The Nebraska Supreme Court ruled on Friday February 6, 2009 that property tax authority given to the Upper, Middle and Lower Republican Natural Resources Districts is unconstitutional because the money is for a state purpose: the Republican River Compact compliance. The Court stated, “We conclude that LB701(1)(d) violates the prohibition against levying a property tax for state purposes… and that such provision is therefore unconstitutional.” “The state has acknowledged that compliance with the compact is the state’s responsibility by entering into the final settlement stipulation resolving the litigation which was initiated by the state of Kansas in 1998,” the ruling continued. Therefore, the judges concluded, the state is obligated to comply with the compact, and the LB701 tax was designed to meet a state obligation.

LeRoy Sievers of the Knudsen Law Firm said the Supreme Court decision shows that “the taxing provisions were… imposing a tax for a state purpose.” Sievers added that the lawsuit was not filed to cause problems in the Republican Basin but to do just the opposite– have the state do its job in compact compliance. Jeanelle Lust with the firm added the court’s message to state senators and water managers is “you can’t stick your head in the sand and do nothing about the Republican River issues. Maybe this is what some state senators who don’t live in the basin needed to hear.”

Lust said Nebraska’s water issues won’t disappear. The same water shortage issues are cropping up all over the state, and Nebraska needs to find a sensible way of regulating these issues as a state. “What we were really hoping to accomplish, in addition to eliminating the property tax, was to get the Legislature to realize that they can’t solve the state’s compliance problems on the backs of the people in the Republican River basin,” she said. Rod Confer, who tried the case at district court level, and wrote the winning argument on appeal, agreed, “Maybe now the state will come up with some sensible regulations.”

In the District Court, Judge Merritt had decided that LB701 created a closed class of NRDs entitled to the law’s taxing authority, making the tax special legislation, and unconstitutional under Nebraska’s Constitution. The Supreme Court did not address that argument because “once you’ve found something invalid on one basis, you don’t need to go on to the other (bases).” Sievers said.

Angus Garey of McCook, one of nine Republican River basin landowners and residents who filed the lawsuit, said he was pleased with the decision and expected county commissioners to begin asking NRDs to refund the special property tax revenue to the counties. “The taxpayers of southwest Nebraska are relieved,” Garey said.

Rodney M. Confer
Jeanelle R. Lust
LeRoy Sievers

The Knudsen Law Firm
Knudsen, Berkheimer, Richardson & Endacott
3800 VerMaas Place, Suite 200
Lincoln NE 68512
800 714 3439