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LB496 allows new construction of workforce housing to be eligible for Tax Increment Financing (TIF). On the final day of the Legislative session I tried to kill LB496 because I knew how it would raise property taxes. The Nebraska State Legislature passed LB496 over and against my objections to the bill. There were several reasons to oppose this bill and I would like to share some of those reasons today, but the most important reason of all is that LB496 will increase your property taxes.
LB496 offers no clear definition of what constitutes workforce housing. For instance, the bill describes workforce housing as “housing that meets the needs of today’s working families,” and “housing that is attractive to new residents considering relocation to a rural community.”
The original purpose of TIF financing was to redevelop substandard and blighted areas within urban neighborhoods. For instance, Nebraska State Statute 18-2101 states that “land cannot be added to an existing community redevelopment area…unless the additional land is declared blighted or substandard…” So, we should ask if newly constructed workforce housing counts as the redevelopment of blighted or substandard properties.
As Americans we value free-market capitalism. But, TIF financing disrupts our free-market principles. To the contrary, I believe that whenever there is demand for new homes, private investors will build them. Government does not need to be the answer for every problem as some like to believe.
Characteristic of all other government funded programs of this kind, TIF will be nearly impossible to get rid of. Once contractors get a taste of TIF financing and learn that they can always use TIF monies to fund their construction projects, TIF financing will quickly become the norm.
Whenever workforce housing gets financed through TIF, property taxes get diverted away from local units of government. While property taxes from the base of a TIF funded property will continue to go to local units of government, property taxes gleaned from the new construction will not. This results in a net loss of revenue for our local units of government, such as schools. For instance, instead of being used to finance local units of government, property taxes collected from new construction on TIF financed properties will go to paying back bond holders. In Douglas County, for example, local units of government missed out this year on $37 million in property taxes collected from new construction on TIF financed properties.
Whenever workforce housing gets financed through TIF, other property owners have to make up the difference in lost property tax revenues. For instance, if ten new houses get built with TIF financing and ten new families with children move into those new homes, then the other property owners living in the same school district will have to pay for the extra costs associated with educating those children in the public schools. Consequently, TIF financed workforce housing raises the property taxes of all those who purchased their homes in the standard way.
LB496 was a bad bill for Nebraska. TIF financing for the construction of workforce housing is not necessary. Contractors who want to build new houses in our state can fund them in the traditional way without disrupting our free market economy. When Legislators voted for LB496, they were voting for a property tax increase. Unfortunately, government often picks winners and losers and uses your tax dollars to do it. To the contrary, I stand for less taxes and less government!