Nebraska appeals ruling against Republican River taxes

June 2008

U.S. Water News Online

LINCOLN, Neb. — Residents of the Republican River basin may have to write checks for property taxes that a judge ruled are unconstitutional.

Part of a ruling last week that barred the collection and levying of taxes meant to help Nebraska get into compliance with the Republican River compact is now on hold because of an appeal filed by the state, natural resources districts and other defendants.

Recently, they came out on the losing end of a lawsuit attacking the property taxes authorized by state lawmakers to help pay for water to send to Kansas.

"They're probably going to be upset, but I think it can be reasonably explained that we still have to pay taxes until it's decided," said Dan Smith, manager of the Curtis-based Middle Republican Natural Resources District.

Under Nebraska law, judgments against the state are put on hold when appeals are filed and until final rulings are made by the Nebraska Supreme Court.

After the Legislature passed a law last year authorizing the property taxes, natural resources districts in the river basin passed levies expected to generate more than $2 million in 2008. The deadline for paying roughly half of those tax bills has passed, and the second half will be due late this summer.

Smith said property taxes paid over the next several months will probably be refunded if the state, NRDs and the other defendants lose their appeal.

But, he said, whether the taxes collected before the court decision could be refunded is unclear. The NRDs may ask the state Supreme Court to clarify what should be done with the money when it rules on the appeal, he said.

Lincoln attorney Rod Confer, who represents the nine residents who filed the lawsuit, has said that those who paid property taxes under protest would receive refunds.

Complicating the situation is that the collected taxes were to be used to repay bonds taken out to compensate irrigators for sending water to Kansas. But the bonds were never issued because of the lawsuit. Instead, the state loaned the NRDs $9 million.

Kansas contends Nebraska used about 80,000 acre feet, or roughly 26 billion gallons, more than it was allowed in 2005 and 2006. It has demanded more than $72 million for the overuse in addition to a shutdown of wells that irrigate nearly half of the 1.2 million acres in Nebraska's portion of the river basin.

Nebraska has said those figures are too high and that it has a solid plan to get in compliance with the three-state compact that also includes Colorado.

Kansas and Nebraska have failed to resolve the dispute on their own, and the issue is likely headed to arbitration. If that fails, Kansas officials have said they would take it back to the U.S. Supreme Court, which issued a decree in 2003 that governs use of Republican River water.