The proposed Mutual of Omaha tower, on the left, is one of the more sizable development projects to be buoyed by tax-increment financing.(Courtesy of Lanoha Real Estate Co.)

This story was originally published in the Nebraska Examiner.

LINCOLN — A Nebraska lawmaker took aim Tuesday at the City of Omaha’s tax-increment financing practices and is calling for a vote of the people before the tool can be used on projects the size of, say, the modern streetcar or the Crossroads redo.

“It’s not about the merits of the project, it’s the process,” said Sen. Machaela Cavanaugh of Omaha. “Are we honoring the intention of TIF, and are we honoring the people? These are the people’s tax dollars.”

State Sen. Machaela Cavanaugh
State Sen. Machaela Cavanaugh of Omaha (Courtesy of Nebraska Unicameral Information Office)

‘Wonderful’ and ‘abused’

Under Cavanaugh’s Legislative Bill 746, voters in a Nebraska city would have to approve a tax-increment financing request that exceeds $20 million, though she said she would consider other threshold amounts. She called TIF a “wonderful tool” that was being abused and said she hoped her effort, along with a few other senators’ recent attempts to modify the TIF law, would lead to improved practices.

TIF, a popular and sometimes controversial tool, is intended to spur revival of “blighted” areas. Under the incentive program, the developer of a city-approved project takes out a loan to help cover eligible redevelopment expenses. The loan is paid back, generally over 15 or 20 years, by using the increased property taxes generated on the new development.

Normally, property tax payments go to support schools and other local tax-reliant bodies. During the TIF period, the property owner continues to pay a portion of property taxes to local governments based on the valuation that existed before any improvements.

After the TIF loan is repaid, property taxes collected on what then should be a higher-value, improved property starts flowing to those local governments.

TIF flurry

Cavanaugh presented her proposal to the Legislature’s Urban Affairs Committee, saying it was sparked by a recent flurry of TIF-supported projects including the modern streetcar project and Mutual of Omaha’s planned downtown office tower, which is to rise on the site of the former W. Dale Clark Library.

She was critical of approval processes that she believes snubbed public input.

“None of that can be undone, but it does show bad governance, in my opinion,” Cavanaugh said.

Officials from the City of Omaha and the Greater Omaha Chamber of Commerce were among opponents who testified in opposition to the bill, saying the city offers opportunity for public opinion at various points in the TIF process.

Jacquelyn Morrison, an economic development aide to Mayor Jean Stothert, said few projects in the last few years would fall within the parameters of the bill. Among those, she said, is the redevelopment of the Crossroads mall site at 72nd and Dodge Streets and the new Mutual of Omaha tower in downtown Omaha.

City officials approved a TIF request of nearly $80 million in 2021 for the $550 million-plus Crossroads redevelopment.

For the Mutual tower, which now carries an estimated $600 million price tag, the city approved a TIF request of more than $60 million.

Other examples: Omaha in 2016 approved a $15 million TIF request for the HDR headquarters project at Aksarben Village, and a year later approved a $19 million TIF ask for the Atlas apartments in midtown.

Room for growth

Morrison, responding to questions from Omaha lawmakers including Sens. Terrell McKinney and John Cavanaugh, said the city’s website explains TIF and its procedures.

She said meetings related to the incentive are recorded, and that the city is working on ways to better explain and educate the public about various elements of the streetcar project.

“There is always room for growth,” Morrison said.

Are we honoring the intention of TIF, and are we honoring the people?

– State Sen. Machaela Cavanaugh of Omaha

Christy Abraham of the League of Nebraska Municipalities was opposed to the bill. Among her concerns were the cost of an election and project delays.

She said smaller communities would be even more negatively impacted.

Veta Jeffery, president and CEO of the Greater Omaha Chamber (Courtesy of Greater Omaha Chamber)

In response to McKinney’s suggestion that cities hold evening meetings to include input on TIF projects from more working people, Abraham said that many other municipalities already meet at night.

‘In the dark’

Currently the Omaha City Council and Planning Board meetings are in the afternoon. McKinney said many of his constituents felt “in the dark” or unheard when it came to the streetcar and Mutual projects.

Veta Jeffery, president and CEO of the Greater Omaha Chamber, said she also spoke for the Lincoln and Nebraska chambers in objecting to LB 746.

Jeffery said TIF encourages development and is key to goals the Omaha chamber has set for redevelopment of the urban core.

When communities continue to add restrictions, Jeffery said, it “sends a message to developers that we don’t want you here.”

Requiring an election on large-scale TIF projects could be so time-consuming that developers might set their sights on different cities, Jeffery said.

The Urban Affairs Committee did not take any action following Tuesday’s public hearing on whether to advance the bill to debate by the full Legislature.

The bill garnered one letter of support and four written objections.

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