure III.1, with per capita property taxes as follows: Colorado: $1,654 Iowa: $1,434 Kansas: $1,347 Nebraska: $1,574 South Dakota: $1,205 Wyoming: $1,679 The lowest property tax states by this measure have taxes in the range of $600 per person or less and include: Alabama ($475), Arkansas ($292), Kentucky ($574), New Mexico ($631), and Oklahoma ($593). Property Taxes Relative to Personal Income Figure III.2 illustrates local property taxes as a share of personal income, expressed as a percentage. Property taxes in Nebraska account for 3.98 percent of personal income. In comparison, the national average is 3.49 percent. States with the highest property tax burden (over 4 percent) by this measure include: Alaska (4.19%), Connecticut (4.66%), District of Columbia (4.08%), Illinois (4.47%), Maine (4.84%), New Hampshire (5.05%), New Jersey (5.75%), and Rhode Island (5.14%). Nebraska is among a second tier of states with relatively high property tax burdens by this measure, and it is higher than all of the neighboring states, but not among the top tier of states in the country. Nebraska is similar to its neighboring states that are illustrated in green bars in Figure III.2, with property taxes as a share of personal income in the range of 3%-4%, as follows: Colorado: 3.91% Iowa: 3.78% Kansas: 3.49% Nebraska: 3.98% South Dakota: 3.04% Wyoming: 3.70% 19

20 Platte Institute Policy Study State and Local Property Taxes as a Share of State and Local Own-Source General Revenue Next, consider the relative importance of state and local property taxes compared to all state and local own-source general revenues. This measure indicates how important property taxes are in comparison with all own-source general revenues and reflects the degree to which state and local governments in a state rely on the property tax. Figure III.3 illustrates state and local property taxes as a share of state and local own-source general revenue, expressed as a percent. State and local property taxes in Nebraska account for 24.7 percent of all state and local own-source revenues, about 3 percent above the national average of 22.5 percent. This indicates that property taxes are a somewhat more important revenue source in Nebraska than in the average state. Nebraska is on the high side of property tax reliance in comparison with neighboring states, which are in the range of 20 to 24 percent: Colorado: 24.4% Iowa: 21.8% Kansas: 21.3% Nebraska: 24.7% South Dakota: 23.6% Wyoming: 19.8% Nebraska has the highest share at 24.7%, followed by Colorado with 24.4% and South Dakota with 23.6%. While the difference with these states is small, the share of own-source general revenue coming from property tax is approximately 3 percentage points higher in Nebraska than in Iowa and Kansas and nearly 5 percentage points higher than in Wyoming. Comparisons with Iowa and Kansas are perhaps most interesting as these states also have mid-size metropolitan areas and a very large farm economy. By contrast, the Colorado economy is more defined by its metropolitan economies and Wyoming has a large mining industry (which generates substantial severance tax revenue.) The share of state and local own-source revenue from the property tax is 3 percent higher in Nebraska than in those states, similar to the difference between Nebraska and the nation overall. One other interesting comparison within the wider region is with the State of Texas. Texas is among the most competitive states in terms of business climate. Texas gathers nearly 30% of its state and local own-source revenue from the property tax, compared to 24.7% in Nebraska. Local Property Taxes as a Share of Local Own-Source General Revenue The final measure of property tax reliance is similar to the previous measure, with the exception that in this case only local property tax is taken into account. Chart III.4 illustrates local property taxes as a share of local own-source general revenue. Nebraska s local governments collect 50.8 percent of their own-source general revenue from property taxes, above the national average of 47.4 percent. Despite being above the national average, however, Nebraska local governments are not among the most property tax reliant. That distinction belongs to the states where the property tax share is above 60 percent, including Connecticut (85. 33%), Illinois (60.63%), Maine 20

21 Property Taxes in Nebraska: Past, Present, and Future (76.67%), Massachusetts (71.32%), New Hampshire (82.21%), New Jersey (77.99%), Rhode Island (80.64%), and Wisconsin (66.14%). Nebraska local governments rely on the property tax to a somewhat greater extent than all but one neighboring state (South Dakota): Colorado: 43.3% Iowa: 48.6% Kansas: 46.1% Nebraska: 50.8% South Dakota: 51.6% Wyoming: 36.81% Figure III.5 combines the information in Figures III.3 and III.4 to illustrate how property tax reliance differs between state and local governments combined as compared to local governments only. The difference between the two bars for any given state provides a view of the relative difference in property tax reliance. Summary The overall picture provided by these data is one of Nebraska as a relatively high property tax state, but certainly not among the top tier of states in terms of the property tax burden or property tax reliance relative to other revenue sources. In most of these comparisons Nebraska is quite similar to neighboring states, reflecting a regional context where the economic and fiscal situations have resulted in states relying on property taxes to a comparable extent. In two of the measures considered above, however, Nebraska is the highest among its neighboring states. Nebraska has the highest property tax relative to personal income and the highest state and local property tax share of state and local own-source revenue. Figure III.1. Local Property Tax Revenue Per Capita Source: U.S. Census Bureau,

22 Platte Institute Policy Study Figure III.2. Local Property Tax as a Share of Personal Income Source: U.S. Census Bureau, Figure III.3. State and Local Property Tax as a Share of State and State and Local Own-Source General Revenue Source: U.S. Census Bureau,

23 Property Taxes in Nebraska: Past, Present, and Future Figure III.4. Local Property Tax as a Share of Local Own-Source General Revenue Source: U.S. Census Bureau, Figure III.5. Shares of Local and of State and Local Own-Source General Revenue Source: U.S. Census Bureau,

24 Platte Institute Policy Study IV. Analysis of the Nebraska Property Tax System within Counties This section examines growth in Nebraska s property tax base and property tax rates across Nebraska counties, and by type of property. We also examine growth in budgeted spending among Nebraska counties over the last decade, including the growth in spending by cities, counties and school districts. The section concludes with a careful statistical analysis of the policy response of property tax rates in reaction to growth in the property tax base. A. Growth in Property Tax Base and Rates within Nebraska The growth in the property tax base within Nebraska reflects a combination of issues. The first issue is the change in the composition of the Nebraska tax base over time. This composition refers to the components of taxable property including residential property, agricultural property, commercial property, and other categories. The second issue is the geographic pattern of growth in the property tax base and property tax rates. Both sets of issues are examined below. The source for all tables and figures presented in this section is the Nebraska Department of Revenue. COMPOSITION OF THE NEBRASKA PROPERTY TAX BASE Table IV.1 and Figures IV.1 and IV.2 illustrate the composition of total property taxes paid by each class of property in Nebraska for both 2004 and 2013, illustrating changes in the overall tax burden across classes. There was rapid growth in many categories of taxes levied. Taxes levied on agricultural property more than doubled while taxes levied on residential property grew more modestly. Table IV.1. Taxes Levied Commercial, Industrial & Agricultural Residential Mineral Railroad Other Total ,796,108 1,149,700, ,089,101 27,797, ,410,459 2,115,794, ,492,585 1,241,555, ,338,888 27,135, ,920,770 2,257,443, ,511,639 1,337,987, ,061,108 28,201, ,872,437 2,416,633, ,293,116 1,422,488, ,732,347 28,754, ,172,572 2,555,441, ,167,382 1,471,672, ,871,571 31,877, ,018,242 2,694,606, ,179,221 1,507,325, ,624,575 35,351, ,160,158 2,846,640, ,472,211 1,535,623, ,101,573 40,548, ,853,603 2,960,599, ,470,670 1,561,886, ,776,933 50,242, ,216,447 3,076,593, ,056,213 1,576,790, ,243,059 53,296, ,447,178 3,198,832, ,667,217 1,596,259, ,178,376 54,689, ,699,520 3,366,494,154 As a result, agricultural property s share of taxes levied rose during the 2004 to 2013 period. As seen in Figure IV.1, in 2004 the residential class of property paid 54 percent of the total property taxes in the state while the agricultural class paid 19 percent. Commercial and industrial properties were responsible for another 19 percent of the total. As seen in Figure IV.2, by 2013 the distribution of the tax burden had shifted notably with the residential class share shrinking to 47 percent and the agricultural share increasing to 26 percent. There was virtually no change in the combined commercial, industrial and mineral, and other shares. 24

25 Property Taxes in Nebraska: Past, Present, and Future Figure IV.1. Share of Nebraska Property Taxes Levied 2004 Figure IV.2. Share of Nebraska Property Taxes Levied 2013 Figure IV.3 below shows the shares of agricultural and residential property on an annual basis between 2004 and Shares held fairly steady between 2004 and While the housing bubble was not as severe in Nebraska as nationally, there was solid growth in Nebraska residential property values during this period. The value of agricultural properties also rose from 2004 through 2007 but at a more moderate rate. Beginning in 2008, the value of agricultural properties began to rise more rapidly. At the same time, residential property values in Nebraska grew very slowly as the housing boom was replaced by the housing bust. These opposing patterns lead to the decline in residential property s share of total property taxes levied and the rise of agricultural property s share, beginning in Figure IV.3. Share of Nebraska Property Taxes Levied, Agricultural and Residential Property,

26 Platte Institute Policy Study GEOGRAPHIC TRENDS IN AVERAGE TAX RATES (ATRS) AND PROP- ERTY TAX BASE IN NEBRASKA Changes in the composition of the tax base reflect faster growth in agricultural property values which has important implications for the Nebraska economy. In a later section, we examine how strong growth in agricultural land values influence growth in the property tax base among Nebraska counties. Before that, however, we examine geographic differences in average tax rates among Nebraska counties. In particular, there are distinctly different ATR trends across Nebraska counties. For example, Figure IV.4 below illustrates ATRs for Nebraska s three most populous counties, Douglas, Lancaster, and Sarpy. As the trends illustrate, there has been a clear rising ATR trend in Douglas and Sarpy Counties over the past decade while there is essentially no change in the Lancaster County ATR over the same period. Figure IV.4. Trends in Average Tax Rates, Largest Nebraska Counties, Table IV.2: Average Tax Rates (ATRs), 2013 Median 1.58 Mean 1.60 AVERAGE TAX RATES IN NEBRASKA COUNTIES Table IV.2 and the map in Figure IV.5 illustrate average property tax rates (ATRs) by county in ATRs range from a high of 2.28 percent in Douglas County to a low of 1.04 percent in Keya Paha County. The typical ATR, as indicated by the median statistic, is 1.58 percent. The top five counties, in rank order, are: (1) Douglas, 2.28 percent, (2) Sarpy, 2.25 Descriptive Statistic ATR (percent) percent, (3) Hall, 2.04 percent, (4) Buffalo, 2.01 percent, Maximum 2.28 and (5) Cheyenne, 1.99 percent. Appendix A provides a Minimum 1.04 county-by-county list of ATRs in

27 Property Taxes in Nebraska: Past, Present, and Future Figure IV.5: Average Tax Rates by County, 2013 Table IV.3 and the map in Figure IV.6 illustrate ten year average ATRs by county. Ten-year average ATRs range from a high of 2.20 percent in Douglas County to a low of 1.19 percent in Sioux County. The typical ATR, as indicated by the median statistic, is 1.75 percent. The top five counties, in rank order, are: (1) Douglas, 2.20 percent, (2) Sarpy, 2.19 percent, (3) Dakota, 2.06 percent, (4) Hall, 2.01 percent, and (5) Cass, 1.99 percent. Appendix B provides a county-by-county list of ten-year average ATRs and rankings. Table IV.3. Ten Year Average ATRs, Descriptive Statistic Ten Year Average ATR (percent) Maximum 2.20 Minimum 1.19 Median 1.75 Mean 1.74 Figure IV.6. Ten Year Average ATRs by County,

28 Platte Institute Policy Study Table IV.4. Change in Agricultural Property Value, , percent Descriptive Change (percent) Change (percent) Statistic Cumulative Annual Average Maximum Minimum Median Mean Table IV.4 and the map in Figure IV.7 illustrate the change in agricultural property value over the decade period from 2004 to The total figures represented here include both real and personal property value. Percentage growth ranges from a high of 250 percent (13.3 percent annual rate) in Washington County to a low of 51 percent (4.2 percent annual rate) in Sheridan County. The typical growth in value, as indicated by the median, is 149 percent (9.6 percent annual rate). The top five counties, in rank order, are: (1) Washington, 250 percent, (2) Dakota, 236 percent, (3) Cedar, 227 percent, (4) Thurston, 223 percent, and (5) Wayne, 221 percent. Appendix C provides a county-by-county listing and ranking. Appendix C provides a county-bycounty list of cumulate growth of agricultural property values. Figure IV.7. Change in Agricultural Property Value, Change in Agricultural Property Value, , percent x

