Norman Arena TIF Will Harm School and City Budgets

Many promoters of the University North Park Arena TIF project have tried to argue that there is no harm to the schools because the TIF district is not generating tax revenue today.  This, of course, misses the crucial question: would that area generate tax revenue without the TIF?

In the case of the proposed new Arena TIF Increment district is shared by TIF #4 (sales tax) and TIF #5 (property tax). The increment district is the area where taxes collected are used to pay for project costs. 

There is no credible reason that spending up to $600 million for an arena project is necessary for growth to happen in the TIF district.   

Is it realistic to think that nothing at all would happen in the University North Park area over the next 20 or 25 years without an arena?  This claim is ridiculous. 

The Young Family Athletic Center is already drawing tournaments and a lot of activity.  Nearby restaurants have noted the uptick in business. The properties surrounding the YFAC are site ready and already for sale. These sites are probably the most valuable land in Norman today. 

The figure below shows the YFAC and the current year's property taxes for the Surf Bar - just across the road from the YFAC. The School taxes for the current year are a little under $11,000. 

The lots with yellow X's are included in the tax increment district - from which tax revenue growth would be used to pay for the arena TIF costs.  If we multiply the property taxes paid by the Surf Bar by  10 or 11 for 20 to 25 years, we are talking real money that the school district won't get (even accounting for school air formula).

In addition, the sales taxes from these properties would not go the city general fund (3%) but instead be used for TIF project costs.  

These properties south of Rock Creek were in the original University North Park TIF district (TIF #2). The increment from TIF #2 was ended by a restated and amended project plan.  The logic behind TIF is that taxing jurisdictions give up revenues for a period of time and then get higher tax revenues after the costs are paid for. 

By putting this land from the original TIF #2 into the new TIF district, the City and Norman Schools are going to miss out on revenue growth that was tied to TIF #2.  The original TIF was a 60-40% split in advalorem tax revenues between the TIF project and the original taxing jurisdictions The proposed new TIF would be a 100% apportionment to the TIF. It is worse for the original taxing jurisdictions than the original one.

The bottom line is that the proposed UNP Arena TIF plan WILL take revenue growth from the City of Norman and Norman schools because there WOULD absolutely be some development in the area even if an arena is not built.

Council votes to put Arena TIF project to Public Vote

 

This video summarizes some key moments at the meeting.

1. Mayor Heikkila made unprecedented changes in the public comment process. He limited comments to 2 minutes instead of 3 and limited the total time on an item to 30 minutes.  Many who signed up to speak in advance were not given the opportunity to do so. 

2. Developers and applicants get as long as they like and multiple opportunities to address city council. There is a systematic imbalance in the process. 

3. Of the 14 speakers who got a chance to speak on the Arena TIF item, and 2 were against taking the plan to a public vote (Chamber of Commerce President Scott Martin made some claims about jobs. CM Elect Dixon made a claim that people voted for the TIF when they elected him and Matt Peacock. 

Council voted to put the TIF project plan to a public vote in August. There was some discussion about whether that vote would be binding since the Local Development Act does not require a vote as part of the process. 

Can you imagine a mayor or council person voting the opposite of a public vote on an item.  Geez. 

Norman city council changes on July 2. It is unclear of the new council will wait for the public vote or push through a vote on the TIF.  

THINGS THAT DIDN'T MAKE THE EVENING NEWS! Norman OK City Council TIF Meeting 6-11-24 (youtube.com)

TIF is NOT Free money, UNP Arena won't pay for itself!

 

Tax Increment Finance is a popular tool used to pay for public (and private) assets.  Oklahoma City has had over a dozen TIF projects. Yet OKC did not use TIF to build a new NBA arena.  They asked taxpayers to approve a 1% designated sales tax. 

Norman has had 3 TIF projects so far,

TIF #1 was a small TIF for campus corner infrastructure upgrades.

TIF #2 - the infamous University North Park project which yielded a power retail strip anchored by Target but no promised "lifestyle Center".TIF #2 split the growth in tax revenues in the increment  district - 60% of sales taxes and 50% of the property taxes were diverted to TIF projects. 

TIF #3 diverts 90% of property taxes collected in the increment area for upgrades need to replace old infrastructure in central Norman.

The proposed new TIFs are unusual. They would collect tax revenues from the same increment district. TIF #4 would divert sales taxes and TIF #5 would divert property taxes collected in the TIF area.  Both would divert 100% of the taxes collected in the increment district in contrast to most TIF projects which split the revenue growth. The contractual taxpayer obligation would be to spend up to $600,000,000 (that's 600 million) or however much is collected for 25 years.  

