By Allison Peck
As the North Platte City Council prepares to consider a Tax Increment Financing (TIF) request related to a proposed housing development, some residents have raised questions about how the process works and why communities use it.
According to the Nebraska Department of Revenue, TIF is a redevelopment financing tool authorized under Nebraska's Community Development Law and is intended to encourage development in areas that have been designated as blighted or substandard.
According to information published by the Nebraska Department of Revenue, TIF does not create a new tax. Instead, it allows a portion of the increase in property tax revenue generated by a redevelopment project to be used to help pay eligible redevelopment costs.
The Nebraska Department of Revenue explains that when a property's value increases following redevelopment, the taxes generated from that increase in value, known as the increment, may be used to repay approved redevelopment expenses. Property taxes continue to be collected throughout the process.
Nebraska law generally allows tax increment financing to remain in place for up to 15 years, according to the Nebraska Department of Revenue's annual reports to the Legislature.
Supporters of TIF often argue that the tool helps make projects financially feasible and encourages investment that otherwise might not occur. According to Nebraska Revised Statute 18-2116, local governing bodies must determine that a redevelopment project would not be economically feasible without the use of TIF before approving assistance. This requirement is commonly referred to as the "but-for" test.
According to the Nebraska Department of Economic Development, communities have used TIF to support a variety of redevelopment efforts, including housing, commercial and industrial projects.
Critics of TIF have raised concerns that a portion of future property tax revenue is redirected during the life of a TIF project rather than immediately flowing to local taxing entities. Others have questioned whether some projects would proceed without financial assistance.
According to annual reports compiled by the Nebraska Department of Revenue, communities across Nebraska have used TIF for redevelopment projects for several decades.
The question before the North Platte City Council is not whether TIF is authorized under Nebraska law, but whether the proposed housing project meets the legal requirements for the incentive and whether city officials believe the redevelopment goals justify its use.
The council is expected to discuss the proposal during its meeting Tuesday evening.