Norman Residents Pushing for Referendum on Revised TIF plan


On November 26, 2019, the Norman City Council voted 5-4 to approve an amended project plan for the University North Park Tax Increment District.

The impetus for the changes was a City budget shortfall.  Like virtually all cities in Oklahoma, the City of Norman relies on sales tax revenues to fund general services.  The UNP TIF diverts about $4 million per year from the general fund to the UNP project fund.

In the hopes of stopping the sales tax diversion, the City of Norman embarked on negotiations with the private partners, University Town Center, LLC and University of Oklahoma Foundation.  At the same time the City of Norman passes a budget that assumed the tax diversion would end as of June 30, 2019.

The Amended plan reduces authorized spending which returns the increment diversion and addresses the Budget situation.  However, the settlement is very one-sided, obligating a lot of future tax revenue for little benefit.   The new contract removes the cap on spending for the remaining planned roadways and cultural facility components.  This leaves the City open to further "disputed claims" and litigation threats.    

Five OU Economics professors (including myself) wrote a letter to City Council recommending that the Plan be rejected.
UTC and OU Foundation were given a sweetheart deal.  UTC is off the hook for completing the lifestyle center, intended to create a retail environment to draw in shoppers to Norman.  The new contract removes the clawback penalty which UTC would owe if it failed to build the lifestyle center. To date, UTC has not build a single inch in the designated lifestyle center area.  This is up to a $8.3 million benefit to UTC.

The new plan also creates $5 million in incentives to cover costs to build "new to Norman" entertainment uses.  These do not require performance standards, private spending above the $5 million, or analysis of potential cannibalization. In fact, the City Manager is authorized to write the check without City Council oversight.

Finally, the Plan shifts the costs of remaining planned roadways from UTC to taxpayers.  This is a $5 million benefit to UTC.

Residents are pushing back by trying to get a referendum on the ballot for citizens to vote on the new plan.  The deadline for turning this in is December 23. 

For information about the petition see  https://shareok.org/handle/11244/321407?fbclid=IwAR2xwHHuig73ybOYRiFBTXsdH0sKaSOjC2xhdCev_qFkncmTU-NO7sEosBw   

Citizen Lawsuits against TIF deals

Each state has its own laws about the requirements for establishing a Tax Increment Finance District. In practice the interpretation of "economic development" and "blighted" can vary considerably.

This article discusses a case where citizens challenge the "blighted" condition in Chicago.  https://chicago.curbed.com/2019/4/19/18507728/lincoln-yards-lawsuit-tif-district

In Madison, Wisconsin a group of taxpayers argue that $1.5 million in cash payments to a developer in a TIF district "violates the state constitution's uniformity clause, which requires all property within a taxing jurisdiction to be treated the same."

https://madison.com/wsj/news/local/govt-and-politics/supreme-court-hears-oral-arguments-on-lawsuit-challenging-tif-districts/article_a0589408-4f50-503f-b81f-65164cf1650b.html

Legal challenges of TIFs in Illinois - legal standing of citizens regarding TIF challenges.  http://www.franczek.com/frontcenter-Legal_Challenges_TIF_Business_Districts.html

Case law examples of Illinois schools successfully challenging TIF implementation. http://www.franczek.com/frontcenter-Legal_Challenges_TIF_Business_Districts.html

Breaking up [a TIF] is hard to do

The City of Norman City Council has set a June 30, 2019 deadline for ending the collection of the University North Park Tax Increment Finance District - which means it will stop allocating part of the sales tax revenues generated in the TIF Increment District to the TIF fund. 

The original plan authorized a maximum of $54.725 million in spending from the UNP TIF Fund. 

Remaining unspent, but authorized spending, includes $8.25 million left over from the "conference center and cultural facility" and $8.25 million in incentives for "lifestyle center" retail development that meets certain sales per square foot criteria (to fulfill the regional draw component).

The latest TIF evolution is to put two Norman Forward Project (quality of life projects paid for out of a special sales tax assessment), a multi-sport gym and a competitive swimming pool, in the UNP District to fulfill the "lifestyle center" component.

The City as entered into an Memorandum of Understanding (MOU) agreement about how to negotiate the end of the TIF increment. 

https://journalrecord.com/2019/03/27/norman-city-council-approves-mou-to-end-unp-tif/

TIF is springing up all over Oklahoma. Are you prepared?

Bethany, Oklahoma is considering a number of new TIF districts as is Oklahoma City.  With the arise of TIF districts comes added scrutiny.  https://journalrecord.com/2019/04/15/no-mention-of-tifs-in-school-funding-rebalance-proposal/

Seven Professional Tips when thinking about creating a TIF district

Due Diligence and duty of care apply to TIF as an economic development strategy.  Is there a legal obligation to do proper analysis?  http://arizonalawreview.org/ellis-hayden-rogers/

How to Improve Tax Increment Financing

Improving Tax Increment Financing for Economic Development, Lincoln Land Institute, by David Merriman Link

This report provides an overview of how state and local governments can improve the practice of using TIF to stimulate economic development.

Sales Tax TIF - Flawed Deal Lessons

What can we learn from an extreme example of a TIF failure?

Getting STIF[ed]: Louisville’s Yum! Center, Sales-Tax Increment Financing, and Megaproject Underperformance by Robert Sroka, University of Michigan, 1402 Washington Heights, Ann Arbor, MI 48109, USA.Email : rsroka@umich.edu  link

Abstract

This article evaluates the revenue performance failings of the Yum! Center,

a sports arena in Louisville, with the primary objective of explaining how a

flawed deal arose in the first place. While the literature addressing public

subsidization of sports facilities primarily contemplates economic impact

underperformance, Louisville provides an extreme instance of failed

financial performance leading to a bailout. The revenue challenges, arising

from sales-tax increment financing and the lease agreement, link the arena

to a wider literature on megaproject underperformance, characterized by

three primary threads: rent-seeking, governance structures, and project

cultures. This article evaluates the Yum! Center through representative

lenses from each of these threads before offering key lessons for future

projects.

Trouble with TIF

The Trouble with TIF  article explains the pitfalls.

How effective is TIF anyway?

"The answer, like life itself, is complicated. But David Merriman, a professor at the University of Illinois at Chicago, takes a stab at it in a new report for the Lincoln Institute of Land Policy. After reviewing available research on the implementation and impacts of TIF, Merriman concludes that the mechanism, while helpful in some ways, leaves a lot to be desired.

“In the end, it can be a valuable mechanism,” he said. “It’s not something I’d like to get rid of—but it deserves a lot of scrutiny because public sector dollars are being re-routed into a different task, away from general purpose funds.”