This story was originally published in the Nebraska Examiner.
OMAHA — Nebraska’s largest city gave the green light last year to a record amount of tax-increment financing incentives, according to a report listing 23 development projects that represent about $160 million in TIF loans.
For perspective, Omaha’s average annual tally of TIF approvals over the past five years was about $36 million.
Contributing to the bounty in 2022 were projects such as the $600 million Mutual of Omaha office tower, which got the city OK for about $68 million in tax-increment financing.
Other big-ticket economic developments included the $220 million Warhorse Omaha casino (approved for $17.5 million in TIF), and an $82 million apartment structure at 48th and Dodge Streets ($10.7 million in TIF).
The summary of tax-increment financing activity, required of cities by the Nebraska Legislature, was included in a packet presented to Omaha Planning Board members who met Wednesday for their monthly meeting. They did not discuss the material.
Omaha’s report comes at a time when some Nebraska lawmakers have questioned the city’s use of TIF in some cases.
State Sen. Machaela Cavanaugh of Omaha, for example, called for a vote of the people before the financing tool can be used in projects the size of the Omaha streetcar project or the Crossroads mall makeover.
She called TIF a “wonderful tool” to spur economic development but said that it was being abused at times.
State Sen. Lou Ann Linehan of Omaha wanted to prohibit the incentive from being used on a parcel twice within a 50-year period, a move that an Omaha official said could derail the streetcar project.
Linehan challenged TIF use in cases such as the planned Omaha casino, saying that the project likely would have been done without the financial break.
Neither the Linehan bill or the Cavanaugh bill was advanced to the legislative floor for full debate this year.
At public hearings earlier this year at the State Capitol, Omaha economic development aide Steve Jensen defended Omaha’s use of TIF — saying it was being used as the economic development tool that state statute intended it to be.
He and other city officials said that TIF-supported projects would not occur — and therefore not provide future benefits such as spinoff development and higher property valuation — if not for the incentive.
As part of the process, city officials must declare that the project would not occur without the financing boost.
How TIF works
Generally under TIF, the developer of a city-approved project takes out a loan to help cover eligible redevelopment expenses. The loan is paid back 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, but during the 15 to 20 years of the TIF period, those payments go toward paying off the developer‘s TIF loan.
The property owner during that period 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.
According to Omaha’s 2022 summary report, city officials have now deemed about 22% of the city as “blighted” — a designation that opens the door to use the financing tool. State law allows Omaha, a metropolitan class city, to have up to 35% of its area designated as blighted.
Of the two dozen projects outlined, about half are rising or are planned to be built in the city’s urban core area of downtown and midtown.
The report contains a separate narrative of the $300 million-plus streetcar project planned to run from downtown to midtown. City officials last year authorized the use of $356 million in future TIF revenue generated by increased property tax valuations around the street car route to pay for the project.
The 2022 TIF-supported projects are expected to deliver 1,706 housing units, 119 of which the city described as “affordable housing.”
About 1.7 million square feet of commercial and industrial space is attributable to those 2022 TIF-supported projects, the report says. Projects approved last year should result in $1.3 billion in investment.
In all, the report said, Omaha currently has 261 active projects financed at least in part by the financing mechanism shaped by the Legislature in the 1980s.
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