TIF rules updated

An extensive update to the state’s tax-increment financing rules passed March 15.

Introduced by the Urban Affairs Committee, LB874 is the result of an interim study to answer questions about the use of TIF that were raised in a 2016 report by the state auditor of public accounts.

Under a segment of the state’s community development law, Nebraska municipalities are able to designate areas as substandard and blighted, allowing them to be redeveloped. When a redevelopment plan is approved, TIF bonds may be issued for the acquisition and improvement of the property. The increased property taxes generated by the improvements are used to pay for the financing of TIF projects.

Among other provisions, LB874 authorizes the state auditor to audit a community redevelopment authority whenever the auditor believes it necessary, or when requested to do so by the governing body.

The bill requires that:
• a planning commission hearing be held on a redevelopment plan;
• municipalities conduct or contract for a substandard and blighted analysis on whether a redevelopment project meets the requirements and include that analysis in the public hearing notice;
• cost-benefit analyses on TIF projects consider the impact on school districts and be made available to the public;
• if a redevelopment project divides the tax on only a portion of the real property included in the project, the property must be related to the redevelopment project;
• proceeds from indebtedness incurred for a TIF project be prohibited from being used to establish a revolving loan fund;
• TIF redevelopment contracts include a provision requiring developers to retain copies of all supporting documents associated with the project and provide them to the municipality;
• an annual TIF report on projects be provided to a municipality’s governing body; and
• each municipality that utilizes TIF retain copies of all redevelopment plans, substandard and blighted studies and analyses, cost-benefit analyses and supporting documents associated with the redevelopment plan or any related substandard and blighted declaration.

The bill incorporated a provision of LB846, introduced by Albion Sen. Tom Briese, which require that findings commonly referred to as the “but/for” test be documented in writing.

LB874 also:
• limits reimbursement of costs incurred prior to the approval of a redevelopment project;
• redefines the term redevelopment project to include enhancements to structures in the redevelopment project area that exceed minimum building and design standards in the community and prevent recurrence of substandard and blighted conditions;
• allows redevelopment projects to include a provision that requires that all property taxes levied on a redevelopment project be paid before such taxes become delinquent to be eligible to receive TIF funds;
• clarifies that audits done of a community redevelopment authority be paid for by that authority; and
• makes a series of reporting, auditing and notice clarifications.

Lawmakers passed the bill 47-0.