Tax Increment Financing

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Tax Increment Financing
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Community Development Law

• Nebraska State Statutes '18-2101 '18-2154
• Primary stated purpose in statutes is elimination
  or prevention of blight
• TIF pays for the public benefits associated
  with a private development

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TIF Chart
Existing Tax Base
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TIF Chart
Existing Tax Base
Up to 15 years
Base Year
Bond Retired
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TIF Chart
Tax Increment
Existing Tax Base
Up to 15 years
Base Year
Bond Retired
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TIF Chart
20 Haircut
Bond Amount
Tax Increment
Existing Tax Base
Up to 15 years
Base Year
Bond Retired
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TIF Chart
Area Property Value Increase
20 Haircut
Tax Increment
Existing Tax Base
Up to 15 years
Base Year
Bond Retired
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TIF Chart
Area Property Value Increase
Potential Spill Over TIF
20 Haircut
Tax Increment
Existing Tax Base
Up to 15 years
Base Year
Bond Retired
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TIF Chart
Area Property Value Increase
20 Haircut
New Tax Base
Tax Increment
Existing Tax Base
Up to 15 years
Base Year
Bond Retired
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Citys Share 14
Bond is repaid yearly for up to 15 years
Other Public Entities Share 86
20 Haircut
Bond Amount goes to developer for public purpose
portions of the project
Tax Increment
Existing Tax Base
Base Year
Up to 15 years
Bond Retired
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Whats Blight?

• unsafe, insanitary, inadequate, or overcrowded
  condition of the dwellings
• inadequate planning of the area, or excessive
  land coverage by the buildings thereon,
• lack of proper light, air, and open space,
• defective design and arrangement of the buildings
  thereon,

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Whats Blight?

• faulty street or lot layout,
• congested traffic conditions, or
• economically or socially undesirable land uses
• ten more factors

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Nebraska Context

• Lincoln has 23 active TIF projects
• Omaha has 122
• Gothenberg has 19

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Lincoln Context

• Lincoln has retired 16 TIF bonds

• Cornhusker Square
• Golds Galleria
• Northeast Radial
• West Radial/Malone East
• The Haymarket
• Apothecary/Ridnour
• Centerstone
• Hardys and Bucks

• University Square
• Block 35
• Lincoln Station
• 12th Street Theatre
• Commerce Court/ Lincoln Square
• Eagles/Runza
• Grainger

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Retired TIF Payoff

• 14 of 16 retired TIF projects had a total base
  value of 14.5M
• Current value on those projects is 104.8M.
• The other 2 projects grew in value by 49M as of
  1994, current figures unavailable.
• Valuation growth of retired projects is at least
  139M.

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Nebraska Context

• Larger cities can blight 35 of area
• No limit for smaller towns
• Lincoln has declared blight for 12 of area

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Lincoln Context

• Lincoln has, in the past, used a narrower
  interpretation the statute compared to other
  Nebraska communities
• Required a blight study
• New residential retail are rare
• Pay for specific benefits
• Haircut

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Lincoln Context

• Lincoln has
• 18.3 billion in total tax valuation
• 168 million in tax valuation for TIF projects
• 1.045 of total tax valuation in TIF
• State-wide average 1.355
• Hastings 2.027
• Omaha 2.736

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Lincoln Context

• Each year, 3.37 million in taxes is spent for
  public benefits associated with the 23 TIF
  projects
• The amount of City tax base spent for these same
  projects is 505,792/year

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Lincoln Context

• Over 65 of the 3.37 million is replaced by
  sales and income taxes from the school state aid
  formula
• Lincoln sales and income taxes flow out from the
  city under school, city, and county aid formulas.
  53 million in state taxes collected in Lincoln
  go to other jurisdictions by aid formulas

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Lincoln Methodologies

• Public Bond sold/traded publicly
• Public Bond sold/placed privately
• Small TIF bond purchased by City
• Developer TIF bond purchased by developer

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Who is at Risk?

• Public Bond/public trade bond holders City
• Public Bond/private placement bond holders
  City
• Small TIF City as bond holder
• Developer TIF Developer as bond holder

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TIF Bond Proceeds

• Bond size is based on increment of tax growth
• Bond amount is 80 of expected growth a
  haircut to protect against devaluations
• 10 of bond proceeds is held in reserve
• Developer TIF has no haircut

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City Risk

• Pledge to back Public Bonds through 2.6 cents of
  the tax levy dollar if tax increment isnt
  enough to retire the bonds
• Small TIF risk as self-created bond holder
• Neither option has ever caused a problem

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Beyond the TIF Bond

• Developer Spill Over designated for developers
  use
• City Spill Over undesignated

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City Spill Over TIF

• Streetscape improvements to 8th Street in the
  Haymarket
• Projects on North 27th Street

• Center Team Police Station
• Northbridge Community Center
• Sterling Village
• Walgreens/McDonalds
• Bike/Pedestrian Bridge
• Heartland Optical
• Peoples Health Center

• CenterPointe
• Streetscape
• Potter Street Parking
• Pentzer Park Improvements
• Purchase of deteriorated housing for future
  redevelopment

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Developer Spill Over TIF

• 48th O HyVee reimbursement of developers
  special assessment for the cost of 50th Street
  construction

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Where can TIF be used?

• Core elimination of blight
• Outer support of primary employment
• Mayors Policy is online lincoln.ne.gov,
  keyword redevelopment

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Primary Employment

• More than 50 of a companys work is outside of
  Lancaster Co.
• Entry wage is 105 of county average entry wage
  18,645

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What can TIF be used for?

• Lincoln interpretation Show a public purpose for
  use
• Omaha interpretation Growth is a public benefit
  so spend as desired

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Public purpose expenditures recognized in Lincoln
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• Site/ROW Acquisition
• Environmental clean up
• Easements
• Relocation expenses
• Demolition
• Site/area studies
• Site preparation

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• Extension of public utilities
• Rehabilitation of existing buildings to be used
  as public spaces/buildings
• Design and construction of private spaces as they
  relate to the protection or support of a public
  use/safety
• Rehabilitation of existing public facilities

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• Streetscapes
• Street improvements
• Green space-park-trail facilities and
  improvements
• Public/pedestrian plazas
• Lights and police call buttons
• Public transportation and parking facilities
  bus shelters signs

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Non-specific public purposes that are reimbursable

• Progress toward Comprehensive Plan goals (e.g.
  remove blight, promote homeownership)
• Commitment to exceed legal minimums (energy
  efficiency)

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But for

• Governing board approval finds
• Plan conforms with Comp. Plan
• Project would not be economically feasible
  without TIF
• Project would not occur in the community
  development area without TIF

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lincoln.ne.gov

• keyword redevelopment