The project costs include $230,000,000 for an arena, parking structure and district infrastructure.  The financing costs bring up the price tag to $540,000,000 to $600,000,000. 

Arena facilities, themselves are boondoggles - they don't generate enough revenues to pay for construction and finance costs over a 25 year lifespan.    

What we know and don't know about the proposed Arena TIF

Norman Development has posted a detailed discussion of the evolution of the proposed new arena and bar/restaurant strip in northwest Norman north of Robinson and south of Tecumseh along I 35 (aka the University North Park district). -  https://www.facebook.com/share/p/vSM78CRVY8CFicE9/. 

Who is TEAM NORMAN - The group of land owners and special interest (OU Foundation, Norman Economic Development Coalition which is funded in part by OU foundation, OU, OU Athletics) - to promote the arena plan. TEAM Norman is not a citizen led initiative. Note also that ALL the info and projections are based on the conceptual plan provided by OU Foundation and developers. There is NO certainty that all the housing and bars and shops will get built as planned. We don't know how much OU will contribute to the arena construction costs or who would own the facility once built. The only discussion of the impacts of diverting tax revenues from original taxing jurisdictions - city, county and schools, was done at a school board meeting. At that meeting the CFO said there was too much uncertainty to know the impact on the school budget. However, it is possible to back end out just how much the schools give up during the tax diversion period.

Now on to Norman Development's article:

Norman’s Planning Commission will finally hear rezoning and Tax Increment Financing (TIF) Project Plan details for the proposed Rock Creek Entertainment District proposal next week, following five postponements.

The plan has been much anticipated since Team Norman first announced the plan September 6, 2023. At that time the $1 Billion plan was expected to be 20% funded through public investment.

Though the Project Plan and rezoning requests are two separate items, and appear as such on the Planning Commission’s agenda, the two items are inherently intertwined and one will likely not exist without the other.

Prior to review by Planning Commission, the plan was reviewed by the Statutory Review Committee composed of a representative from the City of Norman and the Norman Planning Commission; a representative from each of the affected taxing jurisdictions: Cleveland County, Norman Public Schools, Cleveland County Health Department, Pioneer Library System, and Moore Norman Technology Center; and 3 At-Large members.

The Committee was created by resolution of the City Council in November 2023 and held their first meeting April 5, 2024. The group met on April 25th, May 13th and May 16th before approving the plan at their May 23, 2024 meeting.

𝐓𝐡𝐞 𝐑𝐞𝐳𝐨𝐧𝐢𝐧𝐠 𝐑𝐞𝐪𝐮𝐞𝐬𝐭

New site plans to be presented to Planning Commission are similar to those first obtained by Norman Development in November 2023 with some modifications. Both are almost identical to plans proposed by the University of Oklahoma Foundation in 2018 that Team Norman calls “vaguely similar.”

The 90-acre site is broken up into 3 development areas: urban residential, high density residential, and commercial.

An extension of Radius Way midway through the site divides the residential areas from the arena and associated commercial developments.

The urban residential has shrunk from 96 lots to 37 lots tucked to the north west corner of the site. Typical lots are 40 feet wide and span 3,000 square feet. The neighborhood has OU-themed streets: Crimson Lane, Cream Terrace, Cream Circle, and Live On Lane.

A portion of the single family residential lots from the November plan have been reallocated to multi-family development.

According to the Hunden Partners Market Demand, Financial Feasibility & Impact Report, it is projected that 14% of residents in the Entertainment District will be new to Cleveland County,

Over 750 apartments and 24 townhomes are spread across 5 platted lots spanning over 25 acres of the site.

The site plan south of Radius Way has remained untouched from the November plan. The 7,000-9,000 capacity arena is surrounded by commercial, office, hotel, and conference center buildings to the north and east with a parking garage and surface lots to the northwest and south.

The Rainer Companies, who purchased a large majority of University Town Center in 2019 for $63 Million, are a part of the development team for the Entertainment District.

Developers anticipate the retail component of the Entertainment District to be small scale shops, restaurants, and entertainment focused businesses rather than large big-box stores found in the developments south of Rock Creek Road.

The Hunden Partners report stated 17% of retail anticipated will be new to Cleveland County.

A phased approach will be used in developing the project, with the arena and commercial developments in phase 1, multi-family housing in phase 2, and the single-family housing in the final phase.

𝐓𝐡𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭 𝐏𝐥𝐚𝐧, 𝐃𝐞𝐯𝐞𝐥𝐨𝐩𝐞𝐫’𝐬 𝐀𝐬𝐤

TIFs are used to capture and reinvest new tax dollars created in an increment district back into projects that benefit the TIF area as dictated by the Project Plan.