29 Property Taxes in Nebraska: Past, Present, and Future Table IV.5 and the map in Figure IV.8 illustrate the change in total property value over the decade period from 2004 to The figures represented here include just real property value. Percentage growth ranges from a high of 176 percent (10.7 percent annual rate) in Cedar County to a low of 36 percent (3.1 percent annual rate) in Lancaster County. The typical growth in value, as indicated by the median, is 96 percent (7.0 percent annual rate). The top five counties, in rank order, are: (1) Cedar, 176 percent, (2) Fillmore, 163 percent, (3) Knox, 159 percent, (4) Antelope, 159 percent, and (5) Thurston, 158 percent. Appendix D provides a county-by-county listing and ranking. Table IV.5. Ten-Year Change in Total Property Value, , percent Descriptive Change (percent) Change (percent) Statistic Cumulative Annual Maximum Minimum Median Mean Figure IV.8: Ten-Year Change in Total Property Value, Change in Total Property Value, , percent x

30 Platte Institute Policy Study Table IV.6. Ten-Year Correlation between Agricultural Property Value and Total Property Value, , percent Descriptive Statistic Change (percent) Maximum 1.00 Minimum 0.73 Median 1.00 Mean 0.98 Table IV.6 and the map in Figure IV.9 illustrate the correlation coefficient measuring the association between the growth of agricultural property value and total property value, by county over the period The correlation coefficients range from a low of 0.73 to a maximum of 1.00 which represents a perfect linear association. The median correlation value is 1.00, indicating that in the typical county agricultural property value and total property value are perfectly correlated. That is, they move in lock-step over time. Appendix E provides the county-bycounty correlations and ranking. Figure IV.9. Ten-Year Correlation between Agricultural Value and Total Property Value 30

31 Property Taxes in Nebraska: Past, Present, and Future Table IV.7. Ten-Year Correlation between Residential Value and Total Property Value, , percent Descriptive Statistic Change (percent) Maximum 0.99 Minimum 0.66 Median 0.93 Mean 0.91 Figure IV.7 and the map in Figure IV.10 illustrate the correlation coefficient measuring the association between the growth of residential property value and total property value, by county over the period The correlation coefficients range from a low of 0.66 to a maximum of 0.99 which represents a nearly perfect linear association. The median correlation value is 0.93, indicating that in the typical county agricultural property value and total property value are highly correlated. Residential values and total property values move together over time. The correlation is strongest in Douglas and Sarpy counties. Appendix F provides the county-by-county correlations and ranking. Figure IV.10. Ten-Year Correlation between Residential Value and Total Property Value DISCUSSION The preceding figures reveal notable patterns and trends in property tax base and average tax rates among the counties of Nebraska. These patterns and trends are in part a matter of choice and in part influenced by state policies regarding local tax rates and the growth of local tax revenue. Patterns also may reflect the underlying economic circumstances of individual Nebraska counties such as the level of urban development or characteristics of agricultural properties. Figure IV.11 below shows the population density of each Nebraska County in a recent year,

32 Platte Institute Policy Study Figure IV.11. Population Density , More densely populated counties have a darker red color. The map follows the familiar fish hook pattern which has been observed for Nebraska with greater density along the Interstate Highway corridor and pockets of density in Dodge, Platte and Madison County forming the remaining contours of the hook. Other pockets of greater density are found in Scotts Bluff and Gage counties. Among remaining counties, density is generally greater in the Eastern half of Nebraska. Figures IV.5 and IV.6 above showed average tax rates for Nebraska counties for the fiscal year , the most recent year for which complete data is available, as well as the 10-year average from Darker red implies a higher average tax rate in a county. Average tax rates are simply the total tax revenue taken in by local governments such as cities, counties, school districts and special jurisdictions within the borders of each county divided by the assessed value of property. Average tax rates also follow the fish hook pattern observed in Figure IV.11. Douglas, Sarpy and Lancaster counties are the darkest red with darker shades also along the Interstate 80 corridor in Hall, Adams, Buffalo and Lincoln counties. Scotts Bluff, Madison, Platte and Dodge counties also are somewhat darker, signifying higher average tax rates. Results suggest a correlation between population density and average tax rates. This may occur because of one or more of the following reasons: 1) the cost of providing local public services rises with population density, 2) because individuals and businesses found in more urban areas demand a greater level of public service, or 3) because the assessed property per person is lower in more densely populated counties. The last explanation is intriguing in Nebraska where there is an abundance of valuable farmland in many lightly populated counties. Figure IV.7 and Figure IV.8 show growth in assessed county property values between the years 2004 and Table IV.7 shows the growth in agricultural property and Table IV.8 shows growth in all property. Growth in property values does not show any clear pattern, as had been evident for average property tax rates. Growth in total property values is large in some counties and weaker in others throughout the state. Perhaps one notable pattern is that there is slow growth in total property value in several of the largest counties in the state including Douglas and Lancaster County, as well as Hall County. This may be because agricultural land values are a smaller share of the tax base in these more populous counties. Another pattern is that 32

33 Property Taxes in Nebraska: Past, Present, and Future the strongest growth in agricultural property values is in eastern Nebraska, particularly in the strong farm economies of northeast Nebraska. Figure IV.9 shows the correlation between the growth in agricultural land values and the growth in total taxable property within counties over the 10-year period from 2004 through In the non-metropolitan counties of the state, there is a strong correlation between growth in agricultural land values and the total value of taxable property with counties. Such a correlation is less evident between residential property values and total property value, as seen in Figure IV.10. The correlation is positive and strong in some counties, particularly among the metropolitan counties of Nebraska. The correlation is not necessarily strong in non-metropolitan counties. B. Measuring the Local Government Policy Offset When the market value of property rises, assessed values rise as well. If the local government units that levy property taxes do nothing, tax revenue will rise proportionately with the increase in assessed values. On the other hand, if the local government units lower their tax rates proportionately, they can collect the same revenue using lower rates. The response of local government units in adjusting their tax rates in the face of rising property values can be called their policy response. The policy response can be estimated using a simple statistical model, as follows. First, the elasticity of the levy (TL) with respect to property value (PV) can be estimated using the following regression equation where both TL and PV are expressed in natural logarithms. The estimated coefficient provides the elasticity of the tax levy with respect to property value. This coefficient indicates how a change in PV is translated into a change in TL. If, a ten percent increase in PV results in a ten percent (exactly proportional) increase in TL, so the local government unit is not changing its tax rate at all. There is no policy offset and rising PV results in a proportional increase in TL. If,, the elasticity is less than unity indicating that there is a policy offset to some extent. The local government unit is reducing its tax rate in response to the increased property values. The extent of the policy offset is indicated by the degree to which the elasticity falls below unity. For example, if the estimated elasticity is 0.9, the policy offset is 0.1 indicating a ten percent reduction in the tax rate. The further the elasticity falls below one, the greater the policy offset. On the other hand, if >1, the local government unit is raising its tax rate in response to rising property value, which can be considered a negative policy offset. Table IV.8 provides estimates of the elasticity of the tax levy with respect to property value (assessed value) for various local government units in Nebraska over the period (6) Table IV.8. Tax Levy Elasticity and Policy Offset Estimates, Natural Community Fire Resource Total Schools Colleges Districts Districts Estimated elasticity of total tax level with respect to property value Implied policy offset

34 Platte Institute Policy Study The estimated elasticity for the total tax levy, including all subdivisions of local government, is 0.84, which indicates that a ten percent increase in property value results in an 8.4 percent increase in the tax levy. As a consequence, it is clear that local government units are reducing their tax rates by 1.6 percent in response to the increased property value. Another way to view this is to say that five-sixths of the potential increase is accepted and one-sixth is rolled back. This is the total policy offset in response to a change in property value. There are distinct differences, however, when comparing the policy offset for various local government units. Schools have a policy offset of 18 percent and fire districts offset by 25 percent. On the other hand, both community colleges and natural resource districts have raised their tax rates--a negative offset in response to rising property values. For community colleges, the tax levy rises by 12.3 percent in response to an increase of 10 percent in property values. Natural resource districts raise their tax levy by 6 tenths of one percent in response to a 10 percent increase in property value. C. Trends in County, City and School District Spending With the property tax base rising solidly, and a limited decline in property tax rates, property tax revenue in Nebraska is clearly on the rise. This raises the question of local government spending, and in particular, how local government spending has risen over time. In this section we examine the composition of budgeted spending for counties and cities within counties in Nebraska. We also examine the increase in the three principal local property tax jurisdictions in Nebraska: school districts, cities, and counties. This is accomplished by examining the growth in local government budgets in Nebraska counties from the fiscal year (referred to as 2004) through th e fiscal year (referred to as 2013). COMPOSITION OF BUDGETED SPENDING IN NEBRASKA CITIES AND COUNTIES The Local Government Budget Database of the State of Nebraska Auditor of Public Accounts ( maintains a detailed database of county, city and school district budgets from each year. These budgets captured planned spending for the local jurisdictions. The figures below show the composition of city government and county government spending within Nebraska for the year 2004 and The figures are based on state totals for budget spending for all counties and all cities. Spending is broken into key categories such as public safety, public workers, public health and social services, culture and recreation and community development. Beyond these key categories, budgeted spending for general operation of government and other miscellaneous program areas is also included. The figures show how spending priorities have changed over that decade. In other words, the figures show which types of spending have grown most quickly. Figure IV.12 and Figure IV.13 show the spending share for Nebraska cities in 2004 and There is relative stability in the spending shares for cities. In other words, Nebraska cities increased spending on services of all kinds between 2004 and However, between 2004 and 2013, there is a modest decline in the share of spending on public works and culture and recreation in Nebraska cities. This change suggests that spending in these categories grew, but grew less quickly than spending overall. There also was a modest increase in spending on public safety and on community development. 34

35 Property Taxes in Nebraska: Past, Present, and Future Figure IV.12. Nebraska Cities Budgeted Spending Shares 2004 Source: Nebraska Auditor of Public Accounts Figure IV.13. Nebraska Cities Budgeted Spending Shares 2013 Source: Nebraska Auditor of Public Accounts Figure IV.14 and Figure IV.15 show the spending shares for all Nebraska counties in 2004 and Changes in county spending shares appear to counteract changes at the city level. The county spending share on public safety fell between 2004 and 2013, counteracting more rapid growth in public safety spending in cities. The county spending share on public works rose between 2004 and 2013, counteracting the decline at the city level. These changes may reflect a different allocation of responsibility for public safety and public works among cities and counties. 35

36 Platte Institute Policy Study Overall, results suggest that budgeted city and county combined spending grew at a similar rate in all major spending categories. There was no clear reallocation or cutting back in any particular category. The potential exceptions were culture and recreation and public health and community services. Both categories experienced a large decline in share for one level of government and little change in share for the other. Figure IV.14. Nebraska Counties Budgeted Spending Shares 2004 Source: Nebraska Auditor of Public Accounts Figure IV.15. Nebraska Counties Budgeted Spending Shares 2013 Source: Nebraska Auditor of Public AccountsBudgeted Spending in Cities, Counties and School Districts with Nebraska 36

37 Property Taxes in Nebraska: Past, Present, and Future Budget spending at the county, city and school district level is supported by local property tax revenue, local sales tax revenue in the case of cities, and state and federal aid in the case of school districts. In order to compare growth in budgets across counties, spending is aggregated for all cities in each county in order to estimate countywide spending by cities in 2004 and Similarly, the spending of school districts is apportioned to the relevant counties and total budgeted school district spending is calculated for each county. Growth in budgeted spending between 2004 and 2013 is calculated for counties, cities within counties and school districts within counties. That data is presented in the next three figures, beginning with school district spending within counties. Table IV.9 and Figure IV.16 show growth in budgeted school district spending between 2004 and The median value of 59 indicates 59% cumulative growth over the 2004 to 2013 period. This is equivalent to a 4.7% annual growth rate. The maximum value of 408 implies 408% cumulative growth over the 10-year period or a 17.6% annual rate. The average cumulative growth rate from 2004 to 2013 was 67% while the minimum rate was 0%. Looking at individual counties, there is no particular geographic pattern in county growth rates. Cases of both weak and rapid growth in budgeted school district spending are found in each part of the state. Appendix H provides the county-by-county growth rates and growth rankings. Table IV.9. Change in Budgeted School District Spending Within Counties, , percent Descriptive Change (percent) Change (percent) Statistic Cumulative Annual Maximum Minimum Median Mean Source: Nebraska Auditor of Public Accounts Figure IV.16. Change in Budgeted School Districts Spending, , percent Source: Data from Nebraska Auditor of Public Accounts 37

