OMAHA — In rural Nebraska towns of Scribner and Lexington, workforce housing is rising with help from a sometimes controversial economic development incentive called tax-increment financing.

The assistance TIF offers developers can cut a family’s cost of buying one of the roughly $300,000 houses by as much as $50,000, a developer of the projects said.

Used in urban cities of Omaha and Lincoln as well, TIF will be sought to help revamp and add mixed-income housing to a blighted North Omaha site named after longtime state legislator Ernie Chambers.

Trendier areas, including Omaha’s downtown and midtown, also have spiffed up with TIF-enabled projects such as Mutual of Omaha’s under-construction $600 million skyscraper and spots along the Blackstone commercial district.

During a half-day workshop Wednesday hosted by Urban Land Institute Nebraska, supporters touted the public benefits of those and other Nebraska projects made possible with TIF, a public financing mechanism used for decades to spur investment in blighted areas across the state.

Organizers of the event, aimed at shedding more light on the incentive, called TIF one of the few redevelopment tools available to reverse blight. But they said it is often misunderstood and sometimes maligned. It’s been scrutinized by some state officials and, most recently, has become a wedge issue in Omaha’s mayoral race.

“It’s always a little spicy,” Jay Lund, an Omaha developer who helped organize the TIF discussion this week, said of public reactions to large TIF projects. “Today is about sharing the success of tax-increment financing and how it has helped produce great projects in great places.”

The ‘But For’ Test

Wednesday’s seminar, which packed a 120-person capacity hall at the University of Nebraska at Omaha, was titled, “But for TIF: Tool to Build Stronger Communities.”

The title nods to a key hurdle applicants must clear to access the financial incentive. Workshop organizers, seeking to reinforce that TIF is not handed out without vetting, said developers must convince city leaders that the project would not happen “but for” the assistance — that it wouldn’t happen without.

Mayor Jean Stothert, whose talk wrapped up the event, praised TIF-spurred development and said it contributed to why Forbes ranked Omaha as the No. 1 city to move to in 2024.

The mayor acknowledged, however, skepticism that swirls around the urban core streetcar project, whose $389 million cost to the city is to be covered by TIF proceeds. She announced that the city has hired an independent auditor to review Omaha’s TIF practices, partly to quell naysayer concerns.

Stothert also addressed streetcar criticism from mayoral opponent State Sen. Mike McDonnell, and pooh-poohed his call for the city to pause new TIF projects in light of concerns State Auditor Mike Foley raised in September.

“Why in the world would we stop using TIF?” said Stothert, who is running for a fourth term as mayor of Nebraska’s largest city. “We don’t want to stop this momentum.”

The state auditor’s report took particular aim at Omaha’s TIF program but issued a broader warning about how the financing mechanism is being used in communities across the state.

Foley said more than a half-billion dollars in property tax collections were redirected over the past five years to fund urban redevelopment throughout Nebraska — marking a “remarkable increase” in TIF use that risks further upward pressure on local property taxes.

The way TIF works typically: For up to 20 years, the extra property taxes generated by new improvements on TIF sites are diverted over a set length of time to help private developers pay eligible costs of transforming the area.

Critics have objected in part because local taxing jurisdictions forgo that increased property tax while the developer’s loan is being paid off. Some also question whether city councils have grown too lenient in bestowing the required designation of an area as blighted.

Speakers on Wednesday said the projects and blighted designations undergo a thorough eligibility process. Stothert said, for example, that city approval of $68 million in TIF was key to Mutual’s decision to build its new headquarters in the city’s core rather than in an area where construction costs are lower.

With the streetcar project, TIF will work somewhat differently. The city is to sell bonds and repay the debt with TIF revenue. Stothert has said anticipated development and higher property values sparked by the streetcar will produce enough TIF revenue to pay off the bonds without requiring a tax increase.

Foley’s take on the streetcar was that it would result in the “largest diversion of property tax dollars for an economic development project in Nebraska history.”

Of TIF overall, he said: “Count me a skeptic if anyone tries to claim that the rapid escalation in TIF-funded projects has nothing to do with the ever-higher property tax obligations in our state.”

