Abused and distorted
This past legislative session, Senators Friesen, Erdman and I led a successful filibuster of LB 496, the legislation sought to expand the use of Tax Increment Financing (TIF), adding private construction cost of housing projects (outside of Omaha and Lincoln) to the total cost that property tax dollars could be used for to fund supposed redevelopment projects.
If enacted, it would have created a costly policy change to the present statutory interpretation that TIF dollars are tax dollars and should be used for public purposes: limited to the cost of removal of blighted structures and replacement of older public infrastructure (streets and public utilities). TIF was created by a successful voter-approved 1978 ballot issue, adding Article VIII-Section 12 to our State’s Constitution. TIF is intended to create an incentive to transfer existing economic growth from the outer edges of a town to redevelopment in aged-blighted and substandard areas. It was never intended to become an economic development tool for towns to compete with other communities for normal regional development growth; and it was never intended to be used as a cure-all for normal free-market irregularities such as a present perceived shortage of workforce housing. At that time, the Legislature understood TIF to be primarily an urban renewal tool; economic development only as a by-product and it wisely assigned legislative oversight to the Urban Affairs Committee.
A false perception was presented during debate on the bill that TIF was not being used for housing. The recent TIF report by the Department of Revenue proves otherwise, showing statewide that $557 million of residential property was involved in TIF projects.
Due to being limited to public infrastructure cost, most residential projects run their course much less than the allowable 15 years; thus, returning those tax dollars back into the communities’ property tax base sooner rather than later. By adding construction cost to the equation, all residential TIFs would run the full term. The question also arises, why would any contractor build a residence without TIF? It would soon become apparent that to compete, TIF would be a necessary part of the project’s financing.
Last year, outside of Douglas and Lancaster counties, Nebraska had $667 million in residential construction growth; considering the majority of that growth was in the city limits of communities, it is not hard to imagine the hit our State’s property tax base could take if LB 496 would pass. Last year, TIF diverted $70 million in Nebraska property taxes away from local government revenues, residential TIF accounted for $12 million of the total.
LB 496 would cause that number to grow at an alarming rate.
Property taxes support our schools and public safety, if your neighbor’s home is TIF’d, someone must make up the property taxes lost. That most likely will be YOU!
In rural Nebraska, we have low unemployment but at the same time, loss of population.
The bill’s proponents claimed lack of new rural housing was a deterrent for job applicants, although a tight housing market does not seem to deter Omaha and Lincoln job seekers.
I go back to high property taxes as one reason for the present housing situation.
It should give pause to all of us when supporters of LB 496 admit that property taxes are such a burden, that a 15 year diversion of a homeowner’s taxes to housing investors would be a deciding factor whether or not investors choose to participate in a housing project.
Even with TIF, a mortgage payment comes due.
A family purchasing a $200,000 home in North Platte would pay on a 4% interest, 30 year mortgage a reasonable $955 loan payment; escrow adds another $100 for insurance and $350 for property taxes, creating a budget stressing monthly payment of $1,405.
So, in contrast we continue to work for property tax-relief for all and fight against answers presented by the political lobby intended to profit only special interest.
As statewide policy makers, we have to consider unintended consequences of legislation. Often when you try to fix a perceived short term economic bottleneck, you end up breaking the bottle.