TIF Districts

[Pete]

What is a Tax Increment Financing (TIF) district?

• In Oklahoma City, TIF is used as an economic development tool whereby future property and/or sales tax dollars generated in a specific district are redirected from the budgets of Oklahoma City and Oklahoma County to private and public projects in the same district.
• According to the Oklahoma Tax Commission, as of 1/25/18 there are more than 90 TIF districts in the state.
• The term of a TIF typically runs 25 years, the maximum allowed by the state constitution.
• TIF's are used in other cities in Oklahoma and the U.S., although there is great variation in how this tool is used in terms of redirecting taxes, approval / management process and how the taxes are allocated.

Existing TIF districts in Oklahoma City

There are 12 Tax Increment Funding (TIF) districts that are currently active in Oklahoma City and 6 more approved and soon to be activated:

TIF #	District	Budget*	Type of Taxes	Start	End
1	Health Sciences Center	$47.00
2	Central Business District	$195.00	Ad Valorem	03/07/00	03/06/25
3	Skirvin Hotel	$5.00	Sales	06/07/04	06/06/29
4	Dell	$28.20	Ad Valorem	03/29/05	03/28/30
5	Dell	$0.00	Sales	03/29/05	03/28/30
6	Los Rosas	$3.10	Ad Valorem
7	Health Sciences Center	$21.00	Ad Valorem	08/01/06	07/31/31
8	Devon / Project 180	$157.00	Ad Valorem, Sales	12/16/08	12/15/33
9	Northeast Renaissance	$45.00	Ad Valorem, Sales	2015	2040
10	First National Center	$45.00	Ad Valorem, Sales	2016	2041
11	Innovation	$52.00	Ad Valorem	2016	2041
12	Western Gateway / Wheeler	$120.00	Ad Valorem	2017	2042
13-18	Core to Shore	$395.00	Ad Valorem	TBD	+25
	Total:	$1,113.30

* In millions. In most cases, the original budget is far exceeded by actual receipts.




New TIF District to fund OG&E Headquarters, convention garage and hotel


From where are TIF tax dollars redirected?

Property (ad valorem) tax
Every privately owned property in Oklahoma County (apart from nonprofits, which are exempt) is taxed annually at a rate of approximately 1% of assessed property value. Each year, property values -- and thus property taxes -- are adjusted (almost always upwards) according to the latest market conditions. In normal circumstances, all property tax goes to the County and they in turn distribute to the public schools, library system, City/County Heath Departmnet and CareerTech.

At the start of a TIF a roll of properties within the district is created and the base assessed value (AV) is established according to the current County value. The amount currently paid to the County continues to go them; but any increase in taxes based in increased assessed values is redirected into the TIF. Thus, any increase in property tax over the first year gets paid each of the next 25 years into the TIF account rather than being sent to the County.

Sales tax
In Oklahoma, all sales are taxed by the state at a rate of 4.5% and that money goes into their general budget.

Oklahoma City adds 3.875% (for a total of 8.375%) but only the 2% that goes to the City General Fund (operating budget) is redirected to the TIF:

Partial Listing of City Services
Police, Municipal Court, Fire & Emergency Medical Services, Parks & Recreation Centers, Street Maintenance, Code Enforcement, Public Transportation, Civic Center Music Hall, Arena & Convention Center, Water & Wastewater, Utilities, Solid Waste Collection, Airports.


How are TIF's approved and who manages them?

In Oklahoma City, City staff drafts potential new TIF Districts to address specific challenges or opportunities, presents to the City Council in informal sessions, meets with the affected tax jurisdictions, then the City Council ultimately votes as a part of one their regular public meetings.

Part of setting up any new TIF District is a project plan that includes the boundaries of where the money is captured and where it can be spent. In addition, a general outline is established as to how the money will be used, but usually presented in terms of a few broad categories. To date, the City has not chosen to establish specific criteria for allocating the captured tax dollars.


After the TIF District is established, City staff alone decides which projects are worthy of further consideration. If staff decides a project application isn't worthy of TIF funds, the process stops there. Where an application has been brought for council vote, 100% have been approved.

Most requests from TIF funds come from private developers. But other requests actually originate from City staff themselves, such as public improvements, parking and school projects.

In most cases the allocation is only paid to the developer / entity once the project is complete and certified. In a small number of projects (21c, Plow, Steelyard and 123 Garage) the City loaned the money up front at low interest rates.

Example: OKC TIF District #2

The best way to understand how a TIF operates is to look at a specific example, in this case TIF #2 for downtown OKC.

In 2000, the City decided to create a TIF for the downtown area in order to concentrate spending in the area and spur development.

