Despite receiving millions of dollars from the state of Nebraska, the forces behind the proposed cancer complex on the University of Nebraska Medical Center have recently begun a strong push for additional taxpayer funds from local governments in Omaha and Douglas County. The $370 million expansion of the Omaha medical campus was originally slated to be funded through a combination of private and public dollars.
Early in 2012, the Nebraska Legislature approved $50 million toward the project. Now, the Omaha City Council is deciding whether or not to create a new tax to add another $35 million to the growing pool of public money funding the cancer center. The proposed city ordinance would add a new occupation tax of about 35-cents-per-pack of cigarettes to cigarettes purchased in Omaha in addition to the state taxes already imposed. Some state and local elected officials have begun to question the new taxes and are asking why the medical center project needs more public dollars beyond what has already been allocated. In a interview with the Nebraska Watchdog, Nebraska Governor Dave Heineman questioned why the University of Nebraska Medical Center needed the additional funding, calling them a “fundraising juggernaut.” In the same article State Senator Brad Ashford called for less reliance on local tax dollars and more transparency in the medical campuses funding.
From the Nebraska Watchdog:
In an exclusive interview with Nebraska Watchdog, Heineman—who calls the project important— said the $370 million deal was to be funded with $50 million from the state and the rest from private sources.
“The president of the university, nor any other university official, ever told me that someone was going to ask the city of Omaha, the Douglas County Board or any other local unit of government up there for additional funding,” said Heineman. ”The clear implication is it was going to be raised through private donors. So what’s going on now?”
Councilman Chris Jerram is leading a move to raise $35 million over 10 years with a new 35-cent per pack city cigarette tax. Jerram tells Nebraska Watchdog he’s got four co-sponsors — adding up to five votes, enough to pass the tax. The plan goes to the council Tuesday. A public hearing is scheduled for Sept. 25 with a final vote likely Oct. 2.
As Nebraska Watchdog first reported, mayoral hopeful Brad Ashford wants the university to slow down and “get the City Council off the hook.” Ashford, a state senator, voted for the $50 million in state funds.
Asked by Nebraska Watchdog if the University may have run out of private donors Heineman was less than sympathetic. “They haven’t had that conversation and if that’s what is going on as Senator Ashford suggested, they ought to be public about it,” said the governor. “(NU) President (J.B.) Milliken ought to show up at the City Council and explain, ‘Here’s what happened.”
Heineman also appears skeptical.
“The University of Nebraska Medical Center is a fundraising juggernaut,” said the governor. “They’ve been able to raise the money for any project they wanted so far.”
The proposed occupation tax is problematic for several reasons.
First, occupation taxes lack transparency; they tack additional costs onto consumer purchases with many customers unaware of how they are being used. The whole process has lacked transparency, with taxpayers pouring an increasing amount of money into a project that was supposed to be supported primarily through private funding.
Second, occupation taxes are not subject to the same restrictions as income and sales taxes and could serve as a new medium for large tax increases for municipalities seeking to close large budget deficits.
While the value of an expanded medical campus could be substantial, some critics of the occupation tax argue that funding its construction does not fall under the proper functions of city government. In an article by WOWT Omaha, Chip Maxwell with the Omaha Alliance argues that using local taxes for the medical project goes beyond what local taxes are meant to fund.
From WOWT Omaha:
“The core functions of city government are police, fire and public works. You could also make the argument for parks, pools and libraries, which many families use, but now we’re talking about another realm with the city forcing its taxpayers to subsidize medical research at the state university?”
The tax will also have a strong detrimental effect on Omaha businesses. Omaha retailers and wholesalers stand to lose sales as consumers seeking to avoid the tax vote with their feet and buy cigarettes outside the city. Using tobacco taxes as a source of revenue can also lead to budget shortfalls. Tobacco taxes are notoriously unreliable, and as the number of smokers has continually decreased in recent years, tobacco taxes become a shrinking source of revenue.
The concerns of both Governor Heineman and Senator Ashford are justified. Before any additional tax dollars are allocated to this project, taxpayers need to know more about how their money is being spent. As the cost of building the medical campus rises, the University may not be able to raise the funds privately and may need to return to taxpayers for additional funding in the future. While most occupation taxes are designed with certain projects in mind and have been relatively limited in number and scope up to this point, taxes like these open the door to all kinds of government subsidies for development that may not be the best investment of taxpayer dollars.