The Local Option Municipal Economic Development Act (LB 840, 1991) authorizes incorporated cities and villages to collect and appropriate local tax dollars (sales and/or property tax) if approved by the local voters, for economic development purposes. The Act went into effect on September 6, 1991. The Act has been modified by LB719A in 1992, LB732 in 1993, LB 1188 in 1994, LB207/LB490 in 1995, LB989 in 1998, LB87 in 1999, LB LB1116/LB1258 in 2000, and LB827/LB362/LB362 in 2001.

The Act involves the formulation of the local economic development program plan. The plan forms the foundation for the collection and expenditure of local tax revenues for economic development and, if the voters approve the plan, the provisions of the local plan becomes the basis under which the municipality's program operates.