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Wayne Hopes “Extremely Blighted” Designation Creates Investment, Ownership

By Lynn Sanchez

Senator Justin Wayne

Senator Justin Wayne is playing the long game. The District 13 representative is reshaping Community Development law to help Omahans struggling to live in the city’s oldest, most dangerous areas to achieve home ownership and get a bigger slice of the economic pie. But it begins with two words some might interpret as negative: “Extremely Blighted.”

In May 2019, Wayne introduced the new designation in LB 86 to re-characterize Omaha neighborhoods with the most severe poverty and highest unemployment. The designation applies to 18 “block groups” lying primarily in North and South Omaha, from Harrison to Interstate 680, east of 72nd St. What LB 86 means to the community who live there is twofold, says Wayne. It created a $5,000 nonrefundable tax credit for those who purchase homes in these areas over the next six years. (It is not available to those who already own homes.) There will be an additional line to fill out for this tax credit on Nebraska state income tax forms beginning in 2020. The bill also changed funding provisions under the Nebraska Affordable Housing Act so development projects in these areas will go to the top of the pile. “It creates an additional layer of incentive” for development, said Wayne.

“If you look at the bill, it requires that somebody has to live in the home, it has to be their primary residence. They can’t rent it for at least five years. That was our intention. So we were saying if you’re going to take advantage of TIF or anything else regarding ‘Extremely Blighted,’ then you need to live in the community. I assume most people are going to be from the community, Omaha being as segregated as it is.”

Omaha’s Extremely Blighted Districts shown in green

“Extremely is not the greatest word,” Wayne admitted. “I don’t like the connotations, but we have to be truthful about what’s happening in our communities.” The affected areas were assessed using US census and American Community Survey data, showing them to have at least 200% of the state’s average unemployment and at least 20% of the households living at poverty level. “That sounds extreme to me, something we need to fix,” said Wayne.

For years, the Omaha Planning Department has been able to designate aging structures or neglected properties “Blighted” and “Substandard.” Both terms have lengthy legal definitions that are open to interpretation, but essentially it means they have a high percentage of deterioration, and hazards conducive to neglect, crime and other social ills. Many such areas are also recognized as Community Redevelopment Areas (CRAs), which qualifies them for Tax Increment Financing to incentivize development.

An announcement of the Omaha City Council’s approval of the “Extremely Blighted” designation at their December 17th meeting was met with some outcry by several North Omaha residents on the Omaha Star Facebook group. One called the plan “dangerous.” One said developers wanted “cheap land to build a corporate office campus along Cummings (sic).” Several predicted that eminent domain would be used to acquire homes to make way for development.

While he acknowledged the reality of this fear within the community, Wayne dismissed the idea that the bill creates a greater risk of eminent domain. “I don’t see how,” he said. “With eminent domain they have to meet a certain requirement and any political subdivision has to go through a process. This bill doesn’t do anything of that nature, it doesn’t even touch on those issues. In fact, we’re trying to prevent gentrification and prevent eminent domain. We’re trying to establish home ownership.”

Nebraska’s eminent domain laws require the government to establish a “public purpose” before they can legally acquire private property. This is a broad term, and might includes roads, parks, schools or other public buildings. The city has used “blighted” and “substandard” designations for years, long before “Extremely Blighted.”

“The last major eminent domain project was Highway 75. After that, there really haven’t been a lot,” Wayne said. “The reality of how most people lose their homes in North Omaha is with the tax lien process. So if you don’t pay your taxes somebody can buy that lien, that property tax lien, and then after three years, they can start the process of foreclosing on your home.”

Wayne sees LB 86 as a means to correct the way TIF is currently being used, which he said is not true to its original intent. “TIF was designed for urban development. Through Supreme Court cases, now wherever you have just ONE of these 11 – 15 factors, you can make (property) substandard and blighted! So as a developer, why would I come to North and South Omaha if the only benefit I got from TIF is the same as I got at 108th and Dodge or 144th and Maple? There’s less risk in these areas out west, so I’m going to keep developing out west and using TIF. When I came into the legislature I said we have got to do something different. Instead of reinvent the entire wheel, I’m trying to say that in this subset of ‘Substandard and Blighted,’ this is ‘Extremely Blighted.’ You’re going to eventually get more benefits, because I’m going to encourage development in North and South Omaha east of 72nd.”