Mayor Chris Beutler said the city should save the $1.4 million that will be freed up in its budget next year when the city starts taxing citizens to help pay for a new county jail.

On Monday, the City Council will vote on whether to issue bonds to jointly finance the $65 million jail.

The vote is largely procedural, however, since the council already unanimously approved  creating a joint public agency to finance the jail, which would reduce financing costs.

Under the agreement with the county, the city no longer will have to pay the county $1.4 million annually to house city prisoners. That frees up $1.4 million in the municipal budget, unless the city lowers its tax levy to make up for the shift.

Beutler held a press conference Thursday to lobby for the tax levy to be left alone and the money to be saved, not spent on new programs. He warned the cushion will be needed given the nationwide recession, somewhat stagnant city sales tax revenue and uncertainty about the effect of 2009 property revaluations. (If city property values go down, the city will get less property tax revenue.)

“If property valuations stagnate or show an overall decline in value, that could mean hundreds of thousands or even millions of dollars in losses to the city’s general fund,” Beutler said. “We cannot risk creating a huge deficit in this year’s budget or next year’s.”

He said special interest groups should resist the temptation to spend the money previously spent on prisoners.

“Others will try to argue that the money is a windfall that we can use to reduce our levy,” Beutler said. “But they won’t tell you that their levy reduction will certainly require very undesirable additional budget cuts to cover those reductions in the future.”

Coby Mach disagrees with Beutler’s take.

“I don’t understand how that could be so,” said Mach, head of the Lincoln Independent Business Association. “If we no longer have to pay the $1.4 million, then $1.4 million is now freed up.”

LIBA first raised the issue of what the city would do about the freed-up money in late August. While the group has not yet taken an official position, Mach said LIBA typically supports reducing or holding the tax rate flat.

“At this point, we would like to see the City Council strongly consider reducing our levy by $1.4 million,” he said.

Beutler said if sales tax revenue remains flat this year, the city will be looking at about a $1.5 million budget deficit.

When property tax statements go out later this month, Lincoln taxpayers will see two new line items for the jail: City Joint Public Agency and County Joint Public Agency.

Beutler said those line items don’t represent a tax increase or higher spending by the city because the city no longer has to pay $1.4 million to house prisoners.

Again, Mach disagreed with Beutler’s assessment. He said the only way the money shift is revenue-neutral is if the levy is reduced accordingly.

Beutler said leaving the tax rate alone would help the city end its budget’s “structural imbalance” if city leaders cast an “eye toward the future instead of an eye to the past.”

Councilman Ken Svoboda said Beutler was being “somewhat disingenuous” in saying it wouldn’t be a tax increase to use the excess money that results from what he calls a “tax shift.”

“Unless we credit the taxpayers for the $1.4 million in their property tax (bill) … it is a tax increase,” he said. “It’s a tax that they have not been paying in the past.”

He said he’d support reducing the city tax rate. If the city faces another shortfall next year, he said, the council will deal with it.

“When times are tough, you do the best you can to economize,” Svoboda said.

He said Beutler is “playing with fire” by wanting to keep the cash, levy a new jail tax and ask taxpayers to pay for a new arena next year.

Councilman Dan Marvin said the whole conversation is a bit premature.

“We’ll all deal with the budget starting in May of next near,” he said. “It’s kind of hard to stake out a position at this stage of the game.”

Reach Deena Winter at 473-2642 or dwinter@journalstar.com.