Nebraska Sen. Mike McDonald urges ‘pause’ on new Omaha TIF project
OMAHA — A Nebraska lawmaker has sent a letter to Omaha city officials taking aim at tax increment financing practices related to streetcar projects and calling for a “pause” on any new TIF projects in Omaha.
Omaha state Sen. Mike McDonald. (Zach Wendling/Nebraska Examiner)
In a statement, state Sen. Mike McDonnell, who has said he will run for Omaha mayor, listed several “concerns” that have been brought to his attention. recent surveys Hosted by State Auditor Mike Foley.
Foley last month raised red flags about how the TIF funding mechanism is being used across the state. He specifically targeted Omaha but said there were limits on any further action his office could take.
McDonald wrote a letter on legislative letterhead dated Tuesday to Mayor Jean Stothert and City Council President Pete Festersen, highlighting several issues raised by Foley’s team regarding TIF and the controversial streetcar project.
Jean Stothert has announced her candidacy for Omaha mayor for a record fourth term. (Courtesy of Mayor Jean Stothert)
McDonnell said Omaha’s “aggressive” approach threatens TIF’s existence as a reconstruction tool.
“I raise these concerns because I am concerned that the City of Omaha’s aggressive approach to implementing the TIF program could result in legislation that severely restricts or potentially eliminates an effective development tool,” McDonald, who is term-limited, wrote. Final year as MP.
stimulate economic development
TIF public incentives, created by the Legislature to stimulate economic development, are used to help defray construction costs in distressed areas. Typically, under a TIF, a developer will apply for a loan to pay for the project’s qualified reconstruction costs. The loan would be repaid over 15 or 20 years, while property taxes from the new development would also increase.
In the case of streetcars, TIF revenue is generated in three different ways:
A special TIF district has been established, and future TIF-approved projects within the district will have a portion of their TIF revenues used for streetcars. Loan repayment schedules for existing TIF-approved projects for about six blocks on either side of the streetcar line will be extended for another five years. Other revenue will be generated through increased property valuations for commercial buildings in the zone.
The city of Omaha plans to use TIF revenue to pay for part of its streetcar project costs, or $389 million. Stothert, who is running for a fourth term as mayor of Nebraska’s largest city, has said repeatedly that expected development and higher property values triggered by the streetcars would generate enough TIF revenue to pay off the bonds without the need for an increase. tax.
However, Foley said the controversial Streetcars can cause “The largest transfer of property tax funds from an economic development project in Nebraska history.”
NE auditor warns of rapid growth in TIF use across state, says it poses risk to property tax burden
He told state senators in a Sept. 10 letter that the impact on the budgets of government agencies that rely on property tax revenue “remains to be seen.”
obey the law
Stothert’s office said the mayor is expected to provide a specific response to MacDonald’s letter on Thursday.
Omaha officials have previously defended the city’s use of TIF. In response to Foley’s investigation, they said Omaha has been using TIF correctly and within state law.
McDonald urged Stothert and Feisterson to halt any new TIF projects until his concerns are resolved. He pointed to three specific issues:
Unanswered questions about the so-called “Regional Alliance for Reconstruction Plans.”
Foley’s audit team said documents it read showed neither the city of Omaha nor the government Tramway Authority will manage the finances of the streetcar project. Instead, revenue will be transferred to the Regional Alliance for Redevelopment Initiatives, a nonprofit corporation responsible for overall financing and management.
Foley said his team searched for any documents filed by such a coalition with the Nebraska Secretary of State’s Office but was unable to find them. Foley said the team is also unaware of any provision in the Community Development Act that governs TIF that would allow such a nonprofit entity to serve as a custodian for TIF funds.
Following the passage of Legislative Bill 25 of 2021, the city took action to create a new “extremely debilitated” TIF category.
Foley said that under the change, projects deemed “significantly impaired” would be able to collect TIF revenue for 20 years, compared with 15 years for “impaired” areas.
Mike Foley served as state auditor twice, from 2007 to 2015, and again starting in 2023, after serving as lieutenant governor under Pete Ricketts. (Rebecca S. Gratz for the Nebraska Examiner)
Foley’s letter stated that several older Omaha TIF projects approved before LB 25 had their terms extended from 15 to 20 years because they fell into the newly defined Streetcar TIF zone. MacDonald acknowledged that the law allowed for a “liberal interpretation” of the terms.
He said that while “these arguments appear to justify the city’s actions,” he noted that Foley expressed doubts that such an approach was the Legislature’s intent.
“I can say that as a member of the Legislature who voted for LB 25, I had no intention of allowing an extension in this manner,” McDonald said.
Create a “wide” TIF boundary for the streetcar project.
Foley’s team noted that the planned use of TIF revenue would affect a “huge, two-story area” of about 50 city blocks surrounding the trolley route. The plan requires developers within the zone to use a portion of the TIF proceeds from those individual projects to build streetcars, the audit panel said.
Shown here is a typical streetcar stop at 26th and Farnham Streets. (Courtesy of Omaha HDR)
McDonald, a Republican who once led the Omaha fire union, wants Omaha officials to explain how they determined that area of downtown was severely damaged. He called the title perhaps his most serious concern.
“I urge a moratorium on new TIF projects until these issues are resolved,” he wrote.
“checks and balances”
In June, McDonald called on Stothert and the City Council to put the streetcar on the November ballot.
Jasmine Harris, who recently announced she will run for mayor of Omaha, cited TIFs as an issue of concern. She said she would ensure there are more “checks and balances” on TIFs and other development incentives.
Harris, director of public policy and advocacy at justice-focused RISE, also said she has questions about the cost of the streetcar project.
Harris is the second Democrat to run in the official nonpartisan primary election on April 1, joining Douglas County Treasurer John Ewing.
Feisterson said the mayor’s office will respond to MacDonald’s letter, which has also been sent to other city council members and members of the Omaha Planning Commission.
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