Limiting TIF

This session, several bills have been introduced by different senators to address Tax Increment Financing --or TIF-- including a proposed constitutional amendment introduced by me: LR 394 CA. The Nebraska Department of Economic Development describes TIF as "a method of financing the public costs associated with a private development project ... the property tax increases resulting from development are targeted to repay the public infrastructure investment required by a project." I support TIF, as the idea behind it is a solid one: addressing "blighted and substandard" areas. Areas which are "blighted and substandard" are often not only an eyesore to the community, but discourage new homes and businesses nearby, and lower property values for the entire area surrounding them, which reduces tax revenue, costing money for residents, cities, counties, school districts, and other taxing bodies.

The problem Nebraska has been experiencing in recent years, however, is that some communities have moved toward treating TIF like a no-limit credit card, and some who are affected have no say. While the city which will be forgoing property taxes on the TIF area has the deciding authority on TIF, other entities which draw property tax revenue from the affected area, like school districts and libraries, do not have a say unless the city council chooses to consult with them -- something they have no obligation to do. This may seem inconsequential when a TIF project can raise property values, increasing the revenue for those other bodies without raising tax rates, but the taxing bodies will only realize that increased revenue once the TIF bond repayment period is over -- upwards of 15 years. Additionally, TIF can distort the TEEOSA formula for schools.

Say that a city of 10,000 people used TIF to complete infrastructure improvements and subsidize development of a factory complex which will bring 1,000 new jobs. New workers move to the city, and some have children, raising enrollment at the local school by 100 to 150 students. Not only will the school district not receive any revenue from increased value of the massive factory complex for 15 years, but they will have many additional students to educate as an added expense to the local property tax payer. Another example might be a town with two grocery stores. One store wants to build a new bigger store at a new location, and the city grants them TIF to help the project get off the ground. Now you have one new, improved grocery store and one old grocery store. One has benefited from taxpayer dollars in order to attract more customers, at the expense of the competition.

I always enjoy hearing from the Nebraskans I represent. Please feel free to contact my office with any questions or concerns that you might have. My email address is dhughes@leg.ne.gov and my phone number is (402) 471-2805.You can read more about bills and other work of the Legislature at www.nebraskalegislature.gov, and you can click on the Live Video Streaming NET logo to watch sessions, hearings, and other Capitol events.