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BLAIR, Nebraska — For about three years, Jason Thiellen of E&A Consulting Group watched client after client turn down the prospect of developing a housing subdivision on a tract of land near the Walmart in this town of about 8,000 people.
At the same time, Blair City Administrator Phil Green was on a mission to spur new residential dwellings that would grow the town and its tax base and keep local workers from living away.
He and Thiellen, who is also president of Welcome Home Coalition, a nonprofit that advocates for better housing access, teamed up with others including Bluestem Capital Partners in the municipal securities industry and state Sen. Mike Jacobson, a banker from North Platte.
Together they pushed for change they believe will prod developers to take on small-town homebuilding projects previously shrugged off as too risky.
The change came in the form of a newly passed law that allows for creation of “Community Improvement Districts” — zones inside a city’s boundaries where property owners essentially tax themselves to fund infrastructure and public improvements.
Blair is the first Nebraska town trying to establish a CID, and those working on the 137-unit Bear Creek residential project said the price of a house there could drop by as much as 30% by applying the new provisions.
“It’s a model that is good for the developer and equally as good for smaller communities where having housing development inside the city limits is really really important,” said Green.
CIDs in other states
Known as Legislative Bill 1130 before folding into LB 1114, the CID is viewed by supporters as a tool to confront a statewide housing affordability and supply shortage that, according to a still cited 2023 report, had reached crisis proportions. Committees formed at the time of that report continue to pursue its recommendations, including creation of tens of thousands of affordable dwellings.
Under the CID Act, property owners within a Nebraska city’s limits can voluntarily form a district that has power to issue long-term, income tax-exempt bonds to finance streets, sewers and other public infrastructure needed to build and support a new neighborhood.
Given required approval by the respective city government body, a CID board will set a tax levy on property owners within the district and that revenue pays down bond debt over a period of 20 to 30 years.
That’s on top of other property taxes the homeowners pay. But supporters say the CID model lowers up front costs of home lots, making the price of the house more accessible and affordable. On average, the cost of a house in a Nebraska CID is expected to be 15-20% less than if CID provisions were not applied and public infrastructure costs were reflected in the initial purchase price, Bluestem’s Adam Flanagan said.
Property owners who benefit from district infrastructure collectively pay for them over decades, lifting some risk from developers and municipalities that absorb upfront costs.
In addition to brand new development, the CID model was designed to promote redevelopment and rehabilitation. It allows property owners in established pockets within a town to form a CID to finance amenities such as a park, walking trail or transportation project.
States including Kansas, Missouri and Georgia have CIDs, passed either by state law or constitutional amendment.
Pillen celebrates the CID
First up to test the new Nebraska law, the planned Bear Creek neighborhood is to rise on roughly 40 acres in Blair, about 30 miles north of Omaha. Grading has begun.
On Monday, Blair administrators and housing advocates joined Gov. Jim Pillen at the site for a ceremonial signing of LB 1114. Pillen praised the CID provisions, which received bipartisan legislative support. He said he foresees them busting down some barriers to what he called a great wealth-builder, homeownership.
Pillen told those gathered that he and wife Suzanne bought their first house when they were about 23 years old. He said housing prices are so high that many today don’t take that step until their 40s.
Developer Paul McCune told the Examiner in an interview that he would not have embarked on the Bear Creek project had it not been for the CID tool.
“We wouldn’t be there — we couldn’t do it,” the longtime developer said.
McCune is working on Bear Creek with D.R. Horton, America’s largest production home builder. McCune said escalating lot costs would have made it difficult to build homes at a price point that would sell in Blair, or in many small and rural markets where workforce housing primarily is in demand.
Under the CID scenario, he said, a homebuyer’s up front cost for a land lot might be $65,000 versus $100,000. Homeowners are responsible for paying a CID tax based on the value of their property until the CID bond is repaid.
Bear Creek houses are expected to sell at a starting price, Pillen said, of $320,000.
Said McCune: “It allows housing development on a nice piece of ground in the middle of the city that (otherwise) would just sit there and be corn, forever.”
He noted that a similar financing concept, the Sanitary Improvement District (SID), for years has boosted development of Nebraska housing — but SIDs are limited to outside the boundaries of a city.
The SID emerged after World War II as returning soldiers drove a surge in housing demand and many communities lacked adequate infrastructure. The Legislature established the mechanism in 1949 to finance subdivision improvements.
Perplexing
Why an SID-like tool wasn’t available earlier for housing inside city limits was perplexing to Green. The Blair administrator said the town’s economic growth and recruitment of new business depended on more residential housing.
He pointed to a study of Blair and five smaller Washington County municipalities that in 2021 foresaw a demand for more than 500 new housing units by 2025. Blair is far from its goal, Green said. Last summer’s ground-breaking of a 132-unit market rate apartment complex was the town’s first major housing infusion in a quarter-century.
“Sometimes all that is required is a simple question: Why not?” Green said.
He started meeting about a year and a half ago with representatives of Welcome Home and Bluestem Capital, which has advised SID development for three decades. Jacobson introduced the CID legislation.
Thiellen called the CID perhaps the most significant economic development tool since the Legislature approved tax-increment financing in 1979 and said it marked “a major step forward” in addressing Nebraska’s housing shortage.
Flanagan said he anticipates the CID model to be used across the state, though he said the effort was driven by housing demands of rural and smaller communities.
A problem faced by those towns and villages, Flanagan said, is that high land and construction costs push up home prices but relatively few families are competing to get into half-million-dollar homes. “You couldn’t develop a lot cheap enough for what homeowner demand is,” he said.
Flanagan and fellow Bluestem co-owner J.P. Platisha said that while tax-increment financing is effective in sparking development, that public incentive is limited to projects in designated “blighted” areas. Often controversial, TIF leverages future property tax revenue at a city-approved project site to finance redevelopment efforts.
Bluestem foresees a future effort to try and use both mechanisms on the same project for further affordability, though legislative change would be required.
CIDs for commercial development
Among fans of the CID are business chambers in Omaha, Lincoln and the statewide Nebraska Chamber of Commerce and Industry. Nate McHargue of Olsson design firm spoke on their behalf during a public hearing earlier this year in Lincoln.
He said that beyond housing, CIDs could help commercial and industrial development. Nebraska employers consistently identify infrastructure readiness as a barrier to expansion and McHargue views the CID as a way to speed up timelines and lower initial capital outlays for employers.
“Timeliness is critical as we’re competing for large-scale projects and site readiness,” he said.
The Nebraska State Home Builders Association also favored the concept, as did nonprofit Habitat for Humanity of Omaha.
Speaking for the City of Lincoln, David Cary during the February hearing said the capital city in the past has opposed SID-like bills but in this case saw “additional opportunities for growth.”
Cary said the legislation allows each project to demonstrate that “it can balance developer financing needs against homeowner costs.”
Jacobson told fellow lawmakers at the hearing that he appreciates that no state or general fund dollars are tapped. He called CID participation voluntary and locally driven.
“What I like about this bill is that it fills a niche that’s not being served today,” he said. “It’s got constant oversight by the city council. You don’t have to play if you don’t want to play.”
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