Frequently Asked Questions about Tax Increment Financing
Falls City and other Nebraska communities have used Tax Increment Financing to attract investment and create jobs. Read below for answers to frequently asked questions. Contact us, if you have any additional questions.
What is Tax Increment Financing?
Tax Increment Financing (TIF) is the use of new real property tax dollars created as the result of a commercial project to help support the project’s financing. TIF allows use of new property taxes generated by the increased property value, paid to the Falls City Community Redevelopment Authority (CRA) and invested into public improvements that are part of the project. These taxes are redirected for the benefit of the project for a period of up to 15 years. Property taxes on the original value of the property continue to be paid to local taxing entities.
What is a Blight and Substandard Area?
An area that has been declared blighted and substandard, in accordance with Nebraska state statutes, is defined as one where conditions are present that may have a detrimental effect on public health, safety, morals, or welfare of the neighborhood. The statutes point to conditions such as inadequate infrastructure, conditions which endanger life and property by fire or other causes, dilapidated buildings, inadequate parking, congestion, and economically or socially unacceptable land uses. “Substandard” generally means an area in which there are dilapidated, deteriorated, old, obsolete, or overcrowded buildings and properties which is detrimental to community morale or welfare, public health and safety.
How do I qualify for Tax Increment Financing in Falls City?
To Qualify for TIF, developers must complete an application to receive a recommendation for approval from the CRA. Qualifying projects are those that may not be economically feasible without TIF nor occur in the blight and substandard areas of Falls City. TIF project costs and benefits are found to be in the long-term best interests of the City and its economic vitality.
How does Tax Increment Financing work?
Suppose the present value of a property is $100,000. Following completion of a redevelopment project, the new value of the property is $600,000. Following City Council approval of a Redevelopment Plan and Redevelopment Contract between the CRA and the developer, property taxes generated by the improvement ($500,000) flow to the CRA for a period of up to 15 years. These tax monies are used to finance a bond, the proceeds of which are granted to the developer for public improvements that are part of the project and for the legal and other expenses associated with TIF. Local taxing entities receive taxes based on the original value of the property ($100,000) until the bond is retired on the entire value of the property.
Which properties qualify for Tax Increment Financing?
Properties must be within the Falls City city limits. In addition, they must be in a blighted or substandard area. The Falls City Redevelopment Area contains an estimated 62 acres, equal to an estimated 38% of the incorporated area of the City. See this map for additional details.
What types of projects qualify for Tax Increment Financing?
Tax Increment Financing can be used for a variety of development projects so long as they improve the value of the property within a blighted area. However, the project itself must be financially viable without TIF funds. TIF should be used as an incentive to lower the cost of development, not as the main source of funds.
What can TIF funds be used for?
Possible uses include: project acquisition, preparing the site for development, public infrastructure, and redevelopment of the site.
What’s the approval process?
Tax Increment Financing projects must be reviewed by zoning to ensure compliance with the city’s comprehensive plan. Next, the CRA Board must review it and then it will go to City Council for a full public hearing and approval. The City Administrator and Falls City EDGE can provide further guidance and assistance throughout that process.
What is Falls City Community Redevelopment Authority (CRA)?
The City Council of Falls City established the CRA on November 2, 2009. Nebraska’s Community Development Law empowers the governing body of any Nebraska municipality to create a special political subdivision for the purpose of determining and designating certain areas of the city in need of improvement and development. This body can determine the types of improvements or developments needed and recommend appropriate means for funding such improvements or developments for the maximum benefit to the city’s taxpayers. The CRA can borrow money, issue bonds, conduct public hearings, undertake investigations, surveys, appraisals, and ask for a levy of taxes.
Where can I apply for Tax Increment Financing in Falls City?
An application is available on this website here. Application forms are available from Falls City Economic Development & Growth Enterprise, Inc. (EDGE) and the City Administrator.
What will this do to the school’s tax?
TIF does not impact the school’s tax. What it does is add more tax payers to Falls City which can lower the burden for everyone.
Does anyone else lose money on Tax Increment Financing (TIF) projects?
No one loses money on Tax Increment Financing. No one in the community contributes directly or through raised taxes or fees. Only the developer/property owner has the responsibility for paying back the TIF funds, which is done through property taxes.
Can TIF be used for building houses?
Yes, as an example, in Grand Island, a single family lot valued at $63,684 was turned into a new 4 plex valued at $270,000. This was a good use of TIF that created more housing units in the community.
Can the TIF valuation work against us in the State Aid formula?
No. TIF valuation is not used in the State Aid formula.
What if my property is not actually blighted but I want to use TIF?
Speak with the City Administrator. Sometimes a property could be considered substandard even if it doesn’t appear to be blighted. As an example, one TIF project was done to build a Walmart Distribution Center on farm land that was no longer being used. The land was deemed substandard because it wasn’t being productive.
Do TIF projects raise my taxes?
No. TIF projects impact the value of land where the project is. They are designed to improve property value for properties that are not being well utilized or are ‘blighted.’ When that property increases in value and the TIF bond is paid off, there is another taxpayer contributing to the City. That means more people paying into the pot, which is good for everyone who lives here. The more people paying taxes, the greater the City’s surplus.
Why should a business get TIF funds?
Developers aren’t lining up to improve properties that are blighted or substandard. They typically look for properties that are in the best locations with infrastructure already in place and are near other nice properties. Incentivizing them to improve property that would otherwise sit there unused or underused is better for everyone. It improves the look of our community, makes Falls City more attractive for additional investment, and adds another taxpayer, reducing the burden for those paying taxes now.
Has Tax Increment Financing worked in other communities?
Yes, there are examples in this presentation given by the City Attorney. Gothenburg, for example, grew their population by 11.97%, created 500+ direct jobs, and 200+ housing units by leveraging TIF funds. In Grand Island, for example, as of 2015, the CRA had used TIF funds to increase valuation in the community by over $20 million.