When ‘Done Right’

At least two Nebraska legislators and a senator-elect attended the TIF workshop, along with a few Omaha City Council members and representatives from other Nebraska cities.

State Sen. John Cavanaugh of Omaha said in an interview afterward that he remained “middle-of-the-road” on TIF, but that “the presentation showed me that, done right, TIF can be a valuable tool.”

McDonnell was not at the event, but he previously told city officials that he feared the “aggressive approach” taken by Omaha in implementing TIF could result in legislation that “severely restricts or possibly eliminates” what can be an effective development tool.

Cavanaugh and Omaha State Sen. Brad von Gillern, who also attended, said that if any lawmaker planned to introduce a TIF-related bill, they were unaware of it.

Von Gillern said that rural communities have learned to embrace the tool, particularly to develop workforce housing.

“Rural likes it and urban likes it,” he said, adding that he’s doubtful the Legislature would seek to restrict the incentive.

Kicking off the workshop, Omaha attorney David Levy noted that TIF, which dates back to a 1980 voter-approved constitutional amendment in Nebraska, is used in all states but Arizona. He said each state has its own variation.

He said TIF was a topic of “great interest” across the state and in the Legislature, and that Wednesday’s gathering served as an explainer and an effort to dispel misconceptions.

Among other presenters was Bridget Hadley, who oversees Omaha’s TIF program and Heather Worthington, a principal at Urban3, which helps cities nationwide understand the economic impact of development.

Stories Of Success

A panel of developers talked about their own tax-increment financing projects.

Lund, a co-founder of GreenSlate Development, said the transformation of a deteriorating midtown Omaha corridor would not exist without the incentive to help fill a financing gap.

Widely viewed as one of the hippest areas of the city, the Blackstone District has seen more than $300 million in investment since around 2011, he said.

“We’re taking empty parking lots and we’re turning them into buildings,” said Lund.

Todd Heistand, co-founder of NuStyle Development, said TIF has been a key to his company creating some 2,700 Omaha housing units since 2010.

Among its most recent efforts, NuStyle purchased the mixed-use Central Park Plaza in downtown Omaha to convert into 707 dwellings with street-level retailers and a parking garage. The city approved $26.5 million in TIF for “The Duo” project.

Heistand said earlier project sites such as South Omaha’s Livestock Exchange Building and downtown’s The Bank and The Breakers commercial buildings would have sat vacant without financial incentives to lessen a developer’s risk.

“You get them back on the tax rolls. That in my mind is what TIF is about,” he said.

Cydney Franklin of PJ Morgan Real Estate is former CEO of the nonprofit Seventy Five North who also served on the Omaha Planning Board. She described herself as a TIF advocate, though she said she would like to see more diversity represented among beneficiaries.

Jake Hoppe of Lincoln-based Hoppe Development said his company has tapped the TIF incentive in more rural Nebraska communities where growth is challenged by a housing shortage.

In both Scribner and Pender, he said, his company has constructed a handful of for-sale homes. It is working on another 35 in Lexington. In Grand Island, $6 million in tax-increment financing helped build about 130 for-sale homes.

More typically, said Hoppe, the public incentive is used for rental unit projects. But using TIF to defray lot and infrastructure expenses for for-sale housing is “more emblematic of what happens outside of Lincoln and Omaha.”

In effect, he said, the rural family is able to buy a home minus the lot cost.

Ernie Chambers Court

Hoppe is currently planning to request TIF for his company’s first Omaha project, a mix of affordable and market-rate rental dwellings on about eight acres near 18th Street and Willis Avenue in North Omaha.

As proposed, the 211 units include 70 Chambers Court apartments to be bought from the Omaha Housing Authority and renovated. Another 141 are to be newly constructed on surrounding land.

Guided by input from area residents, Hoppe said the idea is to not focus exclusively on low-income housing, but to create a neighborhood of mixed-income residents.

Additional funding sources such as low-income housing tax credits from the Nebraska Investment Financing Authority are to help the effort.

“It would not happen without TIF,” Hoppe said.

This story was published by Nebraska Examiner, an editorially independent newsroom providing a hard-hitting, daily flow of news. Read the original article: https://nebraskaexaminer.com/2024/12/13/tif-defenders-in-nebraska-say-it...