38 Platte Institute Policy Study Table IV.10 and Figure IV.17 show the growth in budget spending by Nebraska county governments over the 2004 to 2013 period. The median value of 85 indicates 85% growth. The average growth rate was 96%. The growth rate of budgeted county government spending also was uneven throughout the state, with rapidly growing counties often adjacent to counties with a lower growth rate. However, some tendencies are evident in Figure IV.17. Growth tends to be moderate in urban counties. Douglas and Sarpy Counties were both lightly colored suggesting moderate growth. Moderate growth is also indicated in other relatively populous counties such as Buffalo, Hall, Sarpy, Dodge, and Platte. These results Table IV.10. Change in Budgeted County Spending, , percent Descriptive Change (percent) Change (percent) Statistic Cumulative Annual Maximum Minimum Median Mean Source: Nebraska Auditor of Public Accounts make sense in light of the strong growth in agricultural land values discussed earlier. Rural counties would earn a large share of their property tax base from agricultural land and would benefit from stronger growth in agricultural land values. At the same time, property tax is the primary revenue source for county governments, whereas cities have sales tax revenue and many school districts receive state aid. County-by-county growth rates are in Appendix I. Figure IV.17. Change in Budgeted County Spending, , percent Source: Data from Nebraska Auditor of Public Accounts Table IV.11 and Figure IV.18 show the growth in budgeted city spending for the cities located in each county. Rates of growth work the same as in previous figures. The median value of 37 represents 37% growth cumulatively from 2004 through 2013, and average annual growth of 3.2 percent. The average growth rate for cities within counties was 52%. There is less of an urban versus rural pattern for growth in cities. Urban counties such as Douglas and Sarpy in- 38

39 Property Taxes in Nebraska: Past, Present, and Future dicate average rates of growth. More generally, growth was generally moderate in Eastern Nebraska while more extreme changes were evident in the lightly populated West. Kimball, Garden and Loup counties were among the fastest growing counties in terms of growth in budgeted city spending. Yet, a decline in budgeted spending was observed in other Western counties such as Deuel, Arthur, Grant, Blaine, Rock and Garfield. Appendix J provides the county-by-county growth rates and growth rankings. Table IV.11. Change in Budgeted City Spending Within Counties, , percent Descriptive Change (percent) Change (percent) Statistic Cumulative Annual Maximum Minimum Median Mean Figure IV.18. Change in Budgeted City Spending, , percent The overall finding is that budgeting spending growth appeared to follow growth in the tax base in Nebraska Counties. The strongest budgeted spending growth was observed in county governments over the 2004 to 2013 period. The median growth in spending was 85% in Nebraska among county governments. This result makes sense since county governments are most reliant on property values, and in many cases, specifically agricultural land values. County budgets would have benefited from rapid growth in agricultural property values. School districts within counties would benefit from growth in property tax base and also from growth in state aid. State aid grew solidly in Nebraska but perhaps not as rapidly as the property tax base. The state aid component also would tend to moderate growth among counties since state aid for schools would be stagnant or fall in counties with rapid growth in the property tax base, but grow more quickly in counties with anemic growth in the property tax base. The median growth in budgeted spending among school districts in Nebraska counties was 59%. The median growth rate in budget spending was lowest for cities. The median growth rate between 2004 and 2013 was 37%. Cities would have faced weaker growth in sales tax revenue over the last decade and would be more exposed to residential property. Residential property values grew more slowly than agricultural property values over the last decade. 39

40 Platte Institute Policy Study PROPERTY TAXES AND STATE AID FOR SCHOOLS The property tax is a primary funding source for local public schools along with state aid which is the second most important funding source. When considering how school district reliance on property taxes may have changed over the past decade it is important to also consider how state aid to schools may have changed. The interaction between property tax revenue per pupil and state aid is a major factor to consider. As property values rise in a school district, per pupil value rises which then reduces equalization aid provided via the school aid formula. Figure IV.18 presents a history of revenue received by Nebraska school districts over the period Revenue sources include local property taxes, state aid, federal receipts and other receipts. Property tax revenues for schools have risen from $1 billion to $1.5 billion over this time period a 50 percent increase over the decade. At the same time the general price level in the economy rose, but there was a real increase in property taxes (over and above inflation) of approximately 25 percent during the decade. State aid rose from $640 million to $852 million a 33 percent increase over the decade. Federal receipts have fluctuated substantially in recent years with the recession, financial crisis, and recovery. Those receipts fall sharply in with the recession and then rose substantially in and with the stimulus provided by ARRA. Figures IV.20 and IV.21 illustrate the composition of school revenue sources for and , respectively. Local property taxes are the largest source of revenue, accounting for 47 percent of total revenue in The second largest source of revenue is state aid, which accounted for 28 percent of total revenue in Federal and other receipts accounted for 8 and 18 percent, respectively. Despite the dramatic changes that occurred in federal funding over the period 2008 through 2011, the revenue picture in illustrated in Figure IV.21 is remarkably similar to that in Local property taxes accounted for 49 percent of total revenue in , an increase of two percent compared to State aid accounted for 26 percent of total revenue in , a reduction of two percent compared to Federal aid in was one percent higher than it was in

41 Property Taxes in Nebraska: Past, Present, and Future Figure IV.19. School Funding Sources, Source: Nebraska Department of Education, Annual Financial Reports, through Figure IV.20. Sources of School Revenue, Figure IV. 21. Sources of School Revenue, Source: Nebraska Department of Education, Annual Financial Report Source: Nebraska Department of Education, Annual Financial Report

42 Platte Institute Policy Study While it fell slightly as a share of school revenue, state aid to schools rose steadily through the decade. This overall increase, however, masked significant differences within the state. Specifically, there were large increases in state equalization aid in many of the metropolitan school districts of the state while many rural school districts fell off of state equalization aid. This pattern was especially pronounced beginning with the fiscal year. This period included the correction in housing prices and rapid growth in farmland prices. Table IV.12 shows the percentage increase in state equalization aid over the 2008 to 2013, along with the increase in aid to the metropolitan school districts of the state. Note that the Learning Community of Douglas and Sarpy Counties was not yet in existence during the fiscal year so relevant individual school districts were added together for that year. Grand Island also was not yet considered to be the central city of a metropolitan area in Total state equalization aid rose by 8.9% during this period. Aid rose substantially faster in each of the four principal metropolitan schools districts. Most rose between 31% and 34% and one grew by 63%. Table IV.12. Growth in State Equalization Aid, Overall and In Selected School Districts, Geography Equalization Aid Equalization Aid Cumulative Growth Rate Nebraska $694.9 $ % Learning Community $262.5 $ % Lincoln Public Schools $46.2 $ % Grand Island Public Schools $33.5 $ % South Sioux City Community Schools $19.0 $ % Source: Nebraska Department of Education, State Aid Calculated, annual reports , At the same time that equalization aid was rising for metropolitan school districts, equalization aid was falling for most rural school districts. Table IV.13 below provides a list of 60 school districts that lost all equalization aid between the fiscal year and the fiscal year. The table also lists 30 other school districts which lost more than half of their state equalization aid during the period. How large are the lists in Table IV.13? Among districts that did receive equalization aid in , 29.7% no longer received aid in while another 14.9% lost at least 50% of their aid. The affected districts were by and large rural districts. 42

43 Property Taxes in Nebraska: Past, Present, and Future Table IV.13. School Districts Which Lost All or Half of State Equalization Aid Between 2008 and 2013 School Districts Which Lost All Equalization Aid Between the and Fiscal Years SELMO-MERNA PUBLIC SCHOOLS ARNOLD PUBLIC SCHOOLS AURORA PUBLIC SCHOOLS AXTELL COMMUNITY SCHOOLS BANNER COUNTY PUBLIC SCHOOLS BATTLE CREEK PUBLIC SCHOOLS BLOOMFIELD COMMUNITY SCHOOLS CHASE COUNTY SCHOOLS CLARKSON PUBLIC SCHOOLS CONESTOGA PUBLIC SCHOOLS CRAWFORD PUBLIC SCHOOLS CREEK VALLEY SCHOOLS DESHLER PUBLIC SCHOOLS DILLER-ODELL PUBLIC SCHOOLS DONIPHAN-TRUMBULL PUBLIC SCHS DORCHESTER PUBLIC SCHOOLS DUNDY COUNTY PUBLIC SCHOOLS EUSTIS-FARNAM PUBLIC SCHOOLS FILLMORE CENTRAL PUBLIC SCHS FRIEND PUBLIC SCHOOLS GREELEY-WOLBACH PUBLIC SCHOOLS HAYES CENTER PUBLIC SCHOOLS HEMINGFORD PUBLIC SCHOOLS HITCHCOCK CO UNIFIED SCH SYSTM HUMBOLDT TABLE ROCK STEINAUER JOHNSON-BROCK PUBLIC SCHOOLS KENESAW PUBLIC SCHOOLS KIMBALL PUBLIC SCHOOLS LAUREL-CONCORD PUBLIC SCHOOLS LEWISTON CONSOLIDATED SCHOOLS LEYTON PUBLIC SCHOOLS LOGAN VIEW PUBLIC SCHOOLS LOUP CITY PUBLIC SCHOOLS LYONS-DECATUR NORTHEAST SCHS MAYWOOD PUBLIC SCHOOLS MINDEN PUBLIC SCHOOLS MULLEN PUBLIC SCHOOLS NEBRASKA UNIFIED DISTRICT 1 O NEILL PUBLIC SCHOOLS OSCEOLA PUBLIC SCHOOLS PAXTON CONSOLIDATED SCHOOLS PENDER PUBLIC SCHOOLS PERKINS COUNTY SCHOOLS PLAINVIEW PUBLIC SCHOOLS RANDOLPH PUBLIC SCHOOLS RAVENNA PUBLIC SCHOOLS SCRIBNER-SNYDER COMMUNITY SCHS SHELBY PUBLIC SCHOOLS SO CENTRAL NE UNIFIED SYSTEM 5 SOUTHWEST PUBLIC SCHOOLS SUTTON PUBLIC SCHOOLS TEKAMAH-HERMAN COMMUNITY SCHS THAYER CENTRAL COMMUNITY SCHS THEDFORD PUBLIC SCHOOLS TWIN RIVER PUBLIC SCHOOLS VALENTINE COMMUNITY SCHOOLS WALLACE PUBLIC SCH DIST 65 R WAUNETA-PALISADE PUBLIC SCHS WILCOX-HILDRETH PUBLIC SCHOOLS WISNER-PILGER PUBLIC SCHOOLS School Districts Which Lost At least 50% of Equalization Aid Between the and Fiscal Years AINSWORTH COMMUNITY SCHOOLS AMHERST PUBLIC SCHOOLS ANSLEY PUBLIC SCHOOLS ARAPAHOE PUBLIC SCHOOLS BLAIR COMMUNITY SCHOOLS BRIDGEPORT PUBLIC SCHOOLS CALLAWAY PUBLIC SCHOOLS CEDAR BLUFFS PUBLIC SCHOOLS CHAMBERS PUBLIC SCHOOLS CROFTON COMMUNITY SCHOOLS EMERSON-HUBBARD PUBLIC SCHOOLS FULLERTON PUBLIC SCHOOLS GORDON-RUSHVILLE PUBLIC SCHS HERSHEY PUBLIC SCHOOLS LOUP COUNTY PUBLIC SCHOOLS MADISON PUBLIC SCHOOLS MAXWELL PUBLIC SCHOOLS NORTH LOUP SCOTIA PUBLIC SCHS OGALLALA PUBLIC SCHOOLS ORD PUBLIC SCHOOLS POTTER-DIX PUBLIC SCHOOLS RED CLOUD COMMUNITY SCHOOLS SEWARD PUBLIC SCHOOLS SOUTHERN VALLEY SCHOOLS STAPLETON PUBLIC SCHOOLS SUMNER-EDDYVILLE-MILLER SCHS SYRACUSE-DUNBAR-AVOCA SCHOOLS WEST BOYD UNIFIED SYSTEM WINSIDE PUBLIC SCHOOLS WOOD RIVER RURAL SCHOOLS 43

