COLUMBUS — Columbus City Council has approved tax-increment financing for redevelopment projects in the past.
Hobby Lobby, Slumberland, Ramada-Columbus, Hy-Vee and the Village Centre strip mall are a few examples.
But City Administrator Tara Vasicek wants to see the economic development incentive used more often, particularly when it comes to boosting the local housing market.
“TIF is one of the largest and most utilized economic development tools in Nebraska,” Vasicek said Monday night while introducing a new tax-increment financing (TIF) policy that shows developers the city is open to using the funding mechanism and establishes a “framework” for this process.
Much of the focus during the city council meeting was on housing, which has never been supported by TIF in Columbus.
Vasicek said that needs to change to address a local housing shortfall that’s causing headaches for employers trying to bring workers here.
“We have such a shortage in housing because it’s expensive,” Vasicek said. “You can’t get affordable lots on the market. Infrastructure prices are high. Land prices are high. TIF can come in on those projects and lower those initial input costs and get an end result that’s more affordable.”
TIF allows developers to sell bonds for upfront costs with that debt repaid using property taxes collected on the land’s increased valuation following the improvements. This debt must be repaid within 15 years, although Vasicek said the bonds typically get paid off faster.
Taxing entities such as the city, county and school district continue to receive property taxes on the initial assessed valuation during that time, then collect the higher amount once the debt is erased.
Vasicek said all of the financial risk is on the developer.
“We’re never on the hook if the money’s not there,” she said. “The taxpayers are never on the hook if this project doesn’t go perfectly according to plan.”
TIF can only be used in areas declared blighted and substandard by the city council, and the city must prove the project wouldn’t occur without the financial incentive.
Vasicek believes that’s easy to do for housing development, particularly more affordable homes in the $200,000 range.
“Those houses are virtually impossible to find,” she said. “ ... The market is not taking care of this need.”
The city administrator said using TIF to promote housing development is an investment in Columbus, and Mayor Jim Bulkley noted that moving more people here will also boost local sales tax revenue.
Roger Nadrchal, who is the CEO of NeighborWorks Northeast Nebraska, also sees the benefits.
His organization worked with the city on housing developments near Bradshaw and Centennial parks, but since those projects received government grant assistance, many of the homes had income restrictions for buyers. That funding is also becoming harder to secure, according to Nadrchal.
NeighborWorks is currently a partner on a large housing project in Norfolk that will request TIF assistance, he said, removing the income guidelines for buyers and giving developers more flexibility to build affordable homes.
“We as developers need a tool like that to make the numbers work,” he told Columbus City Council members.
Nadrchal said the Norfolk project will include homes priced from $220,000 to $250,000 and townhomes at $190,000 to $210,000. The development will push the 10-acre site’s assessed value over $10 million, he said, increasing property tax revenue moving forward.
Steven Ramaekers of Columbus-based Granville Custom Homes also spoke in favor of using TIF for housing development, saying that funding is “driving a lot of markets” right now.
TIF backing lowered the lot prices for one of his company’s developments in Norfolk, according to Ramaekers, which would benefit the people he hears from monthly looking for more affordable homes in Columbus.
“What I’m telling them right now is hang tight,” he said. “I think there’s help coming.”