Lincoln City Council pauses to review TIF funding program

[April 08, 2015]  LINCOLN - At the March 24th workshop session of the Lincoln City Council, aldermen reviewed an application for Tax Increment Funding of a project on Broadway Street. TIF funds in the amount of $18,000 were being requested for the upgrading of the façade of the building located at 515 Broadway, owned by local businessman David Lanterman. The $18,000 was estimated to be 75 percent of the total cost for the façade. Lanterman estimated in his application that his firm would invest a total of $125,000 for interior and exterior improvements.

At that meeting, City Administrator Clay Johnson said the city had $300,000 remaining from the TIF bond issuance last year. A portion of that could be used to issue the TIF award for the Broadway Street project.

At that time, the council appeared to be in full agreement to go ahead and grant the Lanterman request. Michelle Bauer said that she was hopeful that by granting Lanterman's request, it would open the door to other businesses to do likewise. She mentioned that when the TIF bond was issued, there were folks who thought it had been done solely to benefit the construction of the Lincoln Grand 8 Theater. While the new request was the same owner, it was a different location and new potential to grow downtown commerce as the building being renovated is currently vacant and an eyesore.

At this week’s voting session, however, Johnson took a step back from what he had said on the 24th. He explained that he had not been informed that the remaining $300,000 had been earmarked for streetscape improvements by the city after the theater is completed. He said that if the city wanted to move forward with granting this new request, aldermen would need to decide how to provide the money.

The city of Lincoln voted to create a TIF District in the downtown area in 2013. Last year, Lanterman, as a member of the MMIL Properties Inc. applied for $2,000,000 from the TIF for the construction of the Lincoln Grand 8 Theater.

Funding the theater would benefit the city in that the dollars would be used to improve the downtown area and make the city more attractive to new business. The city would also gain financially by the increase in property tax assessments between the vacant lot and old buildings and the new construction.

On the application for the Broadway site, Lanterman documented the property tax as currently being $1,258.00 per year. He also stated that he expected that with the exterior work, plus interior renovations that are planned, the property tax assessment will double when the work is completed. If the tax assessment were to double to $2,516, the city of Lincoln would be able to collect the difference for the next 20 years. Estimating that at $1,258 per year (with no tax increases considered), the city would collect at the end of the term a total of $25,160.00, more than enough to pay itself back on the initial investment.

On Monday evening, referring to the expected revenues from the theater project, it was noted that to date, there haven’t been any increases in the taxes, as the construction is still underway. Therefore, the city hasn’t collected any dollars that it can invest back into future TIF projects.

The question at hand then, was should the city move forward, and if so, where would the money come from? Jonie Tibbs spoke up saying that because the city is just now working on the new fiscal year budget, she felt that this project should “come to a screeching halt” until the city has determined where it stands for the next 12 months.

Todd Mourning asked city treasurer, Chuck Conzo, if he could see any money in the city’s general fund to go ahead with the request. Conzo said there was not a lot of money anywhere in the city coffers. However, he also said that in regard to the $300,000, yes it had been earmarked for street improvements, but there had been no ordinance passed designating the money had to go to that purpose. He also noted that the $300,000 was an estimate of what the streetscape improvements cost; it was possible that not all of that money would not be needed.

Michelle Bauer said she was struggling with the idea of saying no to this request. She said if they stop promoting the TIF program until it is funded, then the city would be putting all future projects on hold for at least the next five years. She said the TIF fund is not going to fund itself overnight, and the city needed to find a means of keeping it going. She concluded, “If we say no, we’re going backward. We need to look at setting aside funds for the TIF. We need to move forward. We need to put our money where our mouth is.”

Conzo also commented that with the bond that is already in place, payments are going to need to be made that include principal and interest. Those payments in the first years are going to exceed what the city is collecting through the property tax. He said that making those payments in the first few years would mean taking money from the city’s general fund.

Johnson said this was another reason for moving forward with new projects. He noted that the faster the city invests in TIF projects, the faster they will see a return in property tax revenues.

The city has the option of issuing another bond to finance TIF projects, or finding the money in the current budget to earmark for TIF investments.
 

In the end, Scott Cooper said that the item on the agenda should be tabled for the time being. Cooper made that motion, and it was seconded by Jeff Hoinacki. The vote to table carried unanimously.

It should be noted that of the sitting aldermen, only four - Hoinacki, Kathy Horn, Marty Neitzel, and Tibbs - were in office when the TIF program was created. A portion of Cooper’s reason for tabling the TIF request was that he felt the aldermen needed a better understanding of the program and how it worked.

[Nila Smith]