Omaha Mulls Options to Fix City Roadways, Including Bond Issue, Wheel Tax Increase


Omaha Mayor Jean Stothert discusses Omaha’s need for more spending on road repair and answers questions during a town hall meeting at The Venue at Highlander Accelerator, 2120 N. 30th St., Thursday, July 18, 2019. (Photo by Scott Stewart)
By 
Scott Stewart
The Daily Record

Omaha has been losing ground – well, streets and roads – for decades as the budget to make repairs has failed to meet demand.

The result has been an increase in potholes, more emergency roadwork and even streets crumbling to the point that they’re reduced to unimproved dirt paths.

“Potholes are a symptom of the problem,” said Omaha Mayor Jean Stothert. “They are not the issue, and the potholes are a result of aging infrastructure.”

Stothert said that it’s time to invest more into road repair and maintenance, with the goal of adequately funding the program so that each road in the city is repaired once every 20 years, on average, which is the typical lifecycle for a paving project.

In a series of recent town hall meetings, Stothert made the case for nearly doubling the amount of money Omaha spends on road improvement efforts. Doing so would allow the city to stop falling further behind and instead catch up on about 50 years of languishing projects.

Stothert said Omaha currently spends about $41 million annually on road repair. The city has about $1.5 billion in road infrastructure. To keep up with a 20-year lifecycle, the city needs to replace an average of 5% of its road value each year – or about $75 million.

To meet those needs, the city has a $34 million annual shortfall, based on the current city budget.

“This has been decades and decades and decades in the making,” Stothert said. “We have been underfunded for decades.”

Funding for road projects is complicated. The city has a maintenance budget, as well as a capital improvement and construction fund, and it plans projects for six years, although only the first year is budgeted. Funding comes from taxes, bonds and state and federal dollars.

Omaha receives a portion of the federal and state gas taxes, and it also levies a wheel tax on residents. Stothert reminded town hall attendees that Omaha tried to institute a wheel tax on nonresidents, and it was rejected at the state level.

The State Highway Trust Fund also provides support, bringing in state motor vehicle registration, fees and sales tax dollars. Additionally, Omaha has increased its street resurfacing budget each year, climbing from $6.6 million in 2013 to $12.2 million in 2019.

Stothert said an estimated 67,500 potholes have been filled since March 1, at a cost of $13.25 million. She described pothole repairs as “Band-Aid” solutions and said a long-term maintenance and rehabilitation program would reduce such emergency repairs.

“If we continue just filling potholes, these things are just going to continue happening over and over again,” Stothert said after describing several recent street repair projects. “We really need to look at more of a long-range plan that will avoid these things from happening again.”

Omaha has about 5,000 lane miles to maintain, including about 350 lane miles of unimproved streets. To resurface 250 lane miles annually, Omaha needs to find an additional $34 million. The mayor reviewed several options to close the gap.

One possibility is the issuance of a transportation bond. A five-year, $200 million bond would generate $40 million a year, covering the gap and helping jump-start pending repairs. That would require a levy increase of 3.6 cents per $100 taxable valuation, or about $71 annually for the owner of a typical home with a taxable valuation of $200,000.

Town hall attendees also reviewed options for a $150 million bond, which would bring in $30 million a year – nearly covering the gap – and would result in a levy increase of 2.7 cents per $100 taxable valuation, or about $53 annually for a $200,000 residence. A $75 million bond option would cover about half the gap and cost about $27 annually for a typical homeowner.

Any transportation bond would require voter approval, and it would need renewed every five years. However, Stothert said the payments on the CHI Health Center Omaha arena and convention center will drop off in eight years, so that money could be redirected to replace or add to bond dollars.

“Then you’d have a ton more bonding capacity, so that’s how this would be able to go on and on and on without having to raise what you’d pay,” Stothert said.

Beyond a bond issue, Stothert said the city could look to increase its wheel tax, which is currently $50. Raising it to the $74 that Lincoln charges would bring in an additional $11 million, she said, adding that she would not support that approach.

The city could seek a change to state law allowing for an increase in its sales tax rate, another idea that Stothert said she’d oppose. If the city did so, that would trigger a sunset clause in the restaurant tax that would offset much of the revenue generated by a sales tax increase. A half-cent hike would bring in about $55 million annually, but the city would lose $34 million in restaurant tax proceeds – so the half-cent hike would result in a net gain of $21 million.

Together with a wheel tax rate increase, a sales tax adjustment would be nearly enough to cover the funding gap without a bond issue. The remaining difference could be funded by a change in the city’s occupancy tax on tobacco, which currently does not apply to vaping sales. That tax currently sunsets in 2023 and brought in $3.9 million in 2019.

Stothert discussed other changes at the state level that would bring in additional revenue, such as trimming the list of exclusions to sales tax. While the exact dollar amount depends on the exemptions removed, she suggested the state could look at taxing candy, soda, haircuts, manicures and other goods and services.

A status-quo approach where no additional dollars are invested is also a possibility, but Stothert said that would ensure the city is unable to meet its recommended budget for road maintenance and rehabilitation. She said her administration would continue to make road infrastructure a priority, but the city would continue to fall further behind – thereby exacerbating the problem should a future administration tackle it.

“Improvements will not keep up with the pace of deterioration,” Stothert said. “We will fall further and further behind.”

A sustainable, long-term action plan is a better approach, she said, adding that she doesn’t want to let the problem continue to worsen.

Stothert is soliciting feedback on the best way to proceed. To give input, use social media, Warple or the mayor’s website, mayors-office.cityofomaha.org. In addition, more information can be found at cityofomaha.org/a-road-map-to-better-streets.

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