Sen. Chris Beutler proposed Monday that the city help narrow its massive street funding gap by diverting a portion of the sales tax generated in new developments to street construction.

Beutler, who is running for mayor in the spring city election, said streets top the list of Lincolnites’ concerns, and his “New Roads to Good Jobs” proposal would help bridge the city’s estimated $135 million funding gap for street needs in the next dozen years.

“A major obstacle to greatness Lincoln faces is funding the streets and infrastructure that are critical to growth,” he said. “Under my plan, Lincoln can overcome the infrastructure barrier and create more roads, more sales and more jobs.”

He wants to create development districts around the edges of the city — particularly in retail or commercial developments — and set aside a portion of the new sales tax revenue. That revenue would be used to make payments on a general obligation bond for streets and water and sewer service in the district.

It would be similar to a tax increment financing district, except using sales tax revenue.

Beutler says that would generate money to build roads more quickly.

“Tying those bonds to the sales tax created by new businesses allows the city to reap benefits without further burdening our taxpayers,” he said.

The development districts could be located in a half dozen areas around the city fringe, all of the land outside the 1980 city limits, or a large doughnut around the city edges — those are decisions the public should help make, he said.

“I like the idea of an ever-enlarging district,” he said.

Beutler believes much of the city’s funding gap could be closed through his financing tool.

“It makes more sense to use future growth to pay for streets than continue to hit up property taxpayers,” he said. “This plan requires no new taxes — no new sales taxes and no new property taxes. It finances growth with the fruits of growth.”

His plan would require authorization from the City Council and state Legislature, but the 24-year veteran lawmaker doesn’t anticipate legislative approval would be a problem.

“The Legislature will be pleased with the fact that this solution is Lincoln helping to solve its own problems without state money, and that it addresses road infrastructure problems,” he said. The state sales tax is 5½ cents and local sales tax is 1½ cents on the dollar.

City Finance Director Don Herz said while he hasn’t seen the specifics of Beutler’s idea, he wouldn’t have a problem with the idea as long as it’s done similar to TIF districts. In those districts, the financing tool is only allowed for developments that wouldn’t happen “but for” the financing tool.

“Otherwise it does represent a potential loss of revenues,” he said.

Beutler’s concept sounds similar to the sales tax revenue bonds that Kansas calls STAR bonds, which use a portion of the new sales taxes generated by a development to repay bonds. They were designed to promote tourism and were used to build the Kansas Speedway, according to the Kansas City Business Journal. However, Beutler’s proposal wouldn’t use the money to build the development.

It also parallels the concept in a bill that failed earlier this year which would have allowed sales tax generated in the neighborhood of a proposed arena to be used to build the arena, and later to pay off bonds. The bill failed to pass the Legislature.

While having U.S. Sen. Ben Nelson on the powerful Appropriations Committee may help the city land more federal road dollars, that pot is becoming increasingly inadequate nationwide.

And state road dollars are expected to drop 15 percent in the next two years. That’s why states and cities are looking at new ways to pay for streets.

Fred Hoke, government affairs director for the Home Builders Association of Lincoln, said his group certainly supports revenue to build infrastructure, but would want to be fair to the whole city.

“We also have to use growth dividends to help with older neighborhoods and the downtown areas,” he said. “We are one city.”

Bruce Bohrer, executive vice president of the Lincoln Chamber of Commerce, said while the chamber hasn’t taken a position on the proposal, he’s happy to hear Beutler talk about the concept that growth pays for itself.

“That’s a concept that needs to be settled in this community,” he said. “Ten years ago that was an unanswered question.”

Reach Deena Winter at 473-2642 or dwinter@journalstar.com.