Senator Mike Groene
AGO 16-10
No. 16-010
Nebraska Attorney General Opinions
State of Nebraska, Office of the Attorney General
August 15, 2016
TO:
Senator Mike Groene, Nebraska Legislature
FROM:
Douglas J. Peterson, Attorney General, L. Jay Bartel,
Assistant Attorney General
RE:
Propriety of the Use of Tax Increment Financing for the
Acquisition, Planning and Preparation for Development of
Undeveloped Vacant Land Under Neb. Rev. Stat. § 18-2123
(2012).
Neb.
Rev. Stat. § 18-2123 (2012) provides, in part, that
"[u]pon a determination, by resolution, of the governing
body of the city in which such land is located, that the
acquisition and development of undeveloped vacant land, not
within a substandard or blighted area, is essential to the
proper clearance or redevelopment of substandard or blighted
areas or a necessary part of the general community
redevelopment program of the city,..., the acquisition,
planning, and preparation for development or disposal of such
land shall constitute a redevelopment project which may be
undertaken by the authority...." During the recent
legislative session, you introduced LB 719, which proposes to
amend § 18-2123 to provide that "[t]ax-increment
financing as provided in section 18-2147 shall not be used
for the acquisition, planning, and preparation for
development or disposal of undeveloped vacant land as
described in subsection (1) of [§ 18-2123], nor shall
undeveloped vacant land be declared or designated blighted
and substandard to qualify for the use of tax-increment
financing." LB 719, § 1. You have requested our
opinion as to whether tax increment financing may currently
be used for the acquisition, planning, and preparation for
development of undeveloped vacant land authorized under
§ 18-2123, and, if so, whether use of tax increment
financing for this purpose is consistent with Neb. Const,
art. VIII, § 12.
At the
outset, we note it is our long-standing policy not to provide
opinions to members of the Legislature on the interpretation
or constitutionality of existing statutes. Op. Att'y Gen.
No. 157 (Dec. 24, 1985). Accordingly, we normally would
decline to provide an opinion on the question presented. As
you have proposed legislation which could be impacted by our
conclusion, we will proceed to respond to your question.
A.
Community Development and Tax Increment Financing
["TIF"]
The
Community Development Law, Neb. Rev. Stat. §§
18-2101 to 18-2144 (2012 and Cum. Supp. 2014)
["CDL"] generally "authorizes a city to define
and acquire substandard or blighted areas and redevelop them
in accordance with an approved redevelopment plan which in
turn shall conform to the general plan for the municipality
as a whole." Monarch Chemical Works, Inc. v. City of
Omaha, 203 Neb. 33, 36, 277 N.W.2d 423, 425 (1979).
Cities or villages may create a division or department to
function as a community development agency, or may establish
a Community Redevelopment Authority ["CRA"] to
prepare and carry out redevelopment plans for areas which
have been declared substandard and blighted. Neb. Rev. Stat.
§§ 18-2101.01, 18-2102 and 18-2102.01 (2012). After
a redevelopment plan has been prepared and approved, a CRA
may contract with redevelopers regarding the use of property
for residential, commercial, industrial, or recreational
purposes or other public purposes within a community
development area in accordance with the redevelopment plan,
and "provide grants, loans, or other means of financing
to public or private parties in order to accomplish the
rehabilitation or redevelopment in accordance with the
redevelopment plan." Neb. Rev. Stat. § 18-2107(4)
(2012). Section 18-2123 of the CDL provides:
Upon a determination, by resolution, of the governing body of
the city in which such land is located, that the acquisition
and development of undeveloped vacant land, not within a
substandard or blighted area, is essential to the proper
clearance or redevelopment of substandard or blighted areas
or a necessary part of the general community redevelopment
program of the city, or that the acquisition and development
of land outside the city, but within a radius of three miles
thereof, is necessary or convenient to the proper clearance
or redevelopment of one or more substandard or blighted areas
within the city or is a necessary adjunct to the general
community redevelopment program of the city, the acquisition,
planning, and preparation for development of such land shall
constitute a redevelopment project which may be undertaken by
the authority in the manner provided in the foregoing
sections.
Redevelopment
projects may be funded by the use of "Tax Increment
Financing" ["TIF"], which allows the increased
property taxes generated by the redevelopment to be used to
finance the redevelopment. Neb. Rev. Stat. §§
18-2147 to 18-2153 (2007); 350 N.A.C. § 18.001.01. After
a redevelopment project is approved, the city or CRA may
issue TIF bonds to finance the project. See Neb.
Rev. Stat. § 18-2124(3) (2012). A redevelopment plan may
provide that real property taxes in a redevelopment project
shall be divided "for a period not to exceed fifteen
years after the effective date of such provision. . . ."
Neb. Rev. Stat. § 18-2147(1) (2012). Taxing entities can
levy taxes on real property in the project on the
redevelopment project valuation, also known as the base
value, which means "the assessed valuation on the
taxable property in a redevelopment project last certified to
the political subdivisions in the year prior to the effective
date of the provision authorizing the dividing of ad valorem
tax pursuant to" Neb. Rev. Stat. §§
18-2103(21) and 18-2147 (2012). 310 N.A.C. § 18.002.15.
The portion of tax assessed on real property in the
redevelopment project in excess of the base value for the
current year, the...