44 Platte Institute Policy Study V. Policy Considerations and Recommendations The Nebraska property tax system currently does some things very well. First, assessments are based on market values in general (with the exception of special valuation for agricultural properties in some locations). Adhering to a market value standard is exemplary because that is the ideal tax base in order to have the most efficient (i.e. least distortionary), fair and equitable tax system. While many other states deviate from the market value standard, Nebraska upholds the best standard possible. Second, in using a classified tax system in a limited way, most properties are subject to the same tax regime. The single deviation from a uniform tax is the agricultural class assessment ratio of.75 which differs from the ratio of 1.00 used in all other classes of property. While the desire to provide a lower rate of taxation for that class of property is understandable, any further deviation from uniform taxation should be resisted. A reduction in the agricultural assessment ratio to some value less than 0.75 would be an arbitrary policy change with the consequence of shifting the tax burden to other classes of property. Third, the Nebraska property tax system with its three forms of property tax limitation provides an admirable mechanism for local government autonomy combined with potential tax limitation if desired by local citizens. The mechanisms are there if local citizens decide to use them. Our analysis of the policy offset resulting from increased property values indicates that local government units react only partially to property value increases. Overall, a ten percent increase in taxable property value over the period has resulted in an 8.4 percent increase in the amount of property tax revenue generated by local governments. That result indicates tax rates were only reduced to offset about one-sixth, about 16 percent, of the increase that would occur in the absence of any rate action by local government units. One can question whether that result indicates local citizens are satisfied with the outcome, being willing to pay higher property taxes for local public services, or whether local citizens are unaware of the situation. Given the three existing mechanisms to limit local property taxes, it would appear that citizens have the tools necessary to limit increases, if desired. As a consequence, the focus for property tax relief should be placed on targeted mechanisms that assist the neediest citizens. Proposals for reduced reliance on the property tax Consider the policy options for reduction or elimination of the property tax. Fisher (2010) has outlined a number of alternative policies and their implications or results, as indicated in Table V.1. Among the seven policy options listed in the table, the first two options involve no revenue replacement at the local (option 1) or state (option 2) levels, but would require fiscal constraint. Option 3 is a local government revenue replacement strategy under which a reduction in local property tax is accompanied by an increase in an alternative tax source, most likely income or sales tax. 44

45 Property Taxes in Nebraska: Past, Present, and Future Table V.1. Policy Options for Reduced Reliance on the Local Property Tax Policy Option 1. No revenue replacement with no change in local government responsibility 2. No revenue replacement with increased state aid to local governments or an increase in state service responsibility 3. Increase in alternative local government revenue sources with no change in state aid or local government responsibility 4. Substitution of a state property tax for local property taxes with increased state aid to local government 5. Substitution of a state property tax for local property taxes with an increase in state service responsibility 6. Increase in alternative state revenue sources with increased state aid to local government 7. Increase in alternative state revenue sources with an increase in state service responsibility Implications or Results Fiscal constraint on local government; reduced local government services Fiscal constraint on state government; reduction in other state services Increased local sales or income tax or local fees; no change in local government autonomy Used as part of education finance reform, as in Michigan Example, using a state property tax to fund state-operated schools Common recent option, usually involving an increase in state sales tax Common recent option, usually involving increased state responsibility for education Options 4 and 5 substitute a state property tax for local property taxes, which does not really accomplish a reduction in reliance on the property tax mechanism. Rather, a state property tax takes the place of at least a portion of the local property tax with the net effect not necessarily reducing the combined (state and local) property tax rate. Both options involve an increased role for the state in providing local government services. Options 6 and 7 increase alternative state revenue sources (income or sales taxes) and require the state to take increased roles in providing local government services, neither of which are desired goals.. If none of the policy options outlined above are attractive solutions, either based on current economic or political realities in Nebraska, an eighth option can be considered. Consider a variant of Option 1 for Nebraska. The primary focus of the option is on local government autonomy, with no revenue replacement and no change in local government responsibility. Rather, this variant would target property tax relief for those taxpayers most over-burdened by the tax. This could be accomplished with the implementation of an income-based property tax relief program funded using current state resources that are directed at property tax relief (Homestead exemption and general property tax relief), as described below. Relief mechanisms Various property tax relief mechanisms are used by the states. One set of options are so-called tax and expenditure limitations (TEL s). Prominent examples of tax limitations include California s Proposition 13 and Massachusetts Proposition 2.5, which limit the rate of taxation and rate of increase in property tax base. Expenditure limitations include devices such as Colorado s Taxpayer s Bill of Rights (TABOR) that attempts to restrain the growth in government. As indicated in Section II, Nebraska already has three forms of property tax rate and local government expenditure growth limitations. 45

46 Platte Institute Policy Study A second set of property tax options are also commonly used by states. Among the most common programs are: Classified tax system: Nebraska does this with its classification, taxing agricultural property differently from other classes of property (r =.75) Use-value assessment of agricultural land in urban areas: Nebraska does this with its special valuation regulations (Nebraska Administrative Code, Title 350, Chapter 11) Homestead exemptions: Nebraska does this with its homestead exemption program for elderly homeowners Circuit breakers: Nebraska does not do this For a comprehensive overview of residential relief mechanisms, in particular, see Bowman (2009). For a consideration of assessment limits to reduce residential property taxes see Sexton (2009). For a view of the impacts of TEL s on local public finances see Yuan et al (2009). A specific proposal for Nebraska While the property tax is a local tax, and concern for the property tax burden should be focused primarily on the local units of government that rely on this tax, the State of Nebraska currently provides two forms of property tax relief. The State currently allocates $66 million to property tax relief through the Homestead Exemption program and another $140 million in general property tax relief. The Homestead Exemption program targets relief to the elderly, disabled, and veterans with relatively low income. The general property tax relief provided by the state is not targeted in any way. An alternative is to combine these two sources of state property tax relief into a single larger and more clearly targeted form of property tax relief. The state could design an income-based form of property tax relief that applies not only to the elderly, disabled, and veterans but more broadly applies to any property owner whose property tax bill is high relative to income. This form of targeted tax relief is known in the tax policy world as a circuit breaker. Using the electrical circuit analogy, when the taxpayer is overburdened the circuit breaker trips and provides relief. In its simplest form, a circuit breaker provides relief when the ratio of property tax liability is high relative to a broad measure of income. For those taxpayers with sufficiently high ratios, the circuit breaker provides relief for all or a portion of the tax bill, depending on how the mechanism is designed. Bowman et al (2009) and Anderson (2014) explain variants of the circuit-breaker mechanism and suggest ways to implement this form of tax relief. One attractive means of delivering circuit-breaker tax relief is by way of the state income tax. The circuit-breaker relief can be delivered as a refundable credit on the state income tax return, thereby providing a natural audit mechanism and giving property tax relief even if the taxpayer has no income tax liability. Because the circuit breaker is means-tested, it provides relief in a progressive manner. That is, the tax relief is greater for low-income families and declines as income rises. When combined with the income tax, the circuit breaker adds progressivity to the income tax system. If desired, the addition of a circuit breaker on the income tax could be accompanied by a flattening of the nominal income tax rate structure, leaving the overall incidence of the income tax unchanged while improving the efficiency of the income tax. 46

47 Property Taxes in Nebraska: Past, Present, and Future A potential experiment in property tax reform If Nebraskans want to experiment with an alternative form of property taxation that holds the prospect of being less distortionary while providing a stable local government funding source, it may be worthwhile considering a graded property tax (also called a split-rate tax). A graded property tax places a higher tax rate on land value and a lower tax rate on improvements and personal property value (e.g. buildings, machinery, equipment, etc). In so doing, a graded tax takes advantage of the fact that a tax on land is highly efficient, creating no distortions, while a tax on improvements and personal property is distortionary. By taxing land at a higher rate and improvements at a lower rate, the overall efficiency of the property tax system can be improved, enabling the generation of a given amount of revenue at a lower economic cost (i.e. reduced deadweight loss). The ultimate form of graded taxation is the land value tax (LVT) which taxes improvements at a zero rate and only taxes land. See Dye and England (2009) for a comprehensive review of LVT, its implementation and effects. A pure tax on land, with assessed value independent of current use, is neutral. That is, it does not affect land use in any way. Because of that neutrality, there is no impact on the timing of development, as explained in Oates and Schwab (2009). A lower tax rate on improvements, however, can be expected to increase improvements relative to land and thereby increase the capital/land ratio causing higher density of development. Additionally, there may be a reduction in urban sprawl with the implementation of LVT. The switch from a property tax applied to both land and structures at equal rates to a two-rate tax with higher land tax rate, when taxation is based on current use, involves a complex set of interaction effects, as described in Brueckner (1986), and Anderson (1999). For simplicity, consider a revenue-neutral transition to a higher land tax rate and lower structures tax rate. The key factor is the sensitivity of the supply of improvements (capital) to changes in the tax rate on improvements. In the normal case, a revenue-neutral trade of higher land tax for lower improvements tax results in greater development, i.e. increased density. The effect on land values depends on whether the transition in tax regime takes place in a single jurisdiction or area within a larger metro area, or takes place in all jurisdictions. In the single jurisdiction case, most relevant to a situation where LVT or a graded tax will apply in specific isolated geographic areas, the reduction in the improvements tax results in increased improvements relative to other areas, and therefore higher land values. The explanation for this result is that the effect of having a more efficient tax system (reducing the excess burden of taxation) more than compensates for the higher rate of taxation on land resulting in higher land values. This result may be somewhat surprising, that an increase in the rate of taxation on land and a reduction in the rate on improvements in a community can increase land values, but it illustrates the potentially powerful effect of reducing the distortions in the property tax system. This form of property taxation has been used over many years in several cities of Pennsylvania, most notably in Pittsburgh. See Oates and Schwab (1997) and Plassman and Tideman (2000) for evidence on the beneficial effects in Pittsburgh. The State of Connecticut recently passed legislation to permit up to three communities in the state to implement pilot programs with graded tax systems or LVTs (Public Act ). Nebraska could consider similar experimentation by permitting pilot LVT or graded tax projects in communities that wish to engage in property tax reform. 47

48 Platte Institute Policy Study Other options to consider 1. The property tax is particularly distortive as it is applied to mobile capital. Hence, reductions in application of the property tax to business personal property (e.g. machinery and equipment) would help to make the tax more efficient. This could be accomplished with differential tax rates applied to real and personal property, or through selected exemptions of personal property. Personal property accounts for 6.9% of total property value in Of that amount, commercial personal property is the largest category (43.4%) and agricultural personal property is the second largest category (34.1%). Public Service Commission personal property accounts for 17.3% of total personal property. Railroad personal property makes up the remainder at 5.2%. While personal property is not a large share of total property value its taxation is particularly distortive, so reductions in personal property taxes could have substantial efficiency effects. The Nebraska constitution already allows for differential tax treatment of real and personal property. 2. In some communities there is a large amount of property value that is off the tax role because it is owned by governments, non-profit entities, universities, and other organizations. In such communities one alternate form of voluntary financial support for the public services provided to these property owners is provided by way of payments in lieu of taxes (PILOTS). If PILOT revenue were forthcoming from such property owners, the need for property tax revenue would be reduced to some extent. This is not likely to have a large effect in the typical Nebraska community, but it could be substantial in large urban areas with significant amounts of exempt property. Kenyon and Langley (2010) provide an overview of PILOTS with policy suggestions for their implementation. 48

49 Property Taxes in Nebraska: Past, Present, and Future References Anderson, John E Income-Based Property Tax Relief: Circuit-Breaker Tax Expenditure Estimation. Public Finance Management 14(2). Anderson, John E. and Richard W. England Use-Value Assessment of Rural Land in the United States. Cambridge, MA: Lincoln Institute of Land Policy. Anderson, John E Agricultural Use-Value Property Tax Assessment: Estimation and Policy Issues. Public Budgeting & Finance 32(4): Anderson, John E. and Marlon Griffing. 2000a. Use-Value Assessment Tax Expenditures in Urban Areas. Journal of Urban Economics. 48(3): Anderson, John E. and Marlon Griffing. 2000b. Measuring Use-Value Assessment Tax Expenditures. Assessment Journal, January-February 2000, pp Anderson, John E Two-Rate Property Tax Effects on Land Development. Journal of Real Estate Finance and Economics.18(2): Anderson, John E Reducing Reliance on the Property Tax in Education Finance, Chapter 5 of Fiscal Equalization for State and Local Government Finance, edited by John E. Anderson, Praeger Publishers, Westport, Connecticut, 1994, pp Augustine, Nancy Y., Michael E. Bell, David Brunori, and Joan A. Youngman Erosion of the Property Tax Base: Trends, Causes, and Consequences. Cambridge, MA: Lincoln Institute of Land Policy. Bell, Michael E., David Brunori, and Joan Youngman The Property Tax and Local Autonomy. Cambridge, MA: Lincoln Institute of Land Policy. Bowman, John H Residential Property Tax Relief Measures: A Review and Assessment. In Nancy Y. Augustine, Michael E. Bell, David Brunori, and Joan A. Youngman, editors, Erosion of the Property Tax Base: Trends, Causes, and Consequences. Cambridge, MA: Lincoln Institute of Land Policy. Bowman, John H., Daphne A. Kenyon, Adam Langeley, and Bethany Paquiun Property Tax Circuit Breakers: Fair and Cost-Effective Relief for Taxpayers. Cambridge, MA: Lincoln Institute of Land Policy. Circuit%20Breakers%20Final.pdf Brueckner, Jan A Modern Analysis of the Effects of Site Value Taxation. National Tax Journal. 39(1): Dye, Richard F. and Richard W. England Land Value Taxation: Theory, Evidence, and Practice. Cambridge, MA: Lincoln Institute of Land Policy. Fisher, Ronald C An Overview of the Implications of Eliminating the Property Tax. In Michael E. Bell, David Brunori, and Joan Youngman, editors, The Property Tax and Local Autonomy. Cambridge, MA: Lincoln Institute of Land Policy. Fisher, Ronald C What Policy Makers Should Know about Property Taxes. Land Lines 21 (January):

