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Legislative Bill 531 Makes Several Important Changes to Tax Increment Financing in Nebraska

on Wednesday, 31 January 2024 in Dirt Alert: David C. Levy, Editor

Legislative Bill 531 (“LB 531”) became law on June 6, 2023.  This bill made six important changes to Community Development Law and tax increment financing (“TIF”) in Nebraska.  While LB 531 has been law for a bit, it makes enough important changes that we thought it beneficial to send a reminder and summary to our clients. 

  1. Authorization to “De-Blight”.

LB 531 provides for a governing body of the city or village to remove the designation of blighted[1] and substandard[2] or extremely blighted[3] from an area.  In doing so, the governing body may consider any studies or analyses of the area, conducted pursuant to sections 18-2101.02 or 18-2109 of the Nebraska Revised Statutes, or examine the conditions of the physical area itself.  If the governing body finds that the area no longer constitutes a substandard and blighted or extremely blighted area, it may remove the designation by resolution. 

LB 531 also allows for the removal of both designations by one resolution, if applicable.  Further, under this new law, the removal of such designation from an area does not affect the validity of existing redevelopment plans or projects so long as they were approved during a time in which the project area was designated as blighted and substandard or extremely blighted. 

Last, LB 531 implemented a mandatory assessment for areas that have been designated substandard and blighted or extremely blighted for more than thirty (30) years.  Beginning January 1, 2026, if applicable, a governing body may not approve any new redevelopment plans until the city or village conducts an assessment of the area.  This must include, (a) an analysis of the factors contributing to the lack of redevelopment in portions of the area that have had no significant redevelopment, and (b) a plan for future goals of redevelopment in the area.  This assessment must be made available for public inspection within the city or village.  This would not apply to downtown areas of cities of the first or second class and villages. 

  1. Authorization of Allocation of TIF Funds for Affordable Housing.

LB 531 authorized TIF funds for certain projects to be used for both the redevelopment project and nearby affordable housing.  To qualify, the project must either be new construction, rehabilitation, or acquisition of:  

(a) households with annual incomes below the area median income or located within 600 yards of the Omaha Streetcar; or

(b) housing used as primary residences for individuals with annual incomes below the area median income. 

If a city of the metropolitan class pursues this it must first adopt a qualified allocation plan that dictates how such funds would be distributed and must prioritize financially feasible projects that would affect the lowest income occupants. 

  1. New Reporting Requirements

Nebraska community development law requires that the Community Redevelopment Authority (“CRA”) provide an annual report to its city council or village board of trustees.  LB 531 added to the required contents of these annual reports to include the estimated amount of outstanding indebtedness for each redevelopment project and an estimated date whereby the indebtedness is expected to be paid in full. 

  1. New Rules Regarding Expedited Redevelopment Plan Review (“Micro‑TIF”).

Current Nebraska community development law allows for expedited review (i.e., 30-day approval process) of redevelopment plans so long as certain criteria are met.   LB 531 implemented four (4) additional provisions to the Micro-TIF framework.

(a) A city or village may, by resolution, limit the amount of Micro-TIF projects it may approve annually. 

(b) A city or village may revoke its election to allow for Micro-TIF at any point via resolution. 

(c) A redeveloper is no longer required to submit building permits as part of its application for Micro-TIF funding. 

(d) The promissory note associated with the Micro-TIF project no longer must be attached to the land, instead, the payments on the note go directly to the holder. 

  1. Workforce Housing TIF Housing Study Requirements.

Under LB 531, a housing study is “current,” and thus valid for use in awarding TIF, if conducted within the last twenty-four (24) months for cities of the metropolitan class and sixty (60) months for all other cities and villages. 

  1. Confirmation of Use of “Workable Programs” to Allow for Division of Taxes for Multiple Properties Within a Designated Area.

LB 531 confirmed that a governing body or CRA may designate an area, encompassing multiple properties, as a “workable area.”  This allows the governing body provide for guidelines and criteria for TIF applications, and, allows for the division of taxes of all parcels within the workable area to provide TIF funding to a redevelopment project within that area.

Attorneys at Baird Holm LLP have extensive experience in tax increment financing, tax credits, and other alternative forms of project financing.  If you have any questions about these proposed regulations or would like to discuss the potential eligibility of your entity, please do not hesitate to contact the firm.

[1] All references to “blighted” herein shall be with respect to the term as Nebraska Revised Statutes section 18-2103(3) so defines. 

[2] All references to “substandard” herein shall be with respect to the term as Nebraska Revised Statutes section 18-2103(31) so defines. 

[3] All references to “extremely blighted” herein shall be with respect to the term as Nebraska Revised Statutes section 18-2103(13) so defines.

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