OU Foundation owns most of the proposed UNP Arena TIF district

 

It is always good to check the facts when developers bring projects forward asking for large amounts of public tax spending. 

The City of Norman has brought in the Center for Economic Development Law and also CoAlign to "run" the TIF numbers. O'Connor from CoAlign gave the city's presentation at the first public hearing for the proposed Arena TIF project in the north half of the University North Park. 

 O'Connor tried hard to make it seem like the difference between the City's independent analysis by HVS and Hunden was how much Land OU controls.  HVS was hired by the Center for Economic Development Law to do economic impact analysis of the project. The performed estimates for a project that was significantly smaller than the original ones provided by OU Foundation and Rainier Partners done by Hunden Partners. 

FACT CHECKING SHOWS THAT OU FOUNDATION OWNS MOST OF THE LAND

The bulk of the project spending would be for an arena and parking structure in the "improvement area" outlined in yellow. This is ALL owned by OU Foundation. 

OU Foundation controls 159 acres if the data at the assessor's office is correct.

Of the land in the larger project area, the stuff outlined in red is already set to pop.

Southwest Wire has an industrial site and has stated it does not want to be included in the TIF district.

What about the remaining lots that might be developed in connection with the arena?

Norman Economic Development Coalition and Moore-Norman Vo-Tech are the primary land owners of the "larger" project area

The taxes paid in the larger increment district will be used to funnel public spending on OU Foundation land.  OU Foundation and OU don't even pay property taxes making it interesting that they want to grab taxes paid by other businesses. 

If you think of it this way, it is a shell game - where do the tax dollars flow?  From one budget to another.  

UNP TIF #2 Oversight Board REJECTS arena TIF district

 

At the June 18, 2024 meeting, the UNP TIF #2 Oversight Board voted 3- 2 to reject the Rock Creek Entertainment Tax Increment Finance District Project Plan Ordinance. You can find the meeting minutes here: Minutes.

Voting against were Dr. Greg Burge, Attorney Rob Norman, and local builder William "Bill" Wilson. 

Dr. Burge is the Oversight Board Chair and the Economics Department Chair at the University of Oklahoma. Dr. Burge is a nationally recognized expert in housing, public finance (impact fees), and real estate economics. https://sites.create.ou.edu/gregburge1978/curriculum-vitae/

Robert Norman who was a leading advocate for Norman Forward Quality of Life special purpose sales tax program. Attorney Norman has a high level of understanding of legal aspects of development agreements as well as displacement effects which result when you bring new stuff in one area of town causing consumer spending to shift from other areas of town. 

William "Bill" Wilson was first appointed to the board in 2015 and is the longest serving member. He has observed the challenges of holding UNP developers/OU Foundation accountable for completing promised development. Mr. Wilson has developed projects in Norman, including a building in downtown Norman.

Voting in favor of the plan were banker Kurt Lee and accountant Kamie Kellis. Mayor Heikkila appointed both in 2022.  

The overriding concerns of the majority of the Committee, included

(1) The amount of future City sales tax and multi-jurisdictional property tax revenue that would be pledged toward the project for up to 25 years; 

The sales tax pledge is $151 million and the property tax pledge is $389 million.  These tax revenues won't go to original taxing jurisdictions. 

(2) the inclusion of properties in University North Park that lie outside of the proposed Entertainment District within the tax increment area;

The increment district includes properties south of Rock Creek Road which were in the original UNP TIF #2 increment district.  These were part of that original project which has spent about $74 million in tax dollars for project costs. 

(3)  The potential negative impact on Norman businesses and the City's General Fund and Capital Sales Tax Fund through "cannibalization" and diversion of customers from areas of the City outside of the Entertainment District to businesses in the Entertainment District.

The shifting of customer spending from outside the TIF to TIF stores negatively impacts the city general fund.  Estimates of these impacts have not been clearly spelled out in the Hunden Partners study which informed the project plan.  The recent HVS study provides estimates which can be used to evaluate the annual impact on the city general fund.  The Statutory Review Committee and the Oversight Board did not have such analysis when they were asked to evaluate the plan.

(4) Who will own and operate the proposed arena and parking garage? 

Mr. Francisco mentioned that this has not been decided. There have been discussions about some sort of city-county authority. The City has no plans to be the owner/operator.  

UNP TIF #2 Oversight Board Meeting clarifies Issues with Development Agreement

The minutes of the University North Park TIF (#2) Oversight board meeting held on July 16, 2024 spell out problems with the arena TIF development agreement. UNP TIF #2 Oversight Board Minutes

The Economic Development Agreement does not define project or commit developer to completing minimal development beyond an arena.