50 Platte Institute Policy Study Kenyon, Daphne A The Property Tax School Funding Dilemma. Cambridge, MA: Lincoln Institute of Land Policy. Kenyon, Daphne A. and Adam H. Langley Payments in Lieu of Taxes: Balancing Municipal and Nonprofit Interests. Cambridge, MA: Lincoln Institute of Land Policy. Lincoln Institute of Land Policy. Significant Features of the Property Tax. Nebraska Legislature, Chronology of Changes in Property Tax Policy Since Nebraska Legislature, Property Taxes by Sector Nebraska Department of Revenue, Property Assessment Division, Annual Tax Change and History: Change_History.html Nebraska Legislature, Major Tax Policy Trends The Shift from Property Tax Support to Sales and Income Tax Support of State and Local Government: app_rev/source/proptax_trendsshift.htm Oates Wallace E. and Robert M. Schwab The Simple Analytics of Land Value Taxation. in Richard Dye and Richard England, editors, Land Value Taxation: Theory, Evidence, and Practice. Cambridge, MA: Lincoln Institute of Land Policy. Oates, Wallace E. and Robert M. Schwab What Should Local Government Tax: Income or Property? In City Taxes, City Spending, edited by Amy Schwartz, Northampton, MA: Edward Elgar. Oates, Wallace E. and Robert M. Schwab The Impact of Urban Land Taxation: The Pittsburg Experience. National Tax Journal 50(1):1-21. Plassman, Florenz, and T. Nicolaus Tideman A markov chain monte carlo analysis of the effect of two-rate property tax rates on construction. Journal of Urban Economics 47(2): Sexton, Terri A Assessment Limits as a Means of Limiting Homeowner Property Taxes. In Nancy Y. Augustine, Michael E. Bell, David Brunori, and Joan A. Youngman, editors, Erosion of the Property Tax Base: Trends, Causes, and Consequences. Cambridge, MA: Lincoln Institute of Land Policy. University of Nebraska-Lincoln, Department of Agricultural Economics Average Reported Value of Nebraska Farmland by Type of Land. 13f6db5cd16d&groupId= &.pdf U.S. Census Bureau Annual Surveys of State and Local Government Finances. Table 1. State and Local Government Finances by Level of Government and by State:

51 Property Taxes in Nebraska: Past, Present, and Future Yuan, Bing, Joseph Cordes, and David Brunori Tax and Expenditure Limitations and Local Public Finances. In Nancy Y. Augustine, Michael E. Bell, David Brunori, and Joan A. Youngman, editors, Erosion of the Property Tax Base: Trends, Causes, and Consequences. Cambridge, MA: Lincoln Institute of Land Policy. 51

52 Platte Institute Policy Study Appendix A: Average Tax Rates by County, 2013 Source: Nebraska Dept. of Revenue, Property Assessment Division Maximum 2.28% Minimum 1.04% Median 1.58% Mean 1.60% RANK HI-LO CO# COUNTY STATE TAX YEAR ATR 26 1 ADAMS NEBRASKA % 82 2 ANTELOPE NEBRASKA % 68 3 ARTHUR NEBRASKA % 42 4 BANNER NEBRASKA % 83 5 BLAINE NEBRASKA % 89 6 BOONE NEBRASKA % 27 7 BOX BUTTE NEBRASKA % 53 8 BOYD NEBRASKA % 31 9 BROWN NEBRASKA % 4 10 BUFFALO NEBRASKA % BURT NEBRASKA % BUTLER NEBRASKA % 7 13 CASS NEBRASKA % CEDAR NEBRASKA % CHASE NEBRASKA % CHERRY NEBRASKA % 5 17 CHEYENNE NEBRASKA % CLAY NEBRASKA % COLFAX NEBRASKA % CUMING NEBRASKA % CUSTER NEBRASKA % 9 22 DAKOTA NEBRASKA % DAWES NEBRASKA % DAWSON NEBRASKA % DEUEL NEBRASKA % DIXON NEBRASKA % DODGE NEBRASKA % 1 28 DOUGLAS NEBRASKA % DUNDY NEBRASKA % FILLMORE NEBRASKA % FRANKLIN NEBRASKA % FRONTIER NEBRASKA % FURNAS NEBRASKA % GAGE NEBRASKA % 52

53 Property Taxes in Nebraska: Past, Present, and Future RANK HI-LO CO# COUNTY STATE TAX YEAR ATR GARDEN NEBRASKA % GARFIELD NEBRASKA % GOSPER NEBRASKA % GRANT NEBRASKA % GREELEY NEBRASKA % 3 40 HALL NEBRASKA % HAMILTON NEBRASKA % HARLAN NEBRASKA % HAYES NEBRASKA % HITCHCOCK NEBRASKA % HOLT NEBRASKA % HOOKER NEBRASKA % HOWARD NEBRASKA % JEFFERSON NEBRASKA % JOHNSON NEBRASKA % KEARNEY NEBRASKA % KEITH NEBRASKA % KEYA PAHA NEBRASKA % KIMBALL NEBRASKA % KNOX NEBRASKA % 6 55 LANCASTER NEBRASKA % LINCOLN NEBRASKA % LOGAN NEBRASKA % LOUP NEBRASKA % MADISON NEBRASKA % MCPHERSON NEBRASKA % MERRICK NEBRASKA % MORRILL NEBRASKA % NANCE NEBRASKA % NEMAHA NEBRASKA % NUCKOLLS NEBRASKA % OTOE NEBRASKA % PAWNEE NEBRASKA % PERKINS NEBRASKA % PHELPS NEBRASKA % PIERCE NEBRASKA % 53

54 Platte Institute Policy Study RANK HI-LO CO# COUNTY STATE TAX YEAR ATR PLATTE NEBRASKA % POLK NEBRASKA % RED WILLOW NEBRASKA % RICHARDSON NEBRASKA % ROCK NEBRASKA % SALINE NEBRASKA % 2 77 SARPY NEBRASKA % SAUNDERS NEBRASKA % 8 79 SCOTTS BLUFF NEBRASKA % SEWARD NEBRASKA % SHERIDAN NEBRASKA % SHERMAN NEBRASKA % SIOUX NEBRASKA % STANTON NEBRASKA % THAYER NEBRASKA % THOMAS NEBRASKA % THURSTON NEBRASKA % VALLEY NEBRASKA % WASHINGTON NEBRASKA % WAYNE NEBRASKA % WEBSTER NEBRASKA % WHEELER NEBRASKA % YORK NEBRASKA % 54

55 Property Taxes in Nebraska: Past, Present, and Future Appendix B: Ten Year Average ATRs by County, Source: Nebraska Dept. of Revenue, Property Assessment Division RANK HI-LO CO# COUNTY STATE 10-YEAR AVG. 9 1 ADAMS NEBRASKA 1.95% 82 2 ANTELOPE NEBRASKA 1.56% 87 3 ARTHUR NEBRASKA 1.49% 76 4 BANNER NEBRASKA 1.60% 90 5 BLAINE NEBRASKA 1.39% 80 6 BOONE NEBRASKA 1.58% 33 7 BOX BUTTE NEBRASKA 1.80% 60 8 BOYD NEBRASKA 1.68% 27 9 BROWN NEBRASKA 1.83% 8 10 BUFFALO NEBRASKA 1.96% BURT NEBRASKA 1.81% BUTLER NEBRASKA 1.67% 5 13 CASS NEBRASKA 1.99% CEDAR NEBRASKA 1.55% CHASE NEBRASKA 1.66% CHERRY NEBRASKA 1.56% 7 17 CHEYENNE NEBRASKA 1.97% CLAY NEBRASKA 1.72% COLFAX NEBRASKA 1.77% CUMING NEBRASKA 1.65% CUSTER NEBRASKA 1.70% 3 22 DAKOTA NEBRASKA 2.06% DAWES NEBRASKA 1.77% DAWSON NEBRASKA 1.89% DEUEL NEBRASKA 1.88% DIXON NEBRASKA 1.92% DODGE NEBRASKA 1.77% 1 28 DOUGLAS NEBRASKA 2.20% DUNDY NEBRASKA 1.55% FILLMORE NEBRASKA 1.61% FRANKLIN NEBRASKA 1.79% FRONTIER NEBRASKA 1.76% FURNAS NEBRASKA 1.86% Maximum 2.20% Minimum 1.19% Median 1.75% Mean 1.74% 55

56 Platte Institute Policy Study RANK HI-LO CO# COUNTY STATE 10-YEAR AVG GAGE NEBRASKA 1.87% GARDEN NEBRASKA 1.62% GARFIELD NEBRASKA 1.70% GOSPER NEBRASKA 1.81% GRANT NEBRASKA 1.44% GREELEY NEBRASKA 1.67% 4 40 HALL NEBRASKA 2.01% HAMILTON NEBRASKA 1.60% HARLAN NEBRASKA 1.73% HAYES NEBRASKA 1.66% HITCHCOCK NEBRASKA 1.80% HOLT NEBRASKA 1.63% HOOKER NEBRASKA 1.52% HOWARD NEBRASKA 1.73% JEFFERSON NEBRASKA 1.75% JOHNSON NEBRASKA 1.86% KEARNEY NEBRASKA 1.78% KEITH NEBRASKA 1.74% KEYA PAHA NEBRASKA 1.36% KIMBALL NEBRASKA 1.81% KNOX NEBRASKA 1.75% 6 55 LANCASTER NEBRASKA 1.99% LINCOLN NEBRASKA 1.87% LOGAN NEBRASKA 1.60% LOUP NEBRASKA 1.54% MADISON NEBRASKA 1.90% MCPHERSON NEBRASKA 1.45% MERRICK NEBRASKA 1.77% MORRILL NEBRASKA 1.81% NANCE NEBRASKA 1.76% NEMAHA NEBRASKA 1.78% NUCKOLLS NEBRASKA 1.73% OTOE NEBRASKA 1.87% PAWNEE NEBRASKA 1.63% PERKINS NEBRASKA 1.68% PHELPS NEBRASKA 1.77% 56

57 Property Taxes in Nebraska: Past, Present, and Future RANK HI-LO CO# COUNTY STATE 10-YEAR AVG PIERCE NEBRASKA 1.67% PLATTE NEBRASKA 1.60% POLK NEBRASKA 1.62% RED WILLOW NEBRASKA 1.89% RICHARDSON NEBRASKA 1.83% ROCK NEBRASKA 1.62% SALINE NEBRASKA 1.90% 2 77 SARPY NEBRASKA 2.19% SAUNDERS NEBRASKA 1.86% SCOTTS BLUFF NEBRASKA 1.94% SEWARD NEBRASKA 1.72% SHERIDAN NEBRASKA 1.72% SHERMAN NEBRASKA 1.73% SIOUX NEBRASKA 1.19% STANTON NEBRASKA 1.80% THAYER NEBRASKA 1.60% THOMAS NEBRASKA 1.61% THURSTON NEBRASKA 1.88% VALLEY NEBRASKA 1.89% WASHINGTON NEBRASKA 1.85% WAYNE NEBRASKA 1.80% WEBSTER NEBRASKA 1.85% WHEELER NEBRASKA 1.34% YORK NEBRASKA 1.65% 57

