Blighted, substandard, financing, tax and increment. If ever an agglomeration of words existed that implored a bit of Seussical rhythm and rhyme, these five words enthuse one to chime.

Over the past several weeks in Fremont, bountiful opportunity existed for residents to chime in on the debate over Costco Wholesale’s proposed poultry processing operation. Today the Fremont Tribune completes its TIF series with a look at TIF oversight, the blight question and impacts on public schools.

Quick rehash of Latest chicken challenge

This Thursday, in the Dodge County Courthouse, the 6th Judicial District Court of the Nebraska will hear a temporary injunction filed by three plaintiffs accusing the alleged illegal “blight and substandard” declaration of over 400 acres of land just south of Fremont. Three members of the Nebraska Communities United organization filed the suit against the City of Fremont and the Fremont Community Development Agency contending that a Blight and Substandard Study, approved by the City, violated the Nebraska Community Development Law.

The “blight and substandard” designation – formally defined in the Nebraska State Statute 18-2103 – pave the way for Costco Wholesale to access TIF funding for certain aspects of public improvements and infrastructure related its project.

The study claimed and specified various characteristics of the land in question that conformed to legal parameters such as deteriorated structures, faulty street layout, unsanitary/unsafe conditions, floodplain location and more.

TIF state oversight

“Across the nation, citizens are getting a lot more critical about TIF,” said Ernie Goss, a professor of economics at Creighton University in Omaha and a prominent Nebraska economist.

One of those citizens, Nebraska State Senator Mike Groene, District 42, highlighted issues related to TIF regulation. Speaking with the Fremont Tribune, Sen. Groene said TIF represents a practical tool for developers and municipalities and that the problem lies not with TIF but with its oversight.

“TIF is a good program if used responsibly,” Sen. Groene said. “The problem is that we have no enforcement, no oversight by the state.”

Sen. Groene reiterated words he penned in a 2015 op-ed for the Lincoln Journal Star. He stressed that TIF was meant as an urban renewal tool, one that cities used to redevelop “blighted and substandard cores.” He highlighted two successful Nebraska TIF projects: Omaha’s ConAgra River Front and the Haymarket in Lincoln. But he expressed criticism as well.

“They’re (developers and municipalities) using it for everything right now,” Sen. Groene said.

In his Op-ed Sen. Groene wrote: “Municipalities are now unilaterally confiscating property tax dollars of our public schools, counties, NRDs and community colleges in order to increase developer’s profits and avoid the political pain of raising property tax rates.”

“Until somebody sues or we change the law, the economic developers are going to continue to abuse the TIF program,” Groene stated.

What does the law say?

The law of TIF, blight and the “but for” clause

According to Article VIII, section 12 (1978) of the Nebraska State Constitution, the purview of TIF requires that an area be officially declared “blighted and substandard.” Next, a redevelopment plan and TIF agreement are drawn up. Regulating approval of the TIF agreement falls to what is known as the “but for” clause of redevelopment law.

Basically, the “but for” clause serves short hand for section 18-2116 of the Nebraska statutes, stating TIF can only be utilized if the redevelopment project would not be economically practicable without it.

Goss explained, in order to answer the “but for” clause, Fremont needs to evaluate if, “but for the incentives, would the company (Costco) move (into Fremont)?”

Jack Frank, vice president of real estate for Costco, has previously said, without TIF funding a tremendous fiscal burden exists for any developer attempting to overcome necessary infrastructure improvements.

Goss however, approached the idea frugally. He explained that the Costco plant makes sense in terms of Nebraska agriculture. The state possesses the “backward linkages” that will sustain the operations of such a large-scale facility. Backward linkages help support the infrastructure of such operations through the provision of commodities like corn to feed chickens and agricultural resources like the University of Nebraska.

“There’s an appeal for Nebraska (for such a facility) that you don’t get in, say ... Nevada,” Goss pointed out. “The University of Nevada is not set up to support the agricultural field (like Nebraska).”

He pointed out that the financial incentives offered to retain a developer of such a facility in a Nevada community would probably need to be more extensive than those offered in a Nebraska community.

“Given that Nebraska has a very strong agricultural industry, I would argue that (Nebraska) could be a little more frugal in awarding incentives when (it comes to) anything connected to agriculture,” Goss added.

TIF and the school system: Brighter future?

As Executive Director for Student Services and Business Affairs for Fremont Public Schools, Brad Dahl knows the fiscal leveraging it takes to support Fremont students. FPS has continued to follow the development of the Costco project and the of TIF funding.

“(As FPS administrators) we have to be knowledgeable in this area because it’s how we generate revenue to pay for education in our community,” Dahl said.

Referencing a Nebraska Department of Revenue 2015 annual report on TIF, Dahl pointed out that of the total taxable value of the entire City of Fremont (approximately $1.3 billion), consists of less than 1-percent that falls under TIF projects. Of the 125 cities cited in the report, only 18 (including Fremont) fall below 1-percent. In Scribner and Snyder, two other Dodge County communities included in the report, 2.5-percent and 12.89-percent, respectively, of their total taxable city value resides in TIF funds.

“I think that our city has been judicious with utilization of TIF,” Dahl said.

When it comes to TIF, Dahl stated that of the three TIF categories (commercial, industrial and residential) FPS would not be in support for TIF projects promoting residential development. But the Costco development falls under the industrial category.

He clarified that commercial and industrial TIF projects potentially create positive fiscal impacts for FPS, “provided that the (TIF) redevelopment does not include expansion of residential dwellings.

“Such utilization for (residential expansion) without the increased taxable” property value could have a negative effect on the district’s finances,” Dahl said.

A commercial or an industrial project, like Costco, could bring benefits to FPS, Dahl said. First, when the TIF repayment comes to an end after 15 years the Costco redevelopment could leave behind a significant increase in the tax base adding to FPS resources.

Second, the state aid for school systems is determined by taking the difference between the school needs (e.g. number of students) and the community resources (i.e. ability to generate property tax revenue). Dahl said secondary redevelopment and investment stimulated by Costco’s facility could lead to additional students and subsequently more state aid.

Ultimately, Dodge County District Court interprets the law; TIF and blight will have their day in court.

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