Taking a Look at TIF

Episode Transcript

Speaker 1 (00:00):
Welcoming Nebraska State Senator Mike Jacobson of the program.

Speaker 2 (00:03):
Senator, good morning, Hey, good morning guys.

Speaker 1 (00:06):
I wanted to get your take on the state Auditor
Mike Foley weighed in with a one undred what was
the twenty six page letter to a Nebraska legislators weighing
in on his concern about what he says is too
much tax increment financing happening in these cities and subdivisions,
and he specifically mentioned the Omaha streetcar project and he

(00:30):
thinks this has a negative effect on our efforts to
lower property taxes. Mike, is this an issue to you?

Speaker 2 (00:39):
Well, First of all, I need to say I've got
a great deal of respect for Auditor Foley. I think
he's done some really good work in that role and
really kind of knows his way around. TIP is kind
of one of those really misunderstood economic development tools. But
I would tell you that, at least for rural Nebraska,

(01:01):
and I believe also in urban Nebraska, it's probably one
of the most effective economic development tools that should not,
if used properly, cost the taxpayer dime. In fact, would
produce additional tax revenues if used properly. I don't have
a lot of the details on the specifics of how

(01:23):
the streetcar is being financed, but I do want people
to understand that that tax increment financing really runs around
the premise of having to meet the if not but
for test. The if not but fore test means that
if it were not but for TIFF, this project would

(01:44):
not have been built. To give an example, if there's
a project in downtown Omaha. Let's say it's an old
office building that's sitting there decaying on a nice lot,
and the developer comes in and says, I've looked this over.
I'd have to implode the building and I could build

(02:05):
a brand new high rise apartment complex. But I've run
the math and it just doesn't make economic sense for
me to do it. So hence you come in and say, well,
what if we gave you offered you tip, meaning that
what we would do is we would take whatever increase
in value that's going to be created from your project

(02:26):
and any resulting property taxes that are paid as a
result of the increase in the value of the project
when it's completed. We will let you have that revenue
over the next fifteen years. When it's in a regularly
blighted situation in twenty years when it's extremely blighted, and
you can then borrow against that income stream to use

(02:49):
that money to help insent you to build this project.
So if they do that, then they go in, they
take this building of let's say it's on the time
tax rolls today, and let's say it's producing twenty thousand
dollars a year in property taxes and probably going down
every year as that building continues to deteriorate. And they

(03:11):
go in and they implode the building and they build
a new high rise. The next thing you know, they're
generating one hundred thousand dollars a year in property tax revenue. Well,
the twenty thousand that it's are, the ten thousand that's
creating today would continue to go to taxing authorities as
it currently does, but the difference in ninety thousand would

(03:31):
go to the developer over the fifteen year period of
time and any increases in that value until their tip
bond is repaid. Now, think about this. We're only giving
the developer the property tax increases, but there are going
to be personal property taxes paid because they'll be some

(03:53):
number of items will be personal property taxes. There will
be sales taxes paid on some of the labor and
all the materials that go into redoing this project. There'll
be a significant amount of labor coming to the market
where they're temporary labor will we'll have to live in
a motel or stay someplace and pay taxes there. And

(04:13):
at the same time, you're now going to create a
high rise apartment which provides more living capacity for people
to move to Nebraska. We have a severe shortage of
housing throughout the state, and so we get people to
move here and take jobs. And oh, by the way,
if some of those people that move here have children,
those children go into the public schools and guess what.

(04:36):
Omaha Public schools is an equalized district. They get equalization
aids under TIOSA. So for every new child that comes in,
they're picking up another eleven twelve thousand dollars a kid
in TIOSA formula, which means that's eleven or twelve thousand
dollars less they have to get in property taxes every year.

Speaker 3 (04:52):
And Senator, all of that is one of the big
reasons for TIFP. But one of the things I think
Mike fully talked about was the impact of a drama
attic rise in property taxes, not just for that particular
building or facility that's being tiffed, but for all the
people around there, specifically residents. Is there any fear of
that based on the research you've done.

Speaker 2 (05:13):
Well, I'm still kind of back to the idea that
if I own a piece of property, I want that
value to go up. Okay, I don't want the taxes
to go up, but I want the value to go up.
And I think one of the things we get caught
up in, and it's one of the frustrations I've had
in the legislature at times. And I get a lot
of emails and people say, we got to do something

(05:34):
about our values going up, and it's like, no, we've
got to do something about the budgets going up for
the political subdivisions. It's the spending problem, it's not the valuation.
We've got to keep in mind that when all the
political subdivisions budgets are added up. Okay, and now we
know how much they need to ask for in taxes.

(05:55):
If you have a higher tax base, the mill levee
goes down, right, Okay, So so it's mill levy time's
value that generates the property tax to fund the budgets
that have been asked for. So if we see this
project go up and it creates more value, and oh,

(06:17):
by the way, the developer is paying taxes, it's just
it's coming back a property tax. It's coming back to
amortizes bond. But the first property taxes are going to
all the political subdivisions, just as real property would sales
taxes are going to the city and to the state.
So at the end of the day, and if you
can bring in more students, the school districts needs going

(06:40):
to be less. So really, to me, the property tax
problem has very little to do evaluation and everything to
do with what the budgets are. And that's one of
the steps that legislation took this year, which was to
limit how much cities and counties could raise their property
tax ask year over year.

Speaker 3 (06:58):
Yeah, cities in counties, maybe schools next year.

Speaker 1 (07:02):
Let's hope we get more progress on that in the
next session. Senator Jacobson, thank you, sir, from the North
Platte here on kfab's Morning News