By PAUL HAMMEL
Nebraska Examiner
LINCOLN — A new state audit says the Douglas County Treasurer’s Office has wrongly calculated the amount of tax revenue due to several local taxing entities, overpaying the Omaha Public Schools by nearly $6 million but underpaying the Elkhorn School District by $4 million.
Douglas County and the City of Omaha were also among those losing out on millions in tax revenue, said the audit, released Monday.
The mistaken payment of in-lieu-of-taxes funds paid by the Omaha Public Power District is the same problem uncovered a year ago at the Sarpy County Treasurer’s Office by the Nebraska State Auditor’s Office.
Same problem in Sarpy County
In Sarpy County, Treasurer Brian Zuger was fired by the county board in the wake of the mistaken payments there, and several school districts have taken the Sarpy County office to court, seeking repayment of the in-lieu-of-taxes funds owed to them. Millard Public Schools maintains it was underpaid by $2.4 million by Sarpy County, and the Omaha Public Schools says it is owed $1.4 million.
Douglas County Treasurer John Ewing, when reached Monday, said the office has been calculating the in-lieu-of tax distribution in the same way since the 1960s and had continued its practice following a review in 2019 that included some consultation with the State Auditor’s Office.
“This is not a case of money being misappropriated, it’s really a case of a mistaken interpretation of the state statute that had continued up until this year’s distribution,” Ewing said.
He said it will likely be up to the various taxing entities, along with the County Treasurer’s Office, to get together and decide how to reconcile the under- and overpayments over the past several years. Ewing said he has talked with several of the entities involved and doesn’t expect a lawsuit, such as the one filed in Sarpy County.
‘Everyone makes mistakes
“Everyone makes mistakes,” he said, adding. “It’s a mistake versus a knowing, wrong distribution.”
Ewing has scheduled a press conference for 10 a.m. Tuesday to answer further questions.
The office’s official response to the audit was that the mistaken payments were “a good-faith mistake.”
Ewing said that Douglas County, and Sarpy County, are the only two counties in Nebraska that distribute the in-lieu of tax payments to multiple school districts in the same city.
Process corrected
The Treasurer’s Office said that it had begun reviewing its practices prior to the auditor’s review and that its calculation method had been corrected for 2022 payments of the OPPD tax.
Instead of paying property taxes, the Omaha Public Power District pays “in-lieu” of tax payments based on 5% of its annual revenue from electric sales. Last year, that amounted to $26 million, which was then distributed to the county, cities and school districts in the county.
The money, according to the state audit, is supposed to be distributed to the various school districts in Douglas County based on the tax levies of each individual district.
Instead of doing that, the Douglas County treasurer had utilized the tax levy of the Omaha Public Schools and distributed the funds based on the student enrollment at each of the districts. That was the same mistaken formula used in Sarpy County, according to the State Auditors Office.
Overpayments/underpayments
The amount of overpayments identified in the audit:
- $5.6 million to the Omaha Public Schools.
- $4.4 million to the City of Omaha.
- $2.7 million to Douglas County.
The amount of underpayments were:
- $4.2 million to Elkhorn Public Schools.
- $4 million to Ralston Public Schools.
- $3.7 million to Westside Community Schools.
- $818,000 to Millard Public Schools.
Also on Monday, the State Auditor’s Office released a review of the practices of the Sarpy County Treasurer’s Office from July 1, 2021, to the end of 2021, which would be after the county treasurer had been replaced.
Deputy State Auditor Craig Kubicek said procedures at the Sarpy County Treasurer’s Office had improved considerably since the critical 2021 audit by his office.