A TIF, TIF Number 2, was used in the development of University North Park south of Rock Creek Road beginning in 2006. TIF funds were used for the development of Legacy Park, roadway improvements around the UNP area, building the I-35 frontage road between Robinson and Tecumseh, among other projects.

TIF Number 2 has since ended though it is estimated that the developments a part of the TIF generate $13.4 Million in sales tax revenue annually, according to the 2024 Project Plan.

The objectives of the Rock Creek Entertainment District TIF Project Plan are “to retain or expand employment, to attract major investment in the area, and reverse economic stagnation; preserve and enhance the tax base and make possible investment, development, and economic growth that would otherwise be difficult without the Project and the apportionment of incremental tax revenues; [and] to stimulate private commitments to invest and reinvest in the area,” according to the Project Plan.

The project would be carried out by two TIF districts that would be formed. Both TIF Districts encompass the Project Area set in the Project Plan: a portion of the undeveloped land south of Rock Creek Road along with all undeveloped land north of Rock Creek Road.

First, TIF Number 4 would be a sales tax increment district and begin increment collection on May 1, 2025. The TIF would divert 100% of the sales tax collected in the increment district and is expected to generate $151 Million in incremental revenue.

Second, TIF Number 5 would be an ad valorem, or property, tax increment district and begin increment collection on December 31, 2026. The TIF would divert 100% of the ad valorem tax collected in the increment district and is expected to generate $151 Million in incremental revenue.

Entire project costs from both TIFs are limited to $600 Million, up from the original pitch of a $200 Million public investment. TIF increments are statutorily limited to 25 years.

According to the Project Plan, $190 Million of the increment would be used for the construction of the arena and parking garage. An additional $40 Million would be used towards public infrastructure to support the arena and parking garage.

𝐓𝐚𝐱𝐢𝐧𝐠 𝐣𝐮𝐫𝐢𝐬𝐝𝐢𝐜𝐭𝐢𝐨𝐧𝐬 𝐜𝐨𝐮𝐥𝐝 𝐬𝐞𝐞 𝐢𝐧𝐜𝐫𝐞𝐚𝐬𝐞

Once the entire build out is complete, and after the increment has ended, the area is projected to generate an additional $30 Million in annual tax revenue.

Of that increase, Norman Public Schools could see $7.9 Million annually; Moore Norman Technology Center, $2.9 Million annually; Pioneer Library System, $1.1 Million annually; Cleveland County, $1.9 Million annually; Cleveland County Health Department, $495,000 annually.

In addition, the City of Norman could see benefit of over $32 Million in sales taxes outside of increment. This are projected to include $23 Million for the Public Safety Sales Tax Fund, $8 Million in hotel room taxes, $5.8 Million to City of Norman’s Public Transit Fund, and $3.3 Million for Norman Forward.

𝐂𝐨𝐮𝐧𝐜𝐢𝐥 𝐚𝐧𝐝 𝐂𝐢𝐭𝐢𝐳𝐞𝐧 𝐂𝐨𝐧𝐜𝐞𝐫𝐧𝐬

While the Project Plan has been working its way through City processes, public perception of the project remains mixed.

Some feel the project could be a once-in-a-lifetime opportunity for the city, while others feel the project is not a good financial investment for the city.

Talks circulated in 2018, and have come up again with the 2024 version of the plan, regarding putting the issue to a vote of the people.

Three City Councillors invoked a rarely-used “Rule of 3” to require the City Manager to place an item on an agenda when requested.

Councilmembers Lauren Schueler (Ward 2), Michael Nash (Ward 5), and Elizabeth Foreman (Ward 6) made the request on May 29, 2024.

The request of the Councilmembers is to hold a special election on August 27, 2024 for residents of Norman to vote on the proposed TIFs 4 and 5. The item will be heard at Council’s Tuesday evening meeting.

Due to the requirements in the Local Development Act, the state statute that governs TIF Creations, the vote would only be advisory and the ultimate decision to approve or deny the TIFs would still rest upon Council.

“After discussing the potential legal issues with an ‘advisory’ special election with Councilmember Schueler, the request was changed to a resolution directing the City Manager to hire a qualified firm [...] to conduct a scientific survey of the community as a way to gauge community knowledge and sentiment on the proposed project and tax increment financing as a funding mechanism for the public contributions to the project,” the staff report for the item read.

This second item would consider approving an allocation of $15,000 to conduct the public engagement survey. Both the citizen vote and engagement survey items appeared on the agenda as of Friday June 7th.

If the question of TIF approval should not go to vote, the earliest Council could hear the Project Plan is at their July 23, 2024 meeting.

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All reactions:

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Norman Taxpayers would shoulder most of Arena Project costs

 

As details of the proposed arena in northwest Norman roll out, the one thing that is clear is that the cost-split of the arena project lays the bulk of the costs on Norman Taxpayers.  

