Proposed change to redevelopment program terms advances

Lawmakers gave first-round approval Jan. 14 to a measure intended to facilitate the use of tax increment financing (TIF) in Nebraska cities and villages.

LR29CA, introduced by York Sen. Greg Adams, would place a proposed constitutional amendment on the November 2014 general election ballot. If approved by voters, the amendment would change how cities and villages are able to use TIF to rehabilitate substandard properties.

The amendment would replace a current requirement that property be designated “substandard and blighted” with a requirement that it be “in need of rehabilitation and redevelopment.”

An Urban Affairs Committee amendment, adopted 37-0, removed a provision that would have extended from 15 to 20 years the maximum length of time to repay a TIF bond.

Adams said TIF projects sometimes are hindered when owners of neighboring properties balk at the designation of the property to be redeveloped as substandard and blighted. Often they believe that the designation will reflect poorly on their own property, Adams said, adding that replacing the language may help.

Kearney Sen. Galen Hadley agreed, saying that in his time as a mayor and city council member it was difficult to talk to citizens about the substandard and blighted designation.

“There’s a negative connotation that really goes with those terms,” Hadley said.

Adams said the language change also would remind cities that the intent of TIF is limited to rehabilitation and redevelopment.

“I think this is a step in the right direction to clarify, to refocus,” he said.

Columbus Sen. Paul Schumacher offered and later withdrew an amendment that would have removed all qualifying language and would have added economic development projects to the proposal.

Schumacher said the change would “cut away the façade” that there are limits on how cities and villages can use TIF. He said TIF was not intended as an economic development tool, but has been misused by some cities and villages for that purpose.

Sen. Ernie Chambers of Omaha also expressed concern about the proposal. Allowing only areas classified as substandard and blighted to be eligible for TIF guards against misuse, he said.

“If we have constitutional language that is being circumvented by entities, don’t change the constitution – change their conduct,” Chambers said. He suggested that lawmakers consider changing state law rather than the constitution if they have concerns about TIF misuse.

Chambers offered and later withdrew a motion to indefinitely postpone the resolution.

LR29CA advanced to select file 31-0.