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Weekly Column 8-21-2017
Thursday at 1:30 PM, I will be attending the Urban Affairs Committee’s hearings at Mid-Plains Community College. Topics will be LR 60—to examine the findings of the State auditor’s TIF report and LR 160—a look at the potential of offering relocation incentives to attract residents to rural communities. The public is encouraged to attend and testify if they wish to.
Friday, I will be in Lincoln to attend a joint Revenue/Appropriation Committee meeting for a presentation of the 2016 Nebraska Tax Incentive Annual Report from the Nebraska Department of Revenue.
A brief TIF history before the Hearing Thursday: In November 1978, Nebraskans adopted Amendment 1, which added Article VIII-section 12 to our state Constitution. The amendment created an exception to the constitutional mandate that property taxes are levied “uniformly and proportionately upon all real property.”
Nationally, an idea had emerged to encourage urban renewal, to aid our country’s inner cities. Voters allowed municipalities to unilaterally confiscate from all local government entities the increased increment of property taxes attributed to new construction for the purpose of “rehabilitating, acquiring, or redeveloping substandard and blighted property in a redevelopment project.”
This created what’s known as Tax Increment Financing (TIF).
The voters understood the amendment. An Aug. 6, 1978, Omaha World-Herald article stated, the proposal was “to encourage developers to use downtown or main street property instead of building on the outskirts of town, where taxes and property values may be lower.”
The following year the Legislature enacted legislation with an understanding that TIF’s purpose was to fund urban renewal. They knew that existing redevelopment law defined “substandard” as conditions where “there is a predominance of buildings” marked by “dilapidation, deterioration, age or obsolescence, inadequate provisions for ventilation” or “conditions which endanger life or property by fire” or are “conductive to ill health.”
Blighted property was defined in terms such as “unsanitary or unsafe conditions,” and open land was defined as “unimproved land that has been in the city for 40 years and has remained unimproved during that time.” Lawmakers understood that TIF was not a description of a redevelopment area but instead was a financing tool for individual projects that fit certain criteria. Amendment 1 made an important distinction when it used the conjunction “and”: requiring that the property be both “substandard and blighted.” This provision was unlike older redevelopment laws, which allowed a project to be approved if either condition exists.
You get the point; we are not describing a farm field.
Last year, TIF diverted $70 million from local government coffers statewide. TIF has a negative effect on public school funding and adds to already high property tax burdens. Normal growth from housing and retail development brings the need for increased public services, but TIF’s tax revenue shift to developers causes existing taxpayers to foot the bill.
How did a good program that helped rejuvenate the riverfront in Omaha and the entrance to the old downtown in North Platte evolve into something now used as an economic development give away or threat—“give it to me or I won’t build”—for normal free market projects such as building homes on a newly annexed farm field, a chicken factory outside of town, or a big-box store on prime real-estate near an interstate- highway.
The answer is simple: When the Legislature enacted legislation defining TIF, they never allowed for state oversight. Imagine a speed limit without police, and you understand TIF use in Nebraska.
TIF today is whatever a city council wants it to be. Attorneys create tailored legal arguments that promote opportunistic, “end justifies the means” interpretations of TIF. Other than filing expensive civil lawsuits, local taxing entities and citizens have no recourse to stop such practices.
The most obvious way to stop this abuse is to elect city officials who have an appreciation of the rule of law. In lieu of that, I have and will continue to introduce legislation to put state oversight into TIF; our first attempts have been killed in committee.
Why, you ask, would elected city and state officials oppose legislation that promotes accountability and transparency in government? The answer is always the same—follow the money!
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