Comments by City Finance Director, Anthony Francisco:

“Before the recommendation will go before Council formally, we want to have an Economic Development Agreement that basically puts meat on the bones if you will, that makes all the contractual parties bound for what is in that Project Plan,” Francisco said. The Economic Development Agreement has been in negotiations for several months. There have been what Francisco describes as the following “sticking points” which have been communicated by City Council and the City Attorney’s Office to the developers and the developer’s counsel:

1. There needs to be an obligation to do a specific and defined project;

2. The project needs to name a specific party that is the main developer;

3. The developer’s counsel proposed changes to the draft Economic Development Agreement that makes the TIF revenue payments to the developer dependent only on construction of the Arena and not the entire District, leading to default concerns. "



Access to I-35 is not under design. 

The proposed East-west Access Oklahoma Turnpike put a stop to the design of the interchange which would serve the arena entertainment district. 

City interim public works director Scott Sturtz commented:

“There is a big circle on the map that basically says that ‘this (Rock Creek and I-35 intersection) needs further study.’ They did not get far enough along to make recommendations,” Sturtz said. “Again, this is all preliminary. They are pretty good concepts, they’re laid out pretty well, but I wouldn’t say there’s anything that’s definite at this point.”

TIF Project Plan does not detail developers' obligations to build anything

The first of two public hearings for the proposed Arena entertainment district in northwest Norman is scheduled for September 3.  Incredibly, the actual project details beyond an arena and parking structure have not been clearly defined.  The ask is for up to $600 MILLION tax expenditure to repay the financing costs of $230 MILLION for the arena and public infrastructure.

What will City taxpayers get for that huge 25-year spending project?

The TIF Project plan details taxpayer legal obligations via establishing the TIF increment district, and the diversion of tax revenues collected in the increment district to the TIF fund for authorized TIF projects (up to $600 MILLION).

What is included in the development? The Arena project plan gives only the vaguest of details about what is planned.

"The project includes the development of a multi-purpose arena to be used by the University Oklahoma basketball and gymnastics teams and the venue for high school and other sports activities as well as concerts and other performances. The development also includes commercial, and retail uses with restaurants and bars and a public festival plaza street, a public parking garage, as we as over 1000 residential units."   https://www.normanok.gov/sites/default/files/documents/2024-08/project_plan_entertainment_district.pdf

What are the Texas developers, OU Foundation, and OU legally required to do to get the $600 Million in financial assistance?

The developer obligations are established in the Economic Development Agreement? The EDA has not been released to the public presumably because it is still being negotiated. 

Will OU be locked into a 25-year lease??

Will the Texas Developer be locked into building at least 750 apartment units? What if only 500 get built, will the arena costs still be covered?  

Will OU be locked into providing some up front $ to cover part of the $330 million arena+parking costs? 

Will OU Foundation be on the hook for part of the costs?

What is the minimum retail needed to get repayment of the arena costs?  The Hunden partner's analysis projected 240,000 square feet of retail/restaurants but the lastest city-funded analysis by HVS only projected 120,000 square feet.  

Who will OWN the arena?  Private? Public? If public when will "the public" get the deed? 

Who will borrow the money to build the arena?

The bottom line is that the project plan sets out taxpayer costs/payments but NOT developer commitments.  

You wouldn't agree to house mortgage without knowing what house you are buying. This is a similar situation, folks  

Also notice the 3-2 NO vote by the UNP TIF oversight Board does not seem to be included with the agenda or project plan documents.  Oversight? Intentional?  

Don't Yum Center my Norman! 
The Yum! Center provides a useful cautionary tale about how mega projects centered around university sports can fail.   Getting STIF[ed]  

Public Finance of Arenas: Ask Economists, Get Answers - OU Econ Club Event

 
The University of Economics hosted an economists panel on the public finance of sports arenas.  The panelists shared the conclusion from data-driven research:  publicly financed sports arenas have not been shown to be economic drivers.   Rather, arenas tend to move where consumers spend money in a local economy. 

Here's a link to the youtube video of the forum. OU Econ - The Public Finance of Sports Arenas - YouTube

Norman Oversight Committee rejects Arena TIF Project Plan

The University North Park TIF #2 oversight committee met on June 18, 2024. Six members were present representing a quorum.  The committee discussed the proposed Rock Creek Entertainment District Tax Increment Finance Plan which would create two new TIF districts to pay for the costs of an arena + parking structure + district infrastructure. 

