Last week, I sat down with Lincoln County Assessor Julie Stenger to prepare for my first meeting of the Governor’s Property Tax Valuation Working Group. Julie has been in her role for many years and has a great understanding of the assessment process. She and I had a great discussion, and I was able to get a better understanding of the fine points of the assessment process. Julie provided me with the information I needed to be well-prepared to represent the interests of this part of the state when the Working Group meets.

I expect that the goal of the Working Group will be to take a closer look at how we value various types of property and whether the process is fair. I also assume that we will look at the Homestead Exemption, and other tax exemptions to confirm that they are carried out consistently and that the parameters make sense. As I have discussed before, your valuation is only one part of the property tax equation. But ensuring that our property tax “values” are set fairly is the first step in making certain that the property tax burden is fairly distributed.

Two of my biggest concerns with our property tax system are the impact it has on the elderly and agricultural producers. Many retirees face a similar scenario: a couple decides to retire after their homes are paid off, and they have two social security incomes to supplement their other retirement savings. Then, one of the individuals passes away, removing one of the social security revenue sources. Meanwhile, their property value continues to rise, sometimes increasing their property taxes and/or causing them to lose their Homestead Exemption.

The Legislature created the Homestead Exemption many years ago in an attempt to give homeowners over the age of 65, disabled individuals, and disabled veterans a break on property taxes. It is important to remember that the state of Nebraska fully reimburses the lost revenue for local political subdivisions resulting from the Homestead Exemption. We always hear about “unfunded mandates,” but this is a “funded mandate” by the state.

Generally, receiving a Homestead Exemption requires both the individual to qualify (either by income level or disability) and their property to qualify (based on the home’s value).

For a person over 65 to qualify, they must earn less than $33,100 as an individual or under $38,900 for those who are married, closely related, or widowed. For people who are 100% disabled, they can earn up to $37,300 as an individual or $42,700 for married, closely related, or widowed. If their incomes are higher, then the amount of the exemption is reduced by a percentage until the income levels reach $48,600 for singles, $57,700 for married, closely rated, and widowed, and $52,800 for single disabled individuals, and $61,600 for married, closely related, and widowed. If a disabled Veteran is 100% disabled, they have no income limits and no property value limit, but their exemption would be limited to their residence, a detached garage, and up to one acre of land. If they are not 100% disabled, they would qualify under the requirements for a disabled person requirements.

Even if the individual qualifies, their property must also meet certain requirements. For a person over 65, their primary residence must be tax assessed at a rate below 200% of the average value of homes in the county plus $20,000. In Lincoln County, the average home value is $157,498, so a primary residence would qualify if valued under $334,996. For a disabled person, the calculation is under 225% of the average home value plus $20,000. There is no home value limit for Veterans who are 100% disabled.

There are a couple of modifications that I think should be considered. First, I would like to see Veterans who are more than 50% disabled get a full exemption without having to qualify under the individual exemption. Second, I also would like to see us freeze the home value for anyone who must meet the home value calculation to receive the Homestead Exemption, only increasing the valuation for any improvements beyond ordinary maintenance. This would protect those who are impacted by inflation adjustments or spikes in property valuations.

I also think there are broader valuation changes that should be considered. First, assessors must physically inspect all properties in their jurisdiction every six years, essentially reviewing 1/6th of the properties within the county every year. However, there is more that goes into valuations than just the physical inspection. I have long believed that farmers and ranchers are negatively impacted by the property “valuation” process because the assessors are required to reassess agricultural and commercial values at least every three years based on average arms-length sales over the previous three-year period. As many of you know, many farms and ranches are purchased by investors looking for a hedge against inflation or a safe place to park their money. When this happens, land values move to levels well above economic values. Meanwhile, commercial properties are not used as inflation hedges, and they tend to follow economic value. The same is true for residential properties. These properties have values that tend to mirror rental rate increases. Additionally, homes tend to stay below the cost of building new ones. Therefore, I believe that agricultural landowners tend to pay higher property taxes in relation to the income generated from the property.

I am looking forward to the Working Group meeting and will work hard to represent our area’s interests. Please continue to contact me on this and other issues at mjacobson@leg.ne.gov, or feel free to call my office at 402-471-2729. My door is always open!