The Urban Affairs Committee heard testimony Feb. 24 on a bill that would make several changes to Nebraska’s tax increment financing (TIF) laws.
Hyannis Sen. Al Davis, sponsor of LB596, said the bill would increase transparency and accountability for TIF projects. Davis said TIF was created in the 1990s as a tool for cities to encourage redevelopment of blighted areas, but instead has become an economic development tool. For example, he said, the standards for declaring an area substandard and blighted—in order to qualify for TIF—are not uniformly interpreted or applied.
“We need to make sure that these TIF projects are in compliance and are delivering on their promises,” Davis said.
LB596 would create the Tax-Increment Financing Division of the Auditor of Public Accounts, whose primary responsibility would be to provide state-level assistance for TIF projects. The division would establish a fee structure to be paid by TIF project developers to cover the costs of the division.
Cities would be required to report to the property tax administrator and the division regarding strategies and priorities for TIF use and a summary of TIF project contributions to the community. These reports would be displayed on a public website created by the division.
The division also would have the authority to audit redevelopment projects and proposals to ensure compliance with state law.
Cities using TIF would be required to conduct an annual review of each redevelopment plan to determine whether the stated goals and objectives of the project have been met. If a project fails to meet its stated goals, TIF funding could be recaptured by the city.
Finally, the bill would require that each community redevelopment authority include a member approved by the school board of the local school district, a member approved by the county board and a member approved by the local community college board of governors.
Davis said schools and counties are impacted by TIF when money is diverted from the tax base on which they rely, but they do not always have a seat at the table when decisions are made.
Renee Fry of OpenSky Policy Institute testified in support of the bill. TIF projects reduced taxable property in Nebraska by $2.6 billion in 2013, she said, and reduced property tax revenues by more than $55 million.
Those reductions in the tax base ultimately fall to all Nebraska taxpayers, she said, which justifies statewide oversight of TIF usage.
“We believe that TIF should be as transparent as possible,” Fry said. “Communities vary drastically in their applications of TIF despite the statewide implications.”
Russ Karpisek, legislative liaison for the state auditor’s office, testified in support of creating a new division to provide statewide oversight for TIF.
“The auditor would be very willing to take on this responsibility,” he said, “with the caveat that we would need more funding to do this.”
Lincoln Mayor Chris Beutler testified in opposition to the bill, saying it is unnecessary.
Nebraska does not need a new state office to oversee the use of TIF, he said, and lawmakers should be wary of placing unnecessary constraints on a city’s ability to use it as a redevelopment tool. For example, he said, TIF has been responsible for $500 million of private development in Lincoln.
“TIF has been an extremely valuable took in revitalizing some of the more challenging sectors of the Lincoln community,” Beutler said. “It has literally reshaped the city.”
Rick Sanders, a developer from Bellevue who used TIF to build a senior living facility, also opposed the bill. Cities have very few economic incentive options, he said, and adding layers of bureaucracy to the process might discourage developers.
“If TIF weren’t available, I could not have afforded to do the things that needed to be done on that property,” Sanders.
The committee took no immediate action on the bill.