As the TIF was to be funded by property tax (no sales tax was included) a base Assessed Value (AV) was set for all properties within the boundaries shown below (roughly 13th to the north, the old I-40 to the south, Western to the west and I-235 to the east) when the district was formed in 2000. Any INCREASE (called the increment) in property taxes (generally 1% of AV) over that base in 2000 went into the TIF fund.

Also, although the taxes collected are within the boundaries described, they can be spent in a larger area, shown as the Project Area below.

The amount that goes into the TIF is separated into two categories:

• Indirect: 50% of the tax increase since 2000. Indirect properties are defined as those not receiving TIF funds. Currently accounts for about 40% of the TIF 2 amount.
• Direct: 100% of the tax increase since 2000. Direct properties are those that receive TIF funds. Currently accounts for 60% of the TIF 2 amount.

The original budget for TIF #2 was $47.5 million. However, it is now estimated that $126 million will be collected before the TIF expires in 2025. Of that amount, almost $90 million has been allocated.

Where TIF #2 dollars have been spent

Key TIF #2 awards as a percentage of total investment

Follow links for wiki articles on each project.

Project	Type	Investment	TIF Award	TIF as % of Inv.
Level Apartments	Apartments	$24.0	$1.3	5.2%
Maywood Apartments	Apartments	$16.0	$1.0	6.3%
Edge @ Midtown	Apartments	$34.0	$2.3	6.8%
Mosaic	Apartments	$24.0	$1.1	4.6%
Maywood Apartments Phase II	Apartments	$20.0	$1.0	5.0%
21c Museum Hotel	Hotel	$53.0	$5.3	10.0%
LIFT	Apartments	$42.5	$3.0	7.1%
Mideke Building	Office	$17.0	$1.0	5.9%
Civic Center Flats	Condos	$6.0	$0.4	5.8%
Steelyard	Apartments	$75.0	$4.1	5.4%
Avana	Apartments	$33.0	$2.5	7.6%
Block 42	Condos	$12.0	$1.0	8.3%
Totals:		$356.5	$23.9	6.7%

[Pete]

Also wanted to point out that not all increases in assessed values are due to development.

Over the 25 year TIF term, properties will naturally appreciate which raises the assessed value and the resulting property taxes (1% of assessed value).

Also, when properties are sold the assessed value is generally adjusted to reflect the most recent sales price, as a recent transaction is always the best estimate of true value.

So in the case of TIF #2, a big part of the reason the budget went from the original $47.5 million to the current $126 million is the natural appreciation.

As an example: Cotter Ranch Tower is currently generating about twice the property tax it did in 2000. Since this is considered an "indirect" property (one that hasn't received TIF funding) 50% of that property tax increase since 2000 goes into TIF #2 and the other half goes to the County as usual. Property taxes have doubled since 2000 at Leadership Square as well.

[Richard at Remax]

Not to be Johnny come lately but did Clayco hint at the amount of TIF they were seeking when they were presenting thier proposal?

[Pete]

Yes, Clayco put a specific amount in their proposal (see below).

Below is a quick analysis of most the commercial projects that have received TIF funds. You can see the typical amount is around 6%. 21c is a bit of an outlier due to the unique nature of the building and the area of investment. Without 21c the average TIF percentage of total investment is 5.8%.

[DoctorTaco]

Yes, Clayco put a specific amount in their proposal (see below).

Below is a quick analysis of most the commercial projects that have received TIF funds. You can see the typical amount is around 6%. 21c is a bit of an outlier due to the unique nature of the building and the area of investment. Without 21c the average TIF percentage of total investment is 5.8%.

Another overwhelming sense of dishonesty when folks seem to be making the claim that 10% is the accepted, du jour, way of allocating TIF money.

[Midtowner]

$142 million give or take.

That is absurd OG&E is going to build this thing with or without free money from the taxpayers. I was fine with the Devon TIF because of the way it was used to improve all of downtown. In this case, the money is apparently being spent to benefit only this property.

[Urbanized]

...I was fine with the Devon TIF because of the way it was used to improve all of downtown. In this case, the money is apparently being spent to benefit only this property.

And yet that is not at all an unusual use and in fact an (THE?) intended way for TIF dollars to be utilized. They are designed as a lure. Devon's use of TIF dollars spoiled us and skewed our perception of how these things normally happen. Devon was an extreme (and often unappreciated) outlier.

Again, I am not rah-rahing this particular project nor defending the massive request (which I too believe is excessive); I'm only trying to dispel some incorrect notions about what TIF actually is and how it is typically used.