58 Platte Institute Policy Study Appendix C: Change in Agricultural Land Value, , percent Source: Nebraska Dept. of Revenue, Property Assessment Division Maximum % Minimum 50.70% Median % Mean % RANK AGLAND AGLAND PERCENT HI-LO CO# COUNTY STATE REAL REAL CHANGE 22 1 ADAMS NEBRASKA 348,712, ,388, % 18 2 ANTELOPE NEBRASKA 413,961,310 1,199,941, % 83 3 ARTHUR NEBRASKA 62,526, ,118, % 82 4 BANNER NEBRASKA 79,051, ,428, % 80 5 BLAINE NEBRASKA 69,917, ,602, % 7 6 BOONE NEBRASKA 354,582,285 1,120,852, % 53 7 BOX BUTTE NEBRASKA 159,997, ,998, % 64 8 BOYD NEBRASKA 119,625, ,430, % 77 9 BROWN NEBRASKA 168,011, ,041, % BUFFALO NEBRASKA 411,337,000 1,051,527, % BURT NEBRASKA 360,582, ,534, % BUTLER NEBRASKA 455,374,195 1,206,057, % 8 13 CASS NEBRASKA 284,760, ,122, % 3 14 CEDAR NEBRASKA 429,113,890 1,403,290, % CHASE NEBRASKA 266,565, ,953, % CHERRY NEBRASKA 580,339, ,587, % CHEYENNE NEBRASKA 191,270, ,421, % CLAY NEBRASKA 354,611, ,496, % COLFAX NEBRASKA 292,842, ,551, % CUMING NEBRASKA 454,352,305 1,184,869, % CUSTER NEBRASKA 619,488,044 1,420,070, % 2 22 DAKOTA NEBRASKA 145,817, ,197, % DAWES NEBRASKA 119,187, ,717, % DAWSON NEBRASKA 484,522,059 1,011,158, % DEUEL NEBRASKA 74,855, ,354, % DIXON NEBRASKA 232,798, ,500, % DODGE NEBRASKA 430,252,615 1,137,161, % DOUGLAS NEBRASKA 77,899, ,090, % 58

59 Property Taxes in Nebraska: Past, Present, and Future RANK AGLAND AGLAND PERCENT HI-LO CO# COUNTY STATE REAL REAL CHANGE DUNDY NEBRASKA 197,666, ,767, % FILLMORE NEBRASKA 437,098,085 1,308,528, % FRANKLIN NEBRASKA 219,539, ,340, % FRONTIER NEBRASKA 177,000, ,642, % FURNAS NEBRASKA 176,330, ,898, % GAGE NEBRASKA 404,453,620 1,042,296, % GARDEN NEBRASKA 182,447, ,417, % GARFIELD NEBRASKA 77,920, ,807, % GOSPER NEBRASKA 147,966, ,506, % GRANT NEBRASKA 63,961, ,287, % GREELEY NEBRASKA 159,624, ,748, % HALL NEBRASKA 393,545, ,205, % HAMILTON NEBRASKA 468,838,610 1,378,956, % HARLAN NEBRASKA 171,980, ,670, % HAYES NEBRASKA 140,246, ,688, % HITCHCOCK NEBRASKA 134,252, ,075, % HOLT NEBRASKA 642,139,955 1,467,716, % HOOKER NEBRASKA 55,147, ,194, % HOWARD NEBRASKA 221,068, ,036, % JEFFERSON NEBRASKA 290,175, ,559, % JOHNSON NEBRASKA 172,962, ,414, % KEARNEY NEBRASKA 361,519, ,896, % KEITH NEBRASKA 169,129, ,629, % KEYA PAHA NEBRASKA 119,949, ,345, % KIMBALL NEBRASKA 107,315, ,290, % KNOX NEBRASKA 327,109,300 1,012,430, % LANCASTER NEBRASKA 388,150,784 1,149,661, % LINCOLN NEBRASKA 556,777,000 1,043,054, % LOGAN NEBRASKA 71,285, ,373, % LOUP NEBRASKA 78,160, ,292, % MADISON NEBRASKA 353,081,870 1,022,476, % MCPHERSON NEBRASKA 87,806, ,696, % MERRICK NEBRASKA 277,053, ,692, % MORRILL NEBRASKA 147,694, ,606, % NANCE NEBRASKA 205,496, ,842, % 59

60 Platte Institute Policy Study RANK AGLAND AGLAND PERCENT HI-LO CO# COUNTY STATE REAL REAL CHANGE NEMAHA NEBRASKA 226,812, ,215, % NUCKOLLS NEBRASKA 203,048, ,129, % OTOE NEBRASKA 341,584, ,454, % PAWNEE NEBRASKA 155,246, ,959, % PERKINS NEBRASKA 219,094, ,555, % PHELPS NEBRASKA 376,846, ,428, % PIERCE NEBRASKA 301,857, ,930, % PLATTE NEBRASKA 542,519,160 1,521,775, % POLK NEBRASKA 359,134, ,827, % RED WILLOW NEBRASKA 163,458, ,982, % RICHARDSON NEBRASKA 274,067, ,764, % ROCK NEBRASKA 155,092, ,817, % SALINE NEBRASKA 328,600, ,189, % 6 77 SARPY NEBRASKA 86,261, ,278, % 9 78 SAUNDERS NEBRASKA 448,864,450 1,403,780, % SCOTTS BLUFF NEBRASKA 171,480, ,465, % SEWARD NEBRASKA 413,485,797 1,077,341, % SHERIDAN NEBRASKA 292,153, ,278, % SHERMAN NEBRASKA 185,857, ,651, % SIOUX NEBRASKA 150,992, ,653, % STANTON NEBRASKA 240,640, ,356, % THAYER NEBRASKA 323,351, ,510, % THOMAS NEBRASKA 49,258,115 99,569, % 4 87 THURSTON NEBRASKA 159,469, ,510, % VALLEY NEBRASKA 170,231, ,825, % 1 89 WASHINGTON NEBRASKA 202,787, ,537, % 5 90 WAYNE NEBRASKA 262,142, ,565, % WEBSTER NEBRASKA 170,908, ,076, % WHEELER NEBRASKA 119,784, ,908, % YORK NEBRASKA 544,963,713 1,564,220, % 60

61 Property Taxes in Nebraska: Past, Present, and Future Appendix D: Change in Total Property Value, , percent Source: Nebraska Dept. of Revenue, Property Assessment Division Maximum % Minimum 35.53% Median 96.00% Mean 99.67% 2004 TOTAL 2013 TOTAL RANK PROPERTY PROPERTY PERCENT HI-LO CO# COUNTY STATE VALUE VALUE CHANGE 67 1 ADAMS NEBRASKA 1,584,923,550 2,802,359, % 4 2 ANTELOPE NEBRASKA 644,888,378 1,672,417, % 66 3 ARTHUR NEBRASKA 79,763, ,393, % 52 4 BANNER NEBRASKA 113,411, ,941, % 60 5 BLAINE NEBRASKA 93,968, ,271, % 6 6 BOONE NEBRASKA 599,619,279 1,535,273, % 73 7 BOX BUTTE NEBRASKA 629,017,298 1,082,260, % 46 8 BOYD NEBRASKA 171,864, ,234, % 62 9 BROWN NEBRASKA 271,097, ,103, % BUFFALO NEBRASKA 2,325,732,752 4,006,130, % BURT NEBRASKA 623,015,008 1,358,018, % BUTLER NEBRASKA 805,670,062 1,823,384, % CASS NEBRASKA 1,736,714,913 2,898,547, % 1 14 CEDAR NEBRASKA 723,645,288 1,999,072, % CHASE NEBRASKA 461,659, ,481, % CHERRY NEBRASKA 803,126,745 1,310,030, % CHEYENNE NEBRASKA 686,875,373 1,147,495, % CLAY NEBRASKA 626,367,074 1,495,130, % COLFAX NEBRASKA 650,515,177 1,293,967, % CUMING NEBRASKA 835,202,327 1,735,366, % CUSTER NEBRASKA 993,394,011 2,138,251, % DAKOTA NEBRASKA 934,108,682 1,474,179, % DAWES NEBRASKA 404,819, ,345, % DAWSON NEBRASKA 1,412,087,621 2,368,985, % DEUEL NEBRASKA 180,786, ,429, % DIXON NEBRASKA 430,841, ,646, % DODGE NEBRASKA 2,121,189,719 3,279,701, % DOUGLAS NEBRASKA 26,687,321,605 36,938,384, % 61

62 Platte Institute Policy Study 2004 TOTAL 2013 TOTAL RANK PROPERTY PROPERTY PERCENT HI-LO CO# COUNTY STATE VALUE VALUE CHANGE DUNDY NEBRASKA 293,056, ,333, % 2 30 FILLMORE NEBRASKA 678,915,786 1,783,933, % FRANKLIN NEBRASKA 322,414, ,631, % FRONTIER NEBRASKA 293,203, ,887, % FURNAS NEBRASKA 333,403, ,348, % GAGE NEBRASKA 1,315,498,978 2,322,706, % GARDEN NEBRASKA 284,718, ,730, % GARFIELD NEBRASKA 130,475, ,726, % GOSPER NEBRASKA 255,583, ,003, % GRANT NEBRASKA 106,477, ,214, % GREELEY NEBRASKA 252,605, ,617, % HALL NEBRASKA 2,836,354,629 4,260,684, % HAMILTON NEBRASKA 937,307,410 2,213,552, % HARLAN NEBRASKA 317,432, ,975, % HAYES NEBRASKA 176,361, ,161, % HITCHCOCK NEBRASKA 251,158, ,654, % HOLT NEBRASKA 1,007,093,003 2,066,666, % HOOKER NEBRASKA 94,557, ,533, % HOWARD NEBRASKA 459,396, ,603, % 9 48 JEFFERSON NEBRASKA 604,707,411 1,471,918, % JOHNSON NEBRASKA 332,158, ,313, % KEARNEY NEBRASKA 681,607,636 1,299,721, % KEITH NEBRASKA 686,466,437 1,198,769, % KEYA PAHA NEBRASKA 145,123, ,733, % KIMBALL NEBRASKA 364,710, ,464, % 3 54 KNOX NEBRASKA 564,630,110 1,464,520, % LANCASTER NEBRASKA 15,386,232,176 20,853,387, % LINCOLN NEBRASKA 2,128,917,519 3,624,226, % LOGAN NEBRASKA 96,916, ,580, % LOUP NEBRASKA 98,418, ,480, % MADISON NEBRASKA 1,778,282,566 2,992,461, % MCPHERSON NEBRASKA 101,892, ,500, % MERRICK NEBRASKA 632,732,091 1,238,282, % MORRILL NEBRASKA 365,671, ,564, % NANCE NEBRASKA 326,446, ,857, % 62

63 Property Taxes in Nebraska: Past, Present, and Future 2004 TOTAL 2013 TOTAL RANK PROPERTY PROPERTY PERCENT HI-LO CO# COUNTY STATE VALUE VALUE CHANGE NEMAHA NEBRASKA 444,028, ,175, % 7 65 NUCKOLLS NEBRASKA 335,793, ,167, % OTOE NEBRASKA 1,030,405,445 1,865,750, % PAWNEE NEBRASKA 233,316, ,005, % 8 68 PERKINS NEBRASKA 361,175, ,687, % PHELPS NEBRASKA 804,964,515 1,655,851, % PIERCE NEBRASKA 588,384,292 1,355,171, % PLATTE NEBRASKA 2,172,144,584 4,014,768, % POLK NEBRASKA 586,617,959 1,277,983, % RED WILLOW NEBRASKA 588,080, ,419, % RICHARDSON NEBRASKA 499,452,952 1,105,188, % ROCK NEBRASKA 202,610, ,370, % SALINE NEBRASKA 874,867,320 1,679,019, % SARPY NEBRASKA 7,265,699,885 11,599,848, % SAUNDERS NEBRASKA 1,494,378,831 2,953,352, % SCOTTS BLUFF NEBRASKA 1,655,608,631 2,427,211, % SEWARD NEBRASKA 1,185,452,370 2,292,135, % SHERIDAN NEBRASKA 485,184, ,172, % SHERMAN NEBRASKA 299,952, ,926, % SIOUX NEBRASKA 216,265, ,993, % STANTON NEBRASKA 503,302,554 1,042,277, % THAYER NEBRASKA 535,933,065 1,272,060, % THOMAS NEBRASKA 95,098, ,286, % 5 87 THURSTON NEBRASKA 272,573, ,383, % VALLEY NEBRASKA 311,885, ,769, % WASHINGTON NEBRASKA 1,579,821,068 2,659,277, % WAYNE NEBRASKA 576,887,513 1,338,546, % WEBSTER NEBRASKA 291,421, ,368, % WHEELER NEBRASKA 162,299, ,416, % YORK NEBRASKA 1,197,082,593 2,602,022, % 63

