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The original item was published from 11/5/2012 1:29:00 PM to 11/7/2012 12:05:01 AM.

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Posted on: October 29, 2012

[ARCHIVED] Frequently Asked Sales Tax Questions

Some common questions asked by citizens follow. The answers are provided by the City Manager.

Q. If we had to pay for these needed infrastructure improvements with property taxes instead of sales tax, how much would property taxes have to increase?

A. The City is currently 34% below the property tax amount allowed by the State. The City’s current general fund property tax levy is 33 cents per $100 of value. Property taxes would have to increase another 25 cents per $100 of value to generate the same $1 million annually in revenue projected to be raised by the one half cent sales tax. That would be a 76% increase in general fund property taxes and Sidney property owners would pay 100 percent of the cost.

Q. What about the local sales tax that is refunded to help pay for State incentive programs? Won’t Lincoln keep all of our money?

A. The Nebraska Advantage Act gives qualifying businesses, which create a substantial amount of new jobs and investment, a right to eventually recapture sales tax on expenditures used in their projects. Those refunded local sales tax dollars, however, do come back to the community to the local employers. The State’s 5.5% sales tax also comes back to the employers on those projects. With this being a new half cent sales tax it would be several years before that would happen with new projects. Even then, the $1 million of new revenue for Sidney is the amount projected that we will receive over and above any projected refunds.

Q. How much of the local sales tax that is generated is actually paid by people not living in Sidney?

A. Unlike property taxes which are paid by 100 percent of the local property owners, the sales tax affects everyone by their ability to pay. Sidney is an Interstate-80 community, with 550 motel rooms, numerous food and service outlets on Exit 59 for travelers, along with a huge outside retail draw from Cabela’s retail store and Wal-Mart. It is our belief that between 50 and 70 percent of all of the retail sales tax is paid by non-residents. Sidney is also the major employment base for the entire southern Panhandle and northeastern Colorado. Travelers and non-residents still depend on our streets, law enforcement, fire protection, emergency services, parks and all other utilities we provide as a community. Sales tax helps spread the burden to pay for those services to ALL of those using them, instead of having the burden fall just on the Sidney property tax payer. Cabela’s said currently their local retail store generates 79 percent of its sales from citizens living over 30 miles away from Sidney, and in the past that has been as high as 87 percent.

Q. When would the sales tax go into effect.

A. If voters approve the sales tax in November, it would actually go into effect April 1 and show up in sales tax receipts received by the City in June, 2013.

Q. What does the current local sales tax help fund?

A. It provides over $1 million in local property tax relief. It also generates another $1.5 million in revenue used for services such as the city recreational programs provided by the Cheyenne County Community Center; the ambulance service, emergency communication system, Chamber of Commerce, local Fireworks, Memorial Gardens, Swimming pool operation, Gold Rush celebration, Fire Department equipment, community and economic development marketing and promotion, job creation incentives, downtown improvements, street improvements and north side improvements.

Q. Why are the improvements needed now?

A. All communities in Nebraska have been facing aging infrastructure problems and pleaded with the State to provide a new source of revenue to address these problems. This is the first time in over 25 years the Nebraska Legislature has allowed local cities a significant new source of revenue, if the local voters approve it. State aid to cities has also been eliminated. If cities don’t give local citizens the right to vote on this issue, some legislators and the Governor have indicated taking the right away in future sessions. Sidney was also in a downward economic spiral in the late 1960's through the 1980's due to significant loss of payrolls from the Army Depot, Oil and Gas exploration, Missile Base construction crews and tough agriculture times. Priorities had to be made so some infrastructure challenges had to wait. With the recent economic surge Sidney has enjoyed the past two decades, we have addressed major issues with water, wastewater, landfill and rebuilt our economy. With nearly $100 million of new business and industry projects currently being planned, Sidney has a wonderful opportunity to continue growing our community and adding new amenities, but we must address these aging infrastructure challenges now.

Q. When will the one percent occupation tax on restaurants be eliminated?

A. If the local sales tax is adopted, when it becomes effective on April 1, the restaurant occupation tax will be eliminated at the same time. The overall impact will be one-half cent less tax on all restaurant purchases. If the sales tax is voted down, the restaurant tax will remain in place.

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