Tax Increment Financing
Tax increment financing (TIF) in Nebraska is primarily designed to finance the public costs associated with a private development project. Essentially, the property tax increases resulting from a development are targeted to repay the public investment required by a project.
TIF provides a means of encouraging private investment in deteriorating areas by allowing city governments to devote all property tax revenue increases to repay the public investment needed to attract development. Nebraska voters approved community tax increment finance (then known as community improvement financing) in November 1978 and the Unicameral passed enabling legislation in 1979. The legislature revised the TIF statutes in 1988, 1991, 1995, 1996, 1997, and 1999. Forty-five other states have authorized TIF.
The Process
Under Nebraska law, local governments may use TIF only in redeveloping substandard and blighted areas within a community. Following such designation, a community redevelopment agency prepares a redevelopment plan. TIF projects may be commercial, residential, industrial, or mixed use. Generally, TIF funds can be used for land acquisition, public improvements and amenities, infrastructure, and utilities. Every TIF project evaluation must include a cost-benefit analysis. After a project is approved, the locality typically authorizes the issuance of TIF bonds to undertake public improvements in the designated area. TIF bonds may be issued in conjunction with revenue bond issues for water, sewer, or parking purposes and are exempt from state and federal income taxes. Land assembled for the project is conveyed to the developer at a "fair value." The developer then proceeds with construction in accordance with the approved plan and the bonds are paid off from the increase in property taxes resulting from the development.
Issuance and Repayment of TIF Bonds
- Once a project is approved, TIF bonds are issued and used for acquisition, clearance, and public improvements.
- Then, the redevelopment site is transferred to the developer "at its fair value for uses in accordance with the redevelopment plan" (Sec. 18-2115), who then constructs the project approved in the plan.
- The property tax increases generated from the redeveloped site are applied to the TIF bonds until they are repaid, or for 15 years, after which the increases revert to local government taxing jurisdictions (Sec. 18-2147).
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