64 Platte Institute Policy Study Appendix E: Ten-Year Correlation between Agricultural Value and Total Property Value, Source: Nebraska Dept. of Revenue, Property Assessment Division Maximum 1.00% Minimum 0.73% Median 1.00% Mean 0.98% RANK HI-LO CO# COUNTY STATE CORR. COEFF ADAMS NEBRASKA ANTELOPE NEBRASKA ARTHUR NEBRASKA BANNER NEBRASKA BLAINE NEBRASKA BOONE NEBRASKA BOX BUTTE NEBRASKA BOYD NEBRASKA BROWN NEBRASKA BUFFALO NEBRASKA BURT NEBRASKA BUTLER NEBRASKA CASS NEBRASKA CEDAR NEBRASKA CHASE NEBRASKA CHERRY NEBRASKA CHEYENNE NEBRASKA CLAY NEBRASKA COLFAX NEBRASKA CUMING NEBRASKA CUSTER NEBRASKA DAKOTA NEBRASKA DAWES NEBRASKA DAWSON NEBRASKA DEUEL NEBRASKA DIXON NEBRASKA DODGE NEBRASKA DOUGLAS NEBRASKA DUNDY NEBRASKA FILLMORE NEBRASKA FRANKLIN NEBRASKA FRONTIER NEBRASKA

65 Property Taxes in Nebraska: Past, Present, and Future RANK HI-LO CO# COUNTY STATE CORR. COEFF FURNAS NEBRASKA GAGE NEBRASKA GARDEN NEBRASKA GARFIELD NEBRASKA GOSPER NEBRASKA GRANT NEBRASKA GREELEY NEBRASKA HALL NEBRASKA HAMILTON NEBRASKA HARLAN NEBRASKA HAYES NEBRASKA HITCHCOCK NEBRASKA HOLT NEBRASKA HOOKER NEBRASKA HOWARD NEBRASKA JEFFERSON NEBRASKA JOHNSON NEBRASKA KEARNEY NEBRASKA KEITH NEBRASKA KEYA PAHA NEBRASKA KIMBALL NEBRASKA KNOX NEBRASKA LANCASTER NEBRASKA LINCOLN NEBRASKA LOGAN NEBRASKA LOUP NEBRASKA MADISON NEBRASKA MCPHERSON NEBRASKA MERRICK NEBRASKA MORRILL NEBRASKA NANCE NEBRASKA NEMAHA NEBRASKA NUCKOLLS NEBRASKA OTOE NEBRASKA PAWNEE NEBRASKA PERKINS NEBRASKA

66 Platte Institute Policy Study RANK HI-LO CO# COUNTY STATE CORR. COEFF PHELPS NEBRASKA PIERCE NEBRASKA PLATTE NEBRASKA POLK NEBRASKA RED WILLOW NEBRASKA RICHARDSON NEBRASKA ROCK NEBRASKA SALINE NEBRASKA SARPY NEBRASKA SAUNDERS NEBRASKA SCOTTS BLUFF NEBRASKA SEWARD NEBRASKA SHERIDAN NEBRASKA SHERMAN NEBRASKA SIOUX NEBRASKA STANTON NEBRASKA THAYER NEBRASKA THOMAS NEBRASKA THURSTON NEBRASKA VALLEY NEBRASKA WASHINGTON NEBRASKA WAYNE NEBRASKA WEBSTER NEBRASKA WHEELER NEBRASKA YORK NEBRASKA

67 Property Taxes in Nebraska: Past, Present, and Future Appendix F: Ten-Year Correlation between Residential Value and Total Property Value, Source: Nebraska Dept. of Revenue, Property Assessment Division RANK HI-LO CO# COUNTY STATE CORR. COEFF ADAMS NEBRASKA ANTELOPE NEBRASKA ARTHUR NEBRASKA BANNER NEBRASKA BLAINE NEBRASKA BOONE NEBRASKA BOX BUTTE NEBRASKA BOYD NEBRASKA BROWN NEBRASKA BUFFALO NEBRASKA BURT NEBRASKA BUTLER NEBRASKA CASS NEBRASKA CEDAR NEBRASKA CHASE NEBRASKA CHERRY NEBRASKA CHEYENNE NEBRASKA CLAY NEBRASKA COLFAX NEBRASKA CUMING NEBRASKA CUSTER NEBRASKA DAKOTA NEBRASKA DAWES NEBRASKA DAWSON NEBRASKA DEUEL NEBRASKA DIXON NEBRASKA DODGE NEBRASKA DOUGLAS NEBRASKA DUNDY NEBRASKA FILLMORE NEBRASKA FRANKLIN NEBRASKA FRONTIER NEBRASKA 0.96 Maximum 0.99% Minimum 0.66% Median 0.93% Mean 0.91% 67

68 Platte Institute Policy Study RANK HI-LO CO# COUNTY STATE CORR. COEFF FURNAS NEBRASKA GAGE NEBRASKA GARDEN NEBRASKA GARFIELD NEBRASKA GOSPER NEBRASKA GRANT NEBRASKA GREELEY NEBRASKA HALL NEBRASKA HAMILTON NEBRASKA HARLAN NEBRASKA HAYES NEBRASKA HITCHCOCK NEBRASKA HOLT NEBRASKA HOOKER NEBRASKA HOWARD NEBRASKA JEFFERSON NEBRASKA JOHNSON NEBRASKA KEARNEY NEBRASKA KEITH NEBRASKA KEYA PAHA NEBRASKA KIMBALL NEBRASKA KNOX NEBRASKA LANCASTER NEBRASKA LINCOLN NEBRASKA LOGAN NEBRASKA LOUP NEBRASKA MADISON NEBRASKA MCPHERSON NEBRASKA MERRICK NEBRASKA MORRILL NEBRASKA NANCE NEBRASKA NEMAHA NEBRASKA NUCKOLLS NEBRASKA OTOE NEBRASKA PAWNEE NEBRASKA PERKINS NEBRASKA

69 Property Taxes in Nebraska: Past, Present, and Future RANK HI-LO CO# COUNTY STATE CORR. COEFF PHELPS NEBRASKA PIERCE NEBRASKA PLATTE NEBRASKA POLK NEBRASKA RED WILLOW NEBRASKA RICHARDSON NEBRASKA ROCK NEBRASKA SALINE NEBRASKA SARPY NEBRASKA SAUNDERS NEBRASKA SCOTTS BLUFF NEBRASKA SEWARD NEBRASKA SHERIDAN NEBRASKA SHERMAN NEBRASKA SIOUX NEBRASKA STANTON NEBRASKA THAYER NEBRASKA THOMAS NEBRASKA THURSTON NEBRASKA VALLEY NEBRASKA WASHINGTON NEBRASKA WAYNE NEBRASKA WEBSTER NEBRASKA WHEELER NEBRASKA YORK NEBRASKA

70 Platte Institute Policy Study Appendix G: State of Nebraska Population Density, 2007 Source: Nebraska Dept. of Economic Development, 2010 POPULATION RANK DENSITY PER HI-LO CO# COUNTY POPULATION SQUARE MILE 8 1 ADAMS 31, ANTELOPE 6, ARTHUR BANNER BLAINE BOONE 5, BOX BUTTE 11, BOYD 2, BROWN 3, BUFFALO 46, BURT 6, BUTLER 8, CASS 25, CEDAR 8, CHASE 3, CHERRY 5, CHEYENNE 9, CLAY 6, COLFAX 10, CUMING 9, CUSTER 10, DAKOTA 21, DAWES 9, DAWSON 24, DEUEL 1, DIXON 6, DODGE 36, DOUGLAS 517, DUNDY 2, FILLMORE 5, FRANKLIN 3, FRONTIER 2,

71 Property Taxes in Nebraska: Past, Present, and Future POPULATION RANK DENSITY PER HI-LO CO# COUNTY POPULATION SQUARE MILE FURNAS 4, GAGE 22, GARDEN 2, GARFIELD 2, GOSPER 2, GRANT GREELEY 2, HALL 58, HAMILTON 9, HARLAN 3, HAYES HITCHCOCK 2, HOLT 10, HOOKER HOWARD 6, JEFFERSON 7, JOHNSON 5, KEARNEY 6, KEITH 8, KEYA PAHA KIMBALL 3, KNOX 8, LANCASTER 285, LINCOLN 36, LOGAN LOUP MADISON 34, MCPHERSON MERRICK 7, MORRILL 5, NANCE 3, NEMAHA 7, NUCKOLLS 4, OTOE 15, PAWNEE 2,

72 Platte Institute Policy Study POPULATION RANK DENSITY PER HI-LO CO# COUNTY POPULATION SQUARE MILE PERKINS 2, PHELPS 9, PIERCE 7, PLATTE 32, POLK 5, RED WILLOW 11, RICHARDSON 8, ROCK 1, SALINE 14, SARPY 158, SAUNDERS 20, SCOTTS BLUFF 36, SEWARD 16, SHERIDAN 5, SHERMAN 3, SIOUX 1, STANTON 6, THAYER 5, THOMAS THURSTON 6, VALLEY 4, WASHINGTON 20, WAYNE 9, WEBSTER 3, WHEELER YORK 13,

73 Property Taxes in Nebraska: Past, Present, and Future Appendix H: Change in Budgeted School District Spending Within Counties, , percent RANK PERCENT HI-LO CO# COUNTY STATE CHANGE 27 1 ADAMS NEBRASKA 73.8% 66 2 ANTELOPE NEBRASKA 48.9% 7 3 ARTHUR NEBRASKA 122.4% 41 4 BANNER NEBRASKA 63.5% 26 5 BLAINE NEBRASKA 74.0% 50 6 BOONE NEBRASKA 56.2% 81 7 BOX BUTTE NEBRASKA 32.6% 92 8 BOYD NEBRASKA 3.0% 85 9 BROWN NEBRASKA 22.3% BUFFALO NEBRASKA 76.3% BURT NEBRASKA 84.4% BUTLER NEBRASKA 43.4% CASS NEBRASKA 26.3% CEDAR NEBRASKA 64.3% CHASE NEBRASKA 36.0% CHERRY NEBRASKA 37.0% CHEYENNE NEBRASKA 58.9% CLAY NEBRASKA 21.8% COLFAX NEBRASKA 71.3% CUMING NEBRASKA 50.1% CUSTER NEBRASKA 48.5% DAKOTA NEBRASKA 35.5% DAWES NEBRASKA 30.0% DAWSON NEBRASKA 53.2% 9 25 DEUEL NEBRASKA 111.8% 5 26 DIXON NEBRASKA 146.7% DODGE NEBRASKA 48.9% DOUGLAS NEBRASKA 30.1% 8 29 DUNDY NEBRASKA 112.5% FILLMORE NEBRASKA 63.0% FRANKLIN NEBRASKA 70.7% FRONTIER NEBRASKA 71.0% FURNAS NEBRASKA 59.3% GAGE NEBRASKA 68.3% Maximum % Minimum 0.30% Median 58.90% Mean 66.78% 73

74 Platte Institute Policy Study RANK PERCENT HI-LO CO# COUNTY STATE CHANGE GARDEN NEBRASKA 51.7% GARFIELD NEBRASKA 54.7% GOSPER NEBRASKA 77.3% GRANT NEBRASKA 51.7% GREELEY NEBRASKA 20.1% HALL NEBRASKA 60.4% HAMILTON NEBRASKA 50.5% HARLAN NEBRASKA 66.6% HAYES NEBRASKA 45.9% HITCHCOCK NEBRASKA 41.7% HOLT NEBRASKA 50.0% HOOKER NEBRASKA 82.6% HOWARD NEBRASKA 54.3% JEFFERSON NEBRASKA 59.8% JOHNSON NEBRASKA 49.1% KEARNEY NEBRASKA 77.6% 3 51 KEITH NEBRASKA 155.1% KEYA PAHA NEBRASKA 94.4% KIMBALL NEBRASKA 20.1% 2 54 KNOX NEBRASKA 183.3% LANCASTER NEBRASKA 56.1% LINCOLN NEBRASKA 11.9% LOGAN NEBRASKA 88.6% LOUP NEBRASKA 79.6% MADISON NEBRASKA 67.8% MCPHERSON NEBRASKA 46.6% MERRICK NEBRASKA 45.6% MORRILL NEBRASKA 76.7% NANCE NEBRASKA 36.0% NEMAHA NEBRASKA 43.3% NUCKOLLS NEBRASKA 71.7% OTOE NEBRASKA 72.1% PAWNEE NEBRASKA 70.6% PERKINS NEBRASKA 111.6% 4 69 PHELPS NEBRASKA 151.1% PIERCE NEBRASKA 49.7% 74