The project plan sets out how much tax revenues would be obligated for the arena project which includes the arena, parking structure and district infrastructure. The project plan would create a contractual obligation for the City of Norman.  

The overall financing plan is sketchy and evolving.  At a recent meeting, OU Foundation/developers claimed the cost of the arena project would be $330,000,000 (https://nondoc.com/2024/06/05/what-progress-looks-like-ou-president-promotes-tif-for-new-norman-arena-entertainment-district/)

The project plan covers $230,000,000 for the arena + parking + district infrastructure and up to $370,000,000 for the financing costs.  The extra $100,000,000 is not mentioned.   (https://mccmeetingspublic.blob.core.usgovcloudapi.net/normanok-meet-eaebc81b6d61454bbc1bc633acde53f2/ITEM-Attachment-001-da77d9383b714c2d9a392d770de125fc.pdf)

Would OU would pitch in $25,000,000 upfront and commit to paying $75,000,000 over the next 25 years? Would these payments be in the form of venue rental?  The Hunden Partners report (page 80) speculates that OU would pay $500,000 in rental payments in year 2029 with 3% increases over the following 25 years.  Perhaps the hope is that leverage act funds could be used to cover the gap?

 The chart below shows the arena cost split between City of Norman taxpayers and other parties. Taking $700,000,000 ($600,000,000 + $100,000,000 from unspecified origin) as the total arena project costs leaves the taxpayers shouldering 86% of the costs. In fact, if state funds from the leverage act are used to cover the $100,000,000 then ALL of the arena project construction and financing costs would be publicly funded. 

The project plan does not detail who would own the arena.  Early conversations speculated that a city-county authority might be created to own and operate the arena.  At the recent meeting, OU representatives suggested that a private party might own and operate the arena. 

Thus, taxpayers are being asked to commit a large amount of public funds for an asset that may or may not be publicly owned and that OU may or may not contribute to the financing.  

What could $600,000,000 Million Buy? A LOT!

The proposed University North Park Arena/entertainment district TIFs (#4 and #5) seek $600,000,000 to finance $230,000,000 for an arena/parking structure and district infrastructure.  

For perspective, $600 million is over $4,500 per person in Norman.

What could $230,000,000 buy in terms of Norman Forward Project Budgets?

• 5 Young Family Athletic Centers 
• 19 Westwood Aquatic Centers
• 16 Adult Wellness Centers 

These Norman Forward projects were huge successes in terms of utilization. 

The proposed $600,000,000 in tax spending amounts to almost $5,000,000 per acre of the 121 acres that OU Foundation owns in the proposed TIF district. 

DO OTHER CITIES IN OKLAHOMA HAVE TIFs THAT ARE THIS LARGE? NO

According to the Oklahoma Department of Commerce "Oklahoma Tax Increment Financing Districts" report (2024), $600,000,000 million is larger than any other single TIF increment in the State. 
This is available at Oklahoma Tax Increment Financing Districts 2024 (okcommerce.gov).

We might expect Tulsa or Oklahoma City, which are much larger cities, to have bigger districts than Norman.  This, however, is not the case. 

CAN NORMAN AFFORD TO CARRY THIS AMOUNT OF DEBT GOING FORWARD?

This question has not been addressed so far by the TIF feasibility studies. Due diligence suggests analysis which show projected city (county and school district) tax revenue growth for the baseline (no TIF) scenario as well as less than 100% completion of the proposed projects (say 50%, 75%). 

Norman Transcript Article on UNP TIF #2 5/7 meeting

'Canary in the coal mine': committee questions TIF district Feasibility" by Andrea Hancock, Norman Transcript, 5/7/2024.

Here are some excepts from the article.
"The oversight committee discussed recent economic impact studies with Anthony Francisco, the City of Norman’s finance director, and Kathryn Walker, the city attorney.

Four members of the committee were present, one short of quorum, so they could not officially issue any sort of formal recommendations to City Council. Still, they shared concerns with the economic impact studies they reviewed.

The first issue is there is no official project plan for the TIF district yet."

Another issue is the addition of land south of Rock Creek to the latest develop plan.

"Committee member Rob Norman, a business lawyer, characterized this as “the first canary in the coal mine” regarding the project’s feasibility.

He said the area south of Rock Creek is already well along its way, and the taxes brought in from its continued development should go to the city and county, not to finance the arena."

Other issues were raised. 

Parking?
Impact on Lloyd Noble and businesses in rest of town?
How to protect city/county/school budgets from cannibalization?

Read more... 
 'Canary in the coal mine': committee questions TIF district feasibility | News | normantranscript.com