Session Review: Urban Affairs

Economic development, tax-increment financing, vacant property concerns and updates to laws regarding the governing of municipalities were among the Urban Affairs topics taken up by lawmakers this session.

Tax-increment financing

Senators passed an extensive update to the state’s TIF rules this session.

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.

LB874 makes changes to a wide range of reporting, audit and notice requirements for TIF projects as well as substantive changes. 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 also prohibits proceeds from indebtedness incurred for a TIF project from being used to establish a revolving loan fund.

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

Lawmakers passed the bill 47-0.

As introduced by Gering Sen. John Stinner last session, LB496 would have authorized cities of the first and second class and villages to include the construction of single-family or multi-family housing as part of a redevelopment project eligible for TIF.

As amended this session, the bill is limited to rural communities—defined as any municipality in a county with fewer than 100,000 inhabitants—and workforce housing in areas with high unemployment and poverty rates within cities. It defines workforce housing as owner-occupied housing units that cost no more than $275,000 to build or rental housing units that cost no more than $200,000 to build.

LB496 requires a municipality to conduct a housing study, prepare an incentive plan for the construction of housing meant for new or existing workers and hold a public hearing on the plan. A public hearing on a workforce housing incentive plan must be separate from a public hearing on a TIF redevelopment plan.

After the hearing, the municipality is required to determine that the plan is necessary to prevent the spread of blight and substandard conditions within the municipality, will promote additional safe and suitable housing for people employed there and will not result in the unjust enrichment of any individual or company.

The bill passed on a vote of 35-8.

A bill that would have ended an aspect of TIF that allows inclusion of undeveloped vacant land for municipal development was indefinitely postponed by the committee on a 6-0 vote.

LB967, introduced by North Platte Sen. Mike Groene, would have removed a provision of community development law allowing undeveloped vacant land within a three-mile radius of the city limits to be acquired for redevelopment when it is not located in an area deemed blighted or substandard.

Economic development

Grant limitations under the state’s Civic and Community Center Financing Act are expanded under a bill passed this session.

LB940, introduced by Henderson Sen. Curt Friesen, increases by 50 percent the amount of funds eligible to be requested by municipalities and reduces from five to two years the period that a municipality must wait between grant awards.

The CCCF fund is supported by a turn-back of 30 percent of new state sales tax generated by arenas constructed under the Convention Center Facility Financing Assistance Act and the Sports Arena Facility Financing Assistance Act and retailers near the arenas. Grants from the fund are awarded to communities based on a project’s readiness, financial support and likelihood of attracting new activity to Nebraska.

The bill expands the list of eligible CCCF properties to include parks and historic districts. It also clarifies that property receiving a grant under the CCCF Act must be owned by the municipality and cannot be sold within five years of receiving a grant.

Applications from municipalities that have not received grant funds within the last 10 years will be given priority by the state Department of Economic Development.

The bill passed 48-0 and took effect immediately.

One of the caps in the state’s Local Option Municipal Economic Development Act was removed by a bill passed 47-0 this session.

Currently, a cap of four-tenths of one percent of a municipality’s taxable valuation is placed on funds derived from local revenue sources that the municipality can use for approved economic development programs.

LB614, introduced last year by Omaha Sen. Justin Wayne, removes that cap. The bill leaves in place a second, flat-dollar spending cap and the possibility of voter-approved limitations on the municipality’s economic development program.

Other measures

Gov. Pete Ricketts vetoed an omnibus Urban Affairs measure that would have addressed a wide range of laws governing municipalities in Nebraska.

LB873, as introduced by the Urban Affairs Committee, would have made a variety of clean-up changes to state law related to the governing of cities, including clarifying terms and eliminating antiquated and unnecessary language.

The governor focused his objections on provisions included in the bill to expand land bank authority statewide. A land bank is a tax-exempt political subdivision that acquires, manages and develops vacant and tax-delinquent properties.

Originally introduced by Grand Island Sen. Dan Quick as LB854, the provisions would have allowed any Nebraska municipality to create a land bank under the Nebraska Municipal Land Bank Act and clarified that land banks may enter into agreements under the Interlocal Cooperation Act for the joint administration of multiple land banks.

Currently, only municipalities in Douglas and Sarpy counties are eligible under state law to create land banks.

Lawmakers passed the omnibus bill on a 26-15 vote April 18, the final day of the 2018 session.

In his veto message, the governor said land banks are unelected entities that create an additional layer of government vested with “exceptionally” broad powers—including the ability to issue debt without a vote of the people. He said expansion of those powers statewide is unnecessary.

LB873 included provisions of six additional bills:
• LB735, introduced by Bellevue Sen. Carol Blood, which would have clarified that municipalities have the authority to enter into an interlocal agreement with a county in which the extra-territorial zoning jurisdiction of the municipality is located to provide for joint and cooperative action to abate, remove or prevent nuisances within the ETJ;
• LB748, introduced by Lincoln Sen. Matt Hansen, which would have clarified references to municipal population thresholds, providing that such thresholds are met based on either the most recent federal decennial census or the most recent revised certified count by the U.S. Bureau of the Census;
• LB756, introduced by Lincoln Sen. Adam Morfeld, which would have prohibited municipalities from adopting or enforcing an ordinance or regulation that prohibits the use of a property as a short-term rental, unless necessary to protect public health and safety;
• LB765, introduced by the Urban Affairs Committee, which would have amended sections of law governing first class cities to clarify that they apply only to first class cities;
• LB768, introduced by Quick, which would have authorized first- and second-class cities and villages to make grants and loans under the Local Option Municipal Economic Development Act for early childhood infrastructure development; and
• LB880, introduced by Hansen, which would have required cities to include an early childhood element in their comprehensive plans no later than Jan. 1, 2022, either when adopting a new or updating an existing comprehensive plan.

Lawmakers passed a bill intended to help cities address the problem of vacant properties this session.

Under LB256, sponsored by Albion Sen. Tom Briese, a municipality may adopt an ordinance that allows it to identify and register vacant properties, collect fees to compensate for the public costs of property vacancy, plan for rehabilitation and encourage occupancy.

The bill does not apply to metropolitan- and primary-class cities. Currently, Omaha is the state’s only metropolitan-class city and Lincoln is the only primary-class city.

A registry may include commercial or residential property and will apply only to buildings located within a city or village’s corporate limits. An ordinance is required to exempt vacant properties that are advertised in good faith for sale or lease.

If adopted, a vacant property registration ordinance requires registration of a property vacant for 180 days or longer. An initial registration fee of no more than $250 for a residential property and $1,000 for a commercial property would be assessed. Supplemental fees are allowed and exemptions to the fee requirement may be provided.

Unpaid registration fees and fines will become a lien on the applicable property upon notice to the county. LB256 passed on a 47-0 vote.

Finally, lawmakers bracketed a proposal that would have given neighborhoods an additional avenue to pursue improvement projects.

LB986, sponsored by Hansen, would have authorized the development of neighborhood improvement districts in Nebraska. A municipality could have imposed an NID special assessment, with funds to be used only for a specific purpose.

A motion was offered during general file debate to bracket the bill until the end of session, which prevailed on 27-18 vote.