75 Property Taxes in Nebraska: Past, Present, and Future RANK PERCENT HI-LO CO# COUNTY STATE CHANGE PLATTE NEBRASKA 52.4% POLK NEBRASKA 89.9% RED WILLOW NEBRASKA 13.7% RICHARDSON NEBRASKA 0.3% ROCK NEBRASKA 35.4% 1 76 SALINE NEBRASKA 408.4% SARPY NEBRASKA 50.0% SAUNDERS NEBRASKA 58.1% SCOTTS BLUFF NEBRASKA 35.2% SEWARD NEBRASKA 108.6% SHERIDAN NEBRASKA 51.0% SHERMAN NEBRASKA 67.8% SIOUX NEBRASKA 48.6% STANTON NEBRASKA 93.0% THAYER NEBRASKA 77.1% 6 86 THOMAS NEBRASKA 146.0% THURSTON NEBRASKA 67.7% VALLEY NEBRASKA 60.9% WASHINGTON NEBRASKA 57.9% WAYNE NEBRASKA 68.9% WEBSTER NEBRASKA 15.9% WHEELER NEBRASKA 78.1% YORK NEBRASKA 84.1% 75

76 Platte Institute Policy Study Appendix I: Change in Budgeted County Spending, , percent Maximum % Minimum 12.30% Median 84.46% Mean 96.10% RANK PERCENT HI-LO CO# COUNTY STATE CHANGE 54 1 ADAMS NEBRASKA 76.8% 7 2 ANTELOPE NEBRASKA 178.4% 73 3 ARTHUR NEBRASKA 53.4% 93 4 BANNER NEBRASKA 12.3% 46 5 BLAINE NEBRASKA 86.0% 26 6 BOONE NEBRASKA 110.8% 32 7 BOX BUTTE NEBRASKA 96.6% 38 8 BOYD NEBRASKA 92.1% 15 9 BROWN NEBRASKA 120.3% BUFFALO NEBRASKA 44.2% BURT NEBRASKA 92.8% BUTLER NEBRASKA 62.7% CASS NEBRASKA 77.8% CEDAR NEBRASKA 61.2% CHASE NEBRASKA 110.9% CHERRY NEBRASKA 72.8% CHEYENNE NEBRASKA 89.7% 5 18 CLAY NEBRASKA 226.8% COLFAX NEBRASKA 88.2% CUMING NEBRASKA 66.3% CUSTER NEBRASKA 114.5% DAKOTA NEBRASKA 134.5% DAWES NEBRASKA 63.1% DAWSON NEBRASKA 69.8% DEUEL NEBRASKA 31.9% 9 26 DIXON NEBRASKA 148.7% DODGE NEBRASKA 49.4% DOUGLAS NEBRASKA 12.5% DUNDY NEBRASKA 34.3% 4 30 FILLMORE NEBRASKA 239.8% FRANKLIN NEBRASKA 37.9% FRONTIER NEBRASKA 27.6% FURNAS NEBRASKA 92.8% GAGE NEBRASKA 143.6% 76

77 Property Taxes in Nebraska: Past, Present, and Future RANK PERCENT HI-LO CO# COUNTY STATE CHANGE GARDEN NEBRASKA 95.1% GARFIELD NEBRASKA 81.8% GOSPER NEBRASKA 111.8% GRANT NEBRASKA 32.4% GREELEY NEBRASKA 44.6% HALL NEBRASKA 41.8% HAMILTON NEBRASKA 80.6% HARLAN NEBRASKA 113.6% HAYES NEBRASKA 104.0% HITCHCOCK NEBRASKA 26.4% HOLT NEBRASKA 111.4% HOOKER NEBRASKA 21.6% HOWARD NEBRASKA 97.3% JEFFERSON NEBRASKA 124.8% 8 49 JOHNSON NEBRASKA 166.7% KEARNEY NEBRASKA 90.2% KEITH NEBRASKA 69.8% KEYA PAHA NEBRASKA 37.1% KIMBALL NEBRASKA 76.3% 6 54 KNOX NEBRASKA 179.5% LANCASTER NEBRASKA 14.0% LINCOLN NEBRASKA 75.7% LOGAN NEBRASKA 99.7% LOUP NEBRASKA 93.3% MADISON NEBRASKA 92.6% MCPHERSON NEBRASKA 34.2% MERRICK NEBRASKA 31.3% MORRILL NEBRASKA 117.8% NANCE NEBRASKA 113.3% NEMAHA NEBRASKA 59.8% NUCKOLLS NEBRASKA 69.0% OTOE NEBRASKA 68.0% PAWNEE NEBRASKA 124.5% 2 68 PERKINS NEBRASKA 447.0% PHELPS NEBRASKA 38.6% PIERCE NEBRASKA 61.3% 77

78 Platte Institute Policy Study RANK PERCENT HI-LO CO# COUNTY STATE CHANGE PLATTE NEBRASKA 51.4% POLK NEBRASKA 91.0% RED WILLOW NEBRASKA 87.2% RICHARDSON NEBRASKA 83.5% 1 75 ROCK NEBRASKA 521.5% SALINE NEBRASKA 100.9% SARPY NEBRASKA 55.8% 3 78 SAUNDERS NEBRASKA 379.8% SCOTTS BLUFF NEBRASKA 87.9% SEWARD NEBRASKA 79.3% SHERIDAN NEBRASKA 63.0% SHERMAN NEBRASKA 74.1% SIOUX NEBRASKA 29.4% STANTON NEBRASKA 74.9% THAYER NEBRASKA 77.5% THOMAS NEBRASKA 84.5% THURSTON NEBRASKA 56.0% VALLEY NEBRASKA 112.6% WASHINGTON NEBRASKA 113.9% WAYNE NEBRASKA 90.0% WEBSTER NEBRASKA 108.2% WHEELER NEBRASKA 128.5% YORK NEBRASKA 118.6% 78

79 Property Taxes in Nebraska: Past, Present, and Future Appendix J: Change in Budgeted City Spending Within Counties, , percent RANK PERCENT HI-LO CO# COUNTY STATE GROWTH 53 1 ADAMS NEBRASKA 29.5% 50 2 ANTELOPE NEBRASKA 33.6% 84 3 ARTHUR NEBRASKA -23.8% 89 4 BANNER NEBRASKA 85 5 BLAINE NEBRASKA -26.8% 13 6 BOONE NEBRASKA 119.4% 32 7 BOX BUTTE NEBRASKA 50.8% 56 8 BOYD NEBRASKA 23.4% 36 9 BROWN NEBRASKA 45.3% BUFFALO NEBRASKA 43.5% BURT NEBRASKA 63.2% BUTLER NEBRASKA 34.8% CASS NEBRASKA 21.2% CEDAR NEBRASKA 1.3% 5 15 CHASE NEBRASKA 169.1% CHERRY NEBRASKA 82.5% CHEYENNE NEBRASKA 122.4% CLAY NEBRASKA 22.3% COLFAX NEBRASKA -15.8% CUMING NEBRASKA 31.6% CUSTER NEBRASKA 79.7% DAKOTA NEBRASKA 35.7% DAWES NEBRASKA 245.9% DAWSON NEBRASKA 4.3% DEUEL NEBRASKA -48.0% DIXON NEBRASKA 3.7% DODGE NEBRASKA 72.8% DOUGLAS NEBRASKA 42.8% DUNDY NEBRASKA 125.1% 6 30 FILLMORE NEBRASKA 161.5% FRANKLIN NEBRASKA -22.9% FRONTIER NEBRASKA -16.9% FURNAS NEBRASKA 72.5% GAGE NEBRASKA 49.6% Maximum % Minimum 0.00% Median 36.56% Mean 52.11% 79

80 Platte Institute Policy Study RANK PERCENT HI-LO CO# COUNTY STATE GROWTH 3 35 GARDEN NEBRASKA 233.9% GARFIELD NEBRASKA -48.8% GOSPER NEBRASKA 46.0% GRANT NEBRASKA -20.4% GREELEY NEBRASKA 41.5% HALL NEBRASKA 37.1% HAMILTON NEBRASKA 5.1% HARLAN NEBRASKA 103.7% HAYES NEBRASKA 12.3% HITCHCOCK NEBRASKA 65.9% HOLT NEBRASKA 77.6% HOOKER NEBRASKA 10.8% HOWARD NEBRASKA 21.7% JEFFERSON NEBRASKA 36.5% JOHNSON NEBRASKA -32.3% KEARNEY NEBRASKA 36.6% KEITH NEBRASKA 11.3% KEYA PAHA NEBRASKA 37.4% 1 53 KIMBALL NEBRASKA 274.5% KNOX NEBRASKA 80.2% LANCASTER NEBRASKA 19.4% LINCOLN NEBRASKA -6.5% LOGAN NEBRASKA 77.4% 2 58 LOUP NEBRASKA 264.6% MADISON NEBRASKA 37.2% MCPHERSON NEBRASKA MERRICK NEBRASKA 44.4% MORRILL NEBRASKA 89.1% NANCE NEBRASKA 25.6% NEMAHA NEBRASKA 7.7% NUCKOLLS NEBRASKA -2.3% OTOE NEBRASKA -15.2% PAWNEE NEBRASKA 19.7% 9 68 PERKINS NEBRASKA 127.2% PHELPS NEBRASKA 85.5% PIERCE NEBRASKA 37.9% 80

81 Property Taxes in Nebraska: Past, Present, and Future RANK PERCENT HI-LO CO# COUNTY STATE GROWTH PLATTE NEBRASKA 54.9% POLK NEBRASKA -22.6% RED WILLOW NEBRASKA 28.8% RICHARDSON NEBRASKA 15.4% ROCK NEBRASKA -21.3% SALINE NEBRASKA 10.6% SARPY NEBRASKA 85.0% SAUNDERS NEBRASKA 20.4% SCOTTS BLUFF NEBRASKA 33.0% 4 80 SEWARD NEBRASKA 194.0% SHERIDAN NEBRASKA 12.7% SHERMAN NEBRASKA -13.3% 8 83 SIOUX NEBRASKA 153.3% STANTON NEBRASKA 75.4% THAYER NEBRASKA 86.0% THOMAS NEBRASKA -6.4% 7 87 THURSTON NEBRASKA 159.7% VALLEY NEBRASKA 114.5% WASHINGTON NEBRASKA 123.2% WAYNE NEBRASKA 36.4% WEBSTER NEBRASKA 8.3% WHEELER NEBRASKA 68.6% YORK NEBRASKA 50.0% 81

82 The Platte Institute for Economic Research: Leading the Way 900 South 74th Plaza Suite 400 Omaha, NE platteinstitute.org Our Mission: Advance public policy alternatives that foster limited government, personal responsibility and free enterprise in Nebraska. By conducting vital research and publishing timely reports, briefings, and other material, the Platte Institute will assist policy makers, the media and the general public in gaining insight to timeproven free market ideas. A non-profit foundation, the Platte Institute relies on the resources and innovative thinking of individuals who share a commitment to liberty and the best possible quality of life for Nebraskans. Chief Executive Officer: Platte Institute Board of Directors: Jim Vokal Jim, a lifelong Nebraskan, adds to his record of public service a solid business and financial background. He has an unwavering commitment to the Nebraska community through key civic board positions. Gail Werner- Robertson Director and President of the Platte Institute. Founder and President of GWR Wealth Management, a family office focusing on investments, taxes, philanthropy, and legacy planning. As a result of her long-time interest in academic excellence and free market values, she is co-founder of Creighton University s Werner Institute. Appointed by the Governor to the Nebraska Investment Council. Warren Arganbright Director and noted northcentral Nebraska lawyer and water resources activist. He has practiced throughout Nebraska and South Dakota and has represented the Niobrara Council since its creation. Jeff Dinklage Owner and operator of Herman Dinklage, Inc. A fourth-generation cattle feeder, he served on the Nebraska Cattle Board for four years and was a bank director for twenty years. He is also an avid Husker fan and enjoys flying. Jason Dworak Leader of a Private Wealth Team with UBS Financial Services. Served on the board of Lincoln City Mission, Christian Heritage Children s Homes, Lincoln Christian School, and Leadership Resources. Michael Groene Brian Gubbels Kyle Hanson Travis Hiner Director and farm equipment sales representative. Co-founder of the Western Nebraska Taxpayers Association. Originally from a farm in Randolph, Nebraska, entrepreneur Brian Gubbels graduated from the University of Nebraska at Lincoln and is the CEO and owner of DataShield Corporation and a co-founder of Firstar Fiber Corporation. General counsel for The Buckle Inc., Kearney since Served as first vice president and trial attorney for the Mutual of Omaha Companies and as an attorney at Kutak Rock law firm, Omaha. On the boards of Faith Christian School and Kearney Area Family YMCA. Former president and chairman of Hiner Implement, Inc., and president/ chairman of Hiner Lease Company. He has served as a board member of the Kosman Banking Family since 1990 (now Platte Valley Companies).