Council OKs blighted designation

Tuesday, February 19, 2013
Mike Bacon

McCOOK, Nebraska -- Tax increment financing is a powerful tool that makes major redevelopment possible in towns like McCook, a self-described "country lawyer" told the McCook City Council Monday night.

Mike Bacon should know. Twenty years ago, he helped Gothenburg use TIF to land a Baldwin Filters plant that might otherwise have come to McCook.

Following presentations by Bacon, McCook Economic Development executive director Rex Nelson, and with two citizens speaking against the proposal or urging caution, the council unanimously approved designation of a new area of McCook as Redevelopment Area 3.

"It's a harsh term," Bacon said of the "blighted, substandard and area in need of redevelopment" label that the new redevelopment area carries, along with two others.

In fact, legislation has been introduced to soften the terminology, but it will be difficult to enact because those terms are part of the Nebraska constitution.

"It irritates the bejabers" out of some owners of property carrying that designation, but it's "not indicative that your home is ugly."

In fact, the blighted and substandard designation can mean factors as simple as small lot sizes, the age of the buildings (not the condition) and infrastructure -- the latter a big consideration in much of McCook.

"You are blessed with 80-year-old water and sewer pipes," Bacon said.

Tax increment financing subsidizes redevelopment by using future taxes -- increased because of valuation improvements -- to finance infrastructure and other improvements now to make that increased valuation possible.

The Gothenburg lawyer pointed out a number of Nebraska TIF projects that could hardly be seen as rundown. The First National Bank building in Omaha, the Conagra Campus in the old "Jobbers Canyon" warehouse district in east Omaha, the worldwide Gallup headquarters in Omaha and the parking garage at the Cornhusker Hotel in Lincoln were all built with tax increment financing, he said.

There's even an urban legend that Warren Buffet's modest Omaha home was in an area considered for a blighted and substandard designation and TIF eligibility.

One Omaha property owner, Bacon noted, even filed a lawsuit when the city moved to remove his property's blighted and substandard designation.

It definitely worked in Gothenburg, Bacon said, listing a tax base of $39 million in 1993 and $183 million in 2012, along with 500 jobs associated with the Baldwin plant and other industries, plus 200 new housing units.

The Platte River community averaged about $640,000 in building permits each year in 1990, and about $5.4 million in more recent years.

"Being 'blighted and substandard' isn't a bad thing, it allows you to build things," Bacon said. TIF funding "can knock $20-40 thousand off the price of a house."

"It's the most powerful tool you have, and you don't have to ask other people to use that money."

With Bacon's guidance, North Platte used TIF funding to land the Walmart distribution center and a nearby Cabela's call center.

Walmart officials, initially hesitant to use TIF funding because of the potential adverse effects on school funding, relented after assurances from school officials, but guaranteed the bond and paid it off early.

The McCook Valmont plant, built with TIF funding, will generate $160,000 in annual property taxes once TIF is paid off.

Bacon said the blighted and substandard designation is rarely used to condemn property -- power the City Council already has. And, cities are prohibited from annexing land zoned for agriculture, he added.

The latter concerns were raised by Vicky Lampman of McCook, who was concerned her family's long-time property might be annexed because of the blight designation.

"If McCook is losing population, why do we need more houses?" she asked.

"Please leave us alone out there!" she pleaded.

Former city councilwoman Sue Doak, who noted that most of her residental and rental property was in the redevelopment area, urged the council to scale back.

"I'm thinking we're too enthusiastic at this point."

While she agreed new water and sewer lines are needed, she disagreed that an area of older homes, like East First Street, is improved by being interspersed with new houses.

"Let's keep some of the flavor of this town," she urged.

Proponents, however, contend the larger redevelopment area will allow TIF funding to be shifted from one place to another within the designated area.

Larry Rathbun of Four County Feed on North Highway 83 said "I take offense when somebody says it's blighted. If you want to improve this city, make Highway 83 a four-lane highway, and it will improve."

Before Bacon's presentation, Rex Nelson of the McCook EDC noted that there are only 25 or 30 houses on the market currently, compared to a normal 100.

About 1 percent of local houses "age out" every year -- become old enough to qualify for the blighted and substandard designation, meaning McCook needs to build about 100 every year.

"We're not getting that," Nelson said.

The new redevelopment area will help address that need, Nelson said, applying TIF financing to housing here for the first time.

As an example, his slide presentation showed example of "Crown" homes -- credit rent to own -- in Lexington, available on a true 10-year rent-to-purchase basis.

Dr. Mike Nielsen questioned the Downtown Revitalization Plan, saying it didn't address parking problems created by employees who are unwilling to walk a block or more to work, choosing instead to park in front of other downtown businesses.

He urged the McCook Police Department to take a more active role in parking enforcement, rather than responding on a complaint basis only.

Councilman Jerry Calvin said his elderly mother parks in an open city lot to walk a block to her business.

"It hackles me a little when employees don't want to walk a block," Calvin said.

It was noted that acceptance of the Downtown Revitalization Plan was needed as part of the Community Development Block Grant process, and was different than adoption of the plan -- which will take place only after further refinement.

Some $430,000 in CDBG funding and local match funds will initially be available for revitalization projects, and probably will be spent on improvements at Norris and B. The rest of the project will take much more money and many years to complete, it was noted.

Public works director Kyle Potthoff and engineer Chris Miller of Miller & Associates discussed details of the one- and six-year road plans, which were adopted.

Potthoff said new standards require "permitting" of encroachments along the East Seventh to Park Avenue project, which will mean paperwork documenting every mailbox, birdhouse, flag pole or other structure which is technically encroaching on the city's right-of-way. The city won't require that they be moved, he said.

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