The project costs are estimated to be $230 million with up to an additional $370 million in financing costs.

The TIF structure is unusual for two reasons. First, the Texas developer, Rainer, LLC would take out a loan and the City would commit to paying off the principal plus interest costs. Second, 100% of the sales and advalorem taxes collected in the increment district would be used to pay off the debt. TIF usually split revenue growth in an increment district so that taxing jurisdictions share in the growth for the entire life of the project.  

Here is a summary of some of the key points: 

1. The committee approved the PUD and rezoning that went through the planning commission last week. The general sense was that this was an issue for the planning commission and that the Tax Increment Finance plan was what the TIF committee should focus on.

2. The committee rejected approving the Rock Creek Entertainment TIF project plan by a vote of 3 no to 2 yeahs with one abstention by the soon-to-be-new CFO of Norman Schools. Notably, the NPS Superintendent votes yes to the exact same plan at the statutory review committee last month. The superintendent had commented that his vote did not represent the opinion of the school board which had not discussed the matter yet. The school board did discuss the plan at their June meeting and expressed concerns about the impact on the school budget. The four members who were present 3. City council approved putting the arena TIF project plan to a public vote last week. The ballot language has been submitted to the county election board for an August 27th vote. There have been no lawsuits challenging that action to dates according to city attorney Walker. 4. Committee members asked for analysis of how including the lots south of Rock Creek by the Young Family Athletic Center and the industrial lots at the far north of the district would impact the project financing. These are not related to the arena or new housing development. Such estimates have not been done. City Finance Director Anthony Francisco estimated that 5 lots of fast food might generate about $250,000 in general fund sales tax revenues. There are approximately 12 lots in the south area. 5. Committee members pointed out how cannibalization is not just moving businesses but also moving where people shop and spend their entertainment dollars. This sort of shifting means less tax revenues would accrue to city, county and schools from outside the TIF leaving less money for public services - police, fire, public works, etc. 6. TIF consultant pointed out that if all the possible yet to be developed sites are not included, the project won't make. Committee member pointed out that the committee is supposed to look beyond whether the financing works but also at how the city as a whole is impacted. You can find the agenda packet here Development Oversight Committee for TIF District No. 2 Meeting-AMENDED | City of Norman Oklahoma Meetings (municodemeetings.com)

Something WILL Definitely Happen in Arena TIF District Without an Arena!

TIF is not that complicated. You divert tax revenue growth from a given area for project costs.  

The CRUCIAL question is not the situation today (are tax $s being generated now) but whether the area would growth without the TIF (fancy word is the "but for" condition). 

Can anyone with any sense make a credible argument that the increment area won't grow at all for the next 25 years? Absolutely NOT!

Even the Hunden Partners report assumes that growth WILL happen in the TIF district without a new arena. 

Sooner Investments makes a clear case that this area is prime real estate. University Town CenterNorman, OK - Sooner Investment

 "UNIVERSITY TOWN CENTER is Oklahoma’s premier destinations for shopping, dining, entertainment, and lodging! Located off Interstate 35 in the vibrant University North Park district, University Town Center is a power center, developed around Legacy Park and the Legacy Park Trail. At the center of the development is the Legacy Park lake, which boasts impressive water features and fountains, as well as an amphitheater that hosts a concert series and and many other events. Legacy Park Trail will take pedestrians from the hotel district to Legacy Park, through the shopping center, and out of the development, through the city to Historic Downtown Norman and the University of Oklahoma." 

To the extent that the district will grow without a $600 Million arena spending plan, then taking 100% of tax revenue growth from the district WILL hurt city, county and school budgets. They will get less tax revenue growth during the period it takes to pay off the project debt (up to 25 years).

Don't be fooled by the attempts to avoid the real issue - it isn't what is there now, it is a matter of what will likely happen without a new arena. 

Housing, is half of the proposed development area - this can and will happen in Norman without a new arena. The Arena TIF will influence where that housing will happen and where related tax revenues will go (to City and schools or to pay off Rainer LLC's construction loan).

New Bars and restaurants (which make an arena an entertainment "district") don't put more money in people's pockets but will spread out where those entertainment dollars are spent.  If entertainment budgets are spent in the Arena TIF district INSTEAD of other areas of Norman, then city and school budgets are harmed. We call this displacement effects.

The Local Development Act even excludes the use of TIF from areas which would have had developed anyway (without the project). 

Note the TIF increment diversion area INCLUDES all yet to be developed land - even lots that will surely attract private capital in the very near future.