How would you like to pause your property taxes? You know, like going 15 or 20 years without paying any additional property taxes so you could put a new roof on the house or remodel the bathroom. Wouldn’t that be nice? Well, that’s exactly how city officials get to do business in Nebraska. They do this through a very loosely governed program known as Tax Increment Financing (TIF).

Under the current state statutes which govern TIF, city officials can declare any area they so desire as “blighted.” Once an area has been designated as blighted, loans can be secured and structures can be renovated; however, the property taxes won’t increase for the next 15 years in these blighted areas, or 20 years for extremely blighted areas.

The original purpose of TIF was for the renovation of old, dilapidated buildings and to help improve the economic development of a city’s commercial district. However, LB25 (2021), expanded the use of TIF dollars to include the construction of new workforce housing. Proponents of LB25 argue that TIF financing can reduce the value of a home by $50,000, making it more affordable. However, we should ask: “Should government really be in the business of building new workforce housing?” For example, how can a regular developer compete against another developer who gets $50,000 in TIF monies to construct a new house? I submit that this is only a problem because our property taxes are too high.

Many of Nebraska’s cities now abuse TIF. Cities now use TIF dollars to lure new industries, while businesses use TIF as a negotiating tool. The TIF laws are poorly written and give cities too much latitude. For example, the City of Omaha recently approved TIF financing for a new streetcar project which required the entire swath of the 50-block streetcar route to be declared as a blighted area.

By now you may be asking yourself, “So what?” or “Why should it matter as long as these TIF projects are improving the overall economic development of the city and will eventually result in more property tax dollars coming into the city down the road?” Well, State Auditor, Mike Foley, is not so easily convinced. In a letter about TIF financing addressed to the Nebraska Legislature dated September 10, 2024, Foley said, “When overused or misused, however, this popular financing tool risks undermining the interests of local property taxpayers.” Foley continued by saying, “The core concern seems to be ensuring that TIF is applied properly, in strict accordance with the law and in a manner that properly balances economic development needs and reasonable property tax burdens on citizens.”

TIF has simply become too popular with cities. Consider how TIF financing has doubled within the last decade. In 2014 only a little more that $60 million had been approved in TIF financing. This amount grew incrementally each year thereafter so that by 2023 a little more than $120 million had been approved for TIF projects. The number of TIF projects also doubled during that same decade. When this rise in TIF financing is analyzed against the backdrop of skyrocketing property taxes, the alarm bells begin ringing uncontrollably.

One of the major problems with TIF concerns enforcement of the state statutes. Foley has identified numerous violations of TIF financing, but the laws governing TIF financing lack teeth and regulatory enforcement. Consider, for example, that TIF monies should only be made available for properties where at least half of the parcel has been in the city limits for 40 years, but there is no penalty for violating that law.

Next week I plan to attend a hearing on LR416, an interim study by Sen. Robert Dover of Norfolk (LD19). The purpose of the hearing to explore the return on investment on TIF dollars used to fund workforce housing. I have never been in favor of the government funding workforce housing.