Urban Affairs Committee Considers Changes to Tax Increment Financing
The Nebraska Legislature’s Urban Affairs Committee and Executive Board continue to study the use of tax increment financing (“TIF”), potential restrictions on the use of TIF, and the use of Local Option Municipal Economic Development Act or LB 840 funds for economic development projects.
LB 1059 (Crawford) requires redevelopers applying for TIF or LB 840 funds to disclose whether they intend to file an application for tax incentives under the Nebraska Advantage Act (the “Act”). Redevelopers must also disclose the estimated benefits, including the amount of local sales tax (but not use tax) refunded under the Act.
The Urban Affairs Committee also amended LB 1059 to effectively incorporate LB 808 and LB 860, which allow a municipality to amend an existing LB 840 plan without a vote of the people in certain circumstances—to add or remove a qualifying business to qualify for funds or to make technical changes to comply with local, state, or federal law; and allow cities (other than Omaha and Lincoln) to make grants and loans under LB 840 for the construction or rehabilitation of workforce housing. The Urban Affairs Committee declared LB 1059 one of its two priority bills for the session, and LB 1059 is currently on Select File, the second to last round of debate.
The Committee also considered, and rejected, several other bills relating to TIF:
- LB 1042 (Friesen) allows a county board of equalization to approve or deny a TIF project. LB 1042 also requires the excess value of properties that qualify for TIF to be included in the adjusted valuation of school districts for purposes of allocating state aid through the Tax Equity and Educational Opportunities Support Act. The Committee has indefinitely postponed LB 1042.
- LR 394 CA (Hughes) is a constitutional amendment that allows a political subdivision to exclude its taxes from any pledge made by a city or village for a TIF project. The Committee has indefinitely postponed LR 394 CA.
- LR 399 CA (Davis) is a constitutional amendment that requires voter approval of TIF by any city, school district, and county whose taxes would be pledged under the TIF project. The question must include the total dollar amount of taxes the city or village may pledge and a timeframe during which the city or village is empowered to pledge such total dollar amount of taxes. LR 399CA does not affect any TIF project approved prior to January 1, 2017. The Committee has indefinitely postpoined LR 399 CA.
LB 1042, LR 394CA, and LR 399CA will not receive additional consideration by the Legislature in 2016.
Two additional bills are also pending before the Legislature:
- LB 719 (Groene) prohibits the use of TIF to develop vacant land and is currently pending before the Urban Affairs Committee.
- LB 1102 (Davis) authorizes the office of the Legislative Audit, at the direction of the Nebraska Legislature’s Legislative Performance Audit Committee, to audit any city, village, or redevelopment authority that uses TIF and is currently pending before the Executive Board.
The Legislature prioritized neither bill, and therefore both are unlikely to receive additional consideration by the Legislature.
Please do not hesitate to contact us if you have questions about these bills or any others. Thank you.