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The Nebraska Economic Development Task Force was created this year with the passage of Legislative Bill 641 to examine the effectiveness of economic development programs and to look at alternatives. Due to my position as Education Committee chairman, I am appointed as one of its 10 members.
So far we have met every month, requiring a trip to Lincoln. Originally, the subject was geared to analyzing what state and local economic development programs were effective, weighing the cost to the taxpayer versus the economic activity created.
The topic of late has turned to tax increment financing, a program that has legislative oversight by the Urban Affairs Committee. It was created by ballot approval of citizens, adding a new section to our State Constitution, Article VIII-Section 12. TIF is intended to create an incentive to transfer existing economic growth from the outer edges of a community to redevelopment in blighted and substandard older areas. It was never intended to become a tool for communities to use to compete with other communities for normal regional development growth; and it was never intended to be used as a cure-all for normal free-market irregularities such as a present perceived shortage of workforce housing.
This year I led a successful filibuster of LB496 — legislation that would have added private construction cost of projects (outside of Omaha and Lincoln) to the total cost property tax dollars could be used for to finance TIF. This was a major change to the present belief that TIF dollars are still tax dollars and should be used for public purpose: Limited to the cost of removal of blighted structures and replacement of older public infrastructure — streets and public utilities. The false perception during debate on the bill was that TIF was not being used for housing. The most recent TIF report by the Department of Revenue showed $557 million of statewide residential property value involved in TIF projects.
Most of those residential projects, due to being limited to public infrastructure cost, run their course on average much less than the allowable 15 years, thus returning those tax dollars back into the communities’ tax base sooner rather than later. By adding construction cost to the equation, all residential TIFs would run the full 15 years. The question also arises: Why would any contractor build a residence without TIF? It would soon become apparent that to compete, TIF would be a necessary part of the projects’ financing. Last year, outside of Douglas and Lancaster counties, Nebraska had $667 million in residential construction growth; considering the vast majority of that growth was in the city limits of communities, it is not hard to imagine the hit our state’s property tax base could take if LB 496 would pass. Last year, residential TIF had a $12 million cost; that could easily double in a few years.
In Lincoln County, we have an odd array of economic indicators. Low unemployment but, at the same time, loss of population is one. How can there be a shortage of housing when we have fewer people?
Is the cost of housing the problem, or is the cost of owning housing the culprit? I go back to high property taxes as a source for part of the housing situation. The mere fact that the supporters of LB 496 claim that property taxes are such a burden that the diversion of a homeowner’s taxes to a contractor for 15 years is a deciding factor to build should give pause to all of us when we examine our property tax burden. For example, a family looking to buy a $200,000 home in North Platte would pay on a 4 percent interest, 30-year mortgage a reasonable $955 loan payment; but when you throw into escrow an additional $100 for insurance and $350 for property taxes, a monthly payment of $1,405 can deter home ownership. So I continue to work for property-tax relief for all and fight against answers that only profit special interests.
As a statewide policy maker, I have to take into consideration unintended consequences of legislation. Often when you try to fix a perceived short-term economic bottleneck, you end up breaking the bottle.
Contact Sen. Mike Groene: firstname.lastname@example.org or 402-471-2729.