[Pete]

And yet that is not at all an unusual use and in fact an (THE?) intended way for TIF dollars to be utilized. They are designed as a lure. Devon's use of TIF dollars spoiled us and skewed our perception of how these things normally happen. Devon was an extreme (and often unappreciated) outlier.

Again, I am not rah-rahing this particular project nor defending the massive request (which I too believe is excessive); I'm only trying to dispel some incorrect notions about what TIF actually is and how it is typically used.

Right, and even in TIF #2, over 28% of the funds allocated thus far have been for public schools, parking and other public improvements.

[Pete]

Also note that of the TIF awards they are either for public projects, commercial, residential, and hotels.

Very little allocated for office and in fact, that wasn't even a category in the TIF #2 budget.

[Pete]

BTW -- and I added this to the article at the top -- currently TIF #2 is collecting a little over $7 million per year.

Of that amount about 60% comes from direct assessments and the remaining 40% comes from indirect (reminder that indirect means only 50% of the increase since 2000 goes into the TIF and the other half goes to the County as per usual).

[Just the facts]

So let's say the $142 million gets approved. Where does the City get the $142 million to give to Clayco?

[Pete]

So let's say the $142 million gets approved. Where does the City get the $142 million to give to Clayco?

The City doesn't give them anything.

Clayco would merely have their property taxes reduced every year.

However, their pro forma shows they would take that future income stream and borrow against it so they get the money up front, then pay it back to the bank with interest.


They are also asking for a sales tax rebate, ala Devon. Basically, instead of paying local/City sales tax on materials used in their project, that would be returned to them by the City. Probably about $10 million or so and they'll likely seek State matching funds, which is also what Devon did.

[Just the facts]

The City doesn't give them anything.

Clayco would merely have their property taxes reduced every year.

However, their pro forma shows they would take that future income stream and borrow against it so they get the money up front, then pay it back to the bank with interest.

So they don't get a lump sum payment but if they sell the building within 25 years does the new owner get to claim the property tax exemption? I really see the City getting the shaft when TIF building are sold because they sell for market value, not market value minus remaining TIF balance. In other words, if Clayco sells this building after 5 years they walk away with 20 years of property taxes scot-free, on top of whatever profit they sell the building for. That's good work if you can get it.

[Pete]

So they don't get a lump sum payment but if they sell the building within 25 years does the new owner get to claim the property tax exemption? I really see the City getting the shaft when TIF building are sold because they sell for market value, not market value minus remaining TIF balance. In other words, if Clayco sells this building after 5 years they walk away with 20 years of property taxes scot-free, on top of whatever profit they sell the building for. That's good work if you can get it.

Not necessarily.

There is usually a claw-back provision in the TIF agreement.

[Pete]

The timing of this is no coincidence.

I'm sure it won't be long before O'Connor presents the negotiated TIF agreement with Clayco to the City Council.

[Pete]

From the Journal Record:

O’Connor: Not a tax increase
By: Cathy O'Connor Guest Columnist December 9, 2014 0

Tax increment financing has been a hot topic since the designation of Clayco as the redeveloper for new development adjacent to the Myriad Botanical Gardens. Clayco has requested financial assistance to build a level of density higher than typically found in Oklahoma City. The city is also in the process of considering a new TIF district for the northeast side that will be essential in the revitalization of this area.

Cities use TIFs to revitalize and redevelop an area or create other types of economic development. Oklahoma City has eight TIF districts. There’s some discussion on whether the creation of a new one would be beneficial for development between Sheridan and Reno, and Hudson to Walker avenues.

TIFs don’t raise taxes on a property. As the value of property goes up, so does the total amount of property taxes paid – not the percentage or tax rate.

Creating a TIF district isn’t easy. A review committee is made up of all governmental entities that receive property taxes, representatives from the council and planning commission and three at-large members. Following reviews by the review committee and planning commission, the council must adopt an ordinance establishing a base-assessed value for a specific geographic area. Each request for assistance to individual projects goes through the TIF review committee.

Since the creation of the downtown TIF district in 2001, the market value of the district has risen by more than $800 million. This doesn’t include the Devon headquarters, which is in its own TIF district.

There are two ways downtown TIF money is allotted. Direct increment financing is generated from property that the city directly assists in the redevelopment of through an allocation of TIF funds.

Indirect increment applies to property within a TIF district, but hasn’t directly benefited from city assistance. In cases where there’s indirect increment, only half of the additional taxes brought in by the rising property value goes back into the TIF. The other half is provided to the various entities that rely on property taxes, such as the school district. Since the creation of the downtown TIF, these other government entities have received about $22 million from the downtown TIF district.

TIFs are a vital tool for the future of development in Oklahoma City.

Cathy O’Connor is president of The Alliance for Economic Development of Oklahoma City.


