A wrongful conviction judgment is likely to be costly for taxpayers in a rural Nebraska county.
Gage County's plan to increase property taxes if it can't escape from the $28 million judgment could be a credit negative for the county, according to Moody’s Investors Service.
County officials haven't given up completely on their efforts to avoid financial responsibility for the wrongful conviction and incarceration of six people who were found guilty of rape and murder in 1989.
In June 2018, the 8th US Circuit Court of Appeals upheld the wrongful conviction judgment in favor of the "Beatrice 6."
The county of fewer than 22,000 residents is resting its hopes on one last appeal to the U.S. Supreme Court. If that fails it will finance the judgment with increased property taxes, a move that County Board of Supervisors Chairman Myron Dorn said was the only avenue available to pay the judgment though he still believes the state should contribute. Dorn is a Republican candidate for state legislature this year.
On Oct. 10, the Supreme Court granted the county a five-week extension to file an appeal, giving it a Nov. 14 deadline.
Moody’s said that the Supreme Court only considers a small percentage of the roughly 8,000 cases filed each annual term.
In the event the appeal is unsuccessful, the Board of Supervisors has raised the property tax to generate about $3.8 million per year until the $28.1 million judgment is paid down.
“The levy increase will materially constrain the county's financial flexibility,” said Moody’s. "The annual cost for the judgment will materially increase the county's operating budget, representing a projected 16% of annual expenditures." The county, about 100 miles southwest of Omaha, is not rated.
Dorn said the levy is an average increase of up to 8% on a property owner’s total taxes, depending on where their property is. The rate increase, which is the maximum allowable without voter approval, will raise county tax revenues by 36%. The levy increase was approved as part of the county’s $36 million budget for fiscal 2018-2019.
Dorn said it’s expected to take around eight years to pay off the judgment. However the county, by state statute, isn’t allowed to enter into a long-term agreement, so the increase will need to be reevaluated every year. “That means that every year the county board will have to approve, set and come up with that dollar amount in their budget process,” he said.
The county had reviewed options for Chapter 9 bankruptcy but Dorn said a bankruptcy attorney said the county is not in poor enough shape financially.
The county is still hoping to be able to borrow the full judgment amount from the state of Nebraska either through a state loan or having the state absorb the full payment, but that would require legislative action.
Two legislative bills were introduced this year on that issue, one to allow state payment, while the other would have authorized a low interest state loan to help pay the judgment. Neither was approved.
Dorn and Don Schuller, the Democratic candidate who is running against Dorn in the legislative race, have both have said they supported the bills introduced to the Nebraska Legislature.
Dorn said that the Gage County board is revisiting coming up with another proposal that gets some financial assistance from the state or maybe to have other avenue to help pay the judgment.
“There is nothing definite but one suggestion has been to create new revenue stream such as a wheel tax," Dorn said, referring to a vehicle fee. “We are looking at if we can currently do that or if there needs to be a state statute in order for us to do it.”
The county had earlier considered bonding to pay the judgment but Dorn said that would have required a vote of the people and said that all signs point to the bond not getting passed. “Everybody we talked to -- everybody on the board, those we talked to in the county -- said we’d be lucky to get 10 to 15% of the vote for that,” said Dorn.
