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High court agrees, LB 701 unconstitutional

Friday, February 6, 2009

LINCOLN -- Residents of three Southwest Nebraska Natural Resources Districts won't be paying property taxes to help put more water into the Republican River.

In a ruling released Friday, the Nebraska Supreme Court upheld a lower court decision that special taxing authority approved by the state Legislature in 2007 is unconstitutional. The law passed at the same time Kansas officials were complaining of Nebraska's overuse of Republican River water and lack of a plan to comply with the three-state compact in the future. Colorado is also part of the Republican River compact.

It is unconstitutional to set local property taxes for state purposes.

"It is clear from the legislative history that LB 701 has the purpose of ensuring the state's compliance with the compact and additionally addressing the water problems in the Republican River basin," says the court's opinion, written by Judge Lindsey Miller-Lerman. The court pointed to comments made by managers of the three natural resources districts in the basin that received taxing authority under LB 701.

Angus Garey, a plaintiff with the Friends of the River group that filed the lawsuit that successfully challenged the property taxes of LB 701, said he was pleased with the decision.

"The Friends of the River appreciates the unanimous decision of the State Supreme Court that finds meeting compliance with he Republican River Compact is a state problem," he said today.

"This places the problem squarely on the shoulders of the state (making the problem one) that the state is going to have to address."

"We appreciate that the judicial branch rectified an error that the legislative branch made," Garey said.

He commended the group's legal firm in presenting a thorough case and said that the real winners were the taxpayers of Southwest Nebraska.

"I was confident of the decision, but of course, I didn't know for sure," he said. "It's like a horse race: You don' know exactly until it's under the wire."

Sen. Mark Christensen of Imperial said this morning that the Supreme Court's decision puts the state in a difficult situation if the ruling affects the occupation taxes that were also contained in LB 701.

"If the occupation taxes are ruled unconstitutional, we will have no alternative to pay back the money," he said, referring to the $9 million the Republican River Basin NRDs borrowed from the state last year to pay for water the NRD's purchased from irrigators. Another lawsuit is pending that challenges the LB 701 occupation tax levied on irrigators in Southwest Nebraska.

" We can ask the Governor to forgive it, or raise the NRD property tax levy ," he said. "There's still a lot to be determined." It was Christensen's understanding that the ruling can not be appealed to the federal Supreme Court as it is a state issue.

Middle Republican Natural Resources District manager Dan Smith of Curtis did not immediately return a phonecall.

The court's decision also pointed to comments made by Ann Bleed, who then was director of the state Department of Natural Resources.

The comments by all the officials were made during a legislative hearing on LB701.

"I believe that passage of this bill will be extremely helpful in allowing the state and natural resources districts to do what is necessary to comply with the ... compact," Bleed said at the time.

The court added that the "plain language" of the law "is to ensure compliance with the compact."

Attorney General Jon Bruning's Office did not immediately respond to a request to comment.

The high court's reason for concluding that the taxing authority in LB701 is unconstitutional differs from the reason given by Lancaster County District Judge Paul Merritt in May. He ruled that the taxes amounted to unconstitutional "special privileges" by allowing just three of ! the state's natural resources districts - all in the Republican River basin - to set the property taxes.

A pending lawsuit poses another threat to the 2007 water law. It argues that another tax authorized by the law - a per-acre tax on irrigated land - is unconstitutional.

Nebraska Supreme Court ruling

-- Includes information from The Associated Press

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