Read more: O?Connor: Not a tax increase | The Journal Record

[Pete]

OKCTalk - New TIF district would fund OG&E HQ, convention garage and hotel Edit Page

[Pete]

This was written by Cathy O'Connor and published in the Journal Record:

O’Connor: Density, design and parking
By: cathy.oconnor January 6, 2015

Last week, staff members from the city of Oklahoma City and the Alliance discussed future parking requirements for the new convention center, its accompanying hotel and other development planned around these projects.

Structured parking is expensive. Our debate centered on building enough parking to meet future needs at the expense of finances that might be used elsewhere. A member of our group reminded us we are in the business of city building. This part of my job is the most fun – when we can dream and try to develop a vision of what Oklahoma City can be.

These new projects focus on adding spaces that respond well to the pedestrian experience and create an active and interesting street. Oklahoma City needs new Class A office space. Projects are in the works to help fill that need. Building plans are set for more essential residential units, as well.

These developments help change the nature of downtown from an employment center to a place where people live, work and play. Other significant new projects include structured parking garages. While we may not always want to cater so heavily to automobiles, parking is a necessity.

One important consideration is making sure the street level consists of interesting, active spaces available for use as offices, shops or restaurants. By creating and filling those spaces, we can add density to downtown. We measure that density using a floor-to-area ratio, or FAR. A one-block development that covers an entire block with a one-story building (not including parking) has a FAR of 1 and a two-story building over a block has a FAR of 2. For example, the Edge Apartments at NW 13th Street and Walker Avenue have a FAR of 2.5; the SandRidge center is a 6.

The current density of the area adjacent to the MAPS 3 Park has a FAR of 0.5. The goal, which will be rolled out as a part of the Downtown Development Framework, will be a FAR of 3. The framework was prepared by the city planning department to supplement current downtown development design guidelines and provide additional information to developers and property owners.

With this new tool and the goals of city building in mind, density, design and parking can be more easily planned for and accommodated.

Cathy O’Connor is president of The Alliance for Economic Development of Oklahoma City

[Just the facts]

For the love of Pete. If your calculation for measuring density puts Sandridge at 6 and The Edge at 2.5, you have a seriously flawed formula.

[Bellaboo]

For the love of Pete. If your calculation for measuring density puts Sandridge at 6 and The Edge at 2.5, you have a seriously flawed formula.

Not at all, if you read it slowly, she says 'for an entire block'. The footprint taken for the buildings referenced do not take the complete block.

[pickles]

For the love of Pete. If your calculation for measuring density puts Sandridge at 6 and The Edge at 2.5, you have a seriously flawed formula.

Clearly you ought be in charge of determining what might be an appropriate calculation.

[Just the facts]

Clearly you ought be in charge of determining what might be an appropriate calculation.

I wish. Of course, I wouldn't care what the lot coverage area is since I would require the building to be built all the way to the sidewalk. They can do whatever they want on the interior (see the interior courtyards at The Steelyard). Alas, this is the very reason why OKC should adopt a simple form-based code and get rid of all the ridiculous calculations.

[Just the facts]

It isn't based on the footprint of the building, it is based on the size of the lot the footprint is on. A one-story building covering an entire block gets a 1. A 2-story building covering an entire block gets a 2. A 4-story building covering half a block get also gets a 2 - for the whole block. A 2-story building covering a whole block is more dense that a 4 story building covering half a block, but using the City's method they get ranked the same. The best way to measure urban density is lot coverage and can be easily visualized using a black plan. Central Paris is one of the most dense built environments on Earth, and with rare exception, every building is less than 6 stories. If we want density (and I am not sure we actually do) we need to take height out of the equation.

[Spartan]

It isn't based on the footprint of the building, it is based on the size of the lot the footprint is on. A one-story building covering an entire block gets a 1. A 2-story building covering an entire block gets a 2. A 4-story building covering half a block get also gets a 2 - for the whole block. A 2-story building covering a whole block is more dense that a 4 story building covering half a block, but using the City's method they get ranked the same. The best way to measure urban density is lot coverage and can be easily visualized using a black plan.

I think you're referring to adjusted FAR.

I really appreciate O'Connor's perspective on this. I'm pleasantly impressed - I hope that her planning perspective helps in negotiations to better align these developments with the community's best interest.

If you're part of the pro-planning contingent on here, I don't understand how her columns can set you off. This is like Jim Couch on OKC Central, except better because it's much more agreeable..

[Just the facts]

For example, the Edge Apartments at NW 13th Street and Walker Avenue have a FAR of 2.5; the SandRidge center is a 6

If we were just talking about footprint Sandridge center would be a 30.