In January, State Auditor Charlie Janssen issued a scathing audit on the misuse of tax increment financing (TIFs). Last week, I testified at a legislative hearing on an interim resolution examining the use of TIFs. And after hearing other testimony from mostly public officials explaining why they had unintentionally misused TIF from misinterpretation or confusion, I concluded that the entire TIF statute requires remediation.
The original intent of TIF was to allow counties and municipalities to redevelop substandard and blighted areas. However, the original language and subsequent amendments generously allow much leeway for communities to use the statute as an economic development tool, sometimes in areas not blighted. A prime example is the TIF designation given Omaha's Crossroads, a prime commercial area.
A revised TIF law should narrowly define the terms substandard and blighted and definitively state that TIFs target areas needing redevelopment, not huge swaths available for economic development. It must establish strict monitoring and oversight clauses, more accurate collection of funds, better documentation of redevelopment expenses and performance, and meticulous compliance with other notice requirements. Localities should retain the ability to demand the return of funds used to subsidize private investors if redevelopment promises not fulfilled.
A perfect opportunity for reform lies in LB 262, sponsored by Sen. Mike Groene, to prohibit use of TIF for buying or planning or preparing for rejuvenating undeveloped land not depressed or blighted. His bill would prevent property taxes meant for schools and other core services going to developers and prevent redevelopment that would have occurred without TIF. This revision also would prevent developers from playing one community against another to gain TIF status.
Nebraska Taxpayers for Freedom