Retraction on MAPS 3 funding concerns

[Larry OKC]

from the Mass Transit Announcement thread (I didn't want to hijack it and also can't recall where I had posted my concerns)

...I don't see how they can guarantee something as fluid and difficult to predict as sales tax. ...

Actually, according to the Mayor it is fairly easy for them to do. He said that with the MAPS for Kids tax they came within $2M of the revenue projections. With $520M raised with that tax, that means they only were off by 0.4%. I would say that is amazingly accurate, wouldn't you? I would be THRILLED if they could get their cost estimates anywhere near that percentage!

Over a long term it is fairly predictable. The problem with the Ford tax projection of $100M/year was it's relative short term of only 15 months.

I hereby retract any previous misgivings about the $100M/year average the MAPS 3 tax is projected to raise.

MAPS (MAPS and the 6 month extension)
5.5 years
$363M
$66M/year average
(the 6 month extension was projected to bring in $30M )

There was an approximate 2 1/2 year gap between MAPS & MAPS for Kids

MAPS 2
7 years
$520M
$74.29M/year
(11% increase here is probably attributable to MAPS, but have to take out what the normal increase would be due to inflation etc)


Ford Center (what I like to call MAPS 1.75)
15 months
$100M/year (est)
(this is a 25% jump over MAPS 2 collections?? Actual revenue to date is multi-millions below projections, don't have an exact figure but may be the similar 11% increase noted above or $82.46M/year)


MAPS 3
7.75 years
$777M
$100M/year (est)
(this is 46% higher than the yearly average for MAPS, and as noted above, 25% higher than the recently ended MAPS 2??)

Did some digging and found the out the following:
From the City’s 2009 FY budget report (available for download at OKC.gov)

“By year-end, it is expected that Sales Tax growth for FY 2009 will come in at 1.7%, compared with growth in the prior three years of 4.0%, 6.0% and 6.9%. To put these years in perspective, the 10-year average for sales tax growth is 4.3%”

My reading of that is a yearly sales tax growth average = 4.3%.

According to page 553 of the 09-10 Budget report, the Ford tax brought in $34.056M in the previous year and a projected $82.576 for a total of $116.63M (for 15 months) or $93.30M/year but as noted, collections are multi-millions below projections so, taking the presumed amount of the Ford tax of $82.46M and adding the 4.3% figure in for the next 8 years, should result in:

2010 = $64.51M*
2011 = $89.71M
2012 = $93.57M
2013 = $97.59M
2014 = $101.79M
2015 = $106.17M
2016 = $110.74M
2017 = $115.50M

TOTAL = $779.58M or $100.59M/year

That's almost exactly the City's $777M total ($100M/year) figure

*the amount for 2010 is lower because it won’t be a full year, that is the 9 month part of the 7 year and 9 month MAPS 3 tax. The following years amount is based on the total amount the tax should collect for the entire previous year.

[iron76hd]

That's almost exactly the City's $777M total ($100M/year) figure

If they couldn't raise that amount annually during some of our most prosperous times. How do they plan to do that during a certain downturn in the economy?

[mugofbeer]

If they couldn't raise that amount annually during some of our most prosperous times. How do they plan to do that during a certain downturn in the economy?

Anticipation of higher population, anticipation of a better economy (this isn't going to last forever), anticipation of more tourism and therefore, more tax revenue and finally - - anticipation of inflation which will raise prices resulting in more tax revenue - albeit revenue with less bang for the buck.

[Larry OKC]

If they couldn't raise that amount annually during some of our most prosperous times. How do they plan to do that during a certain downturn in the economy?

Had had the same question but if you will read my post, it explains a lot and mugofbeer summed it up well.

If this was a short term tax (like the current Ford), it would be a valid concern. But it is a nearly 8 year tax and that helps level things out.

Of course if we have a prolonged period where the growth rate is less than the 4.3% average, there could still be a shortfall. But historically, over a long term, that hasn't happened. Economies go thru cycles, ups and downs, and we have been thru recessions with other MAPS too. It all depends on how long this "down" cycle lasts. That said, even with the shortfall current Ford tax collection as the baseline, when doing the math, it comes out almost exactly to what the City is saying (see 1st post).

[bdhumphreys]

Thanks for the explanation Larry!

I am still worried about the very small contingency and the low-ball cost estimates, but that is another matter.

[gmwise]

How long was the Depression?
just asking

[Larry OKC]

Thanks for the explanation Larry!

I am still worried about the very small contingency and the low-ball cost estimates, but that is another matter.

I agree on that, was just retracting my concerns about the revenue estimates, they seem to be fairly solid

As I have stated before, while $17M sounds like a lot, they are only allowing 2.2% of the overall budget for cost-over runs. The City has gone on record as saying that projects are over budget an average of 8%. And the MAPS 1 over run (what voters were told vs. final project cost) was 47.75%. 2.2% doesn't seem nearly adequate.

[Larry OKC]

How long was the Depression?
just asking

The Great Depression lasted about 10 years? While some have compared our current recession in those terms, don't think we are anywhere near that (for example, unemployment was roughly 25%+, currently the U.S. is at the 10% mark, with OKC doing much better than the rest of the country. Supposedly, the recession is coming to an end....

[kevinpate]

... while $17M sounds like a lot, they are only allowing 2.2% of the overall budget for cost-over runs. The City has gone on record as saying that projects are over budget an average of 8%. And the MAPS 1 over run (what voters were told vs. final project cost) was 47.75%. 2.2% doesn't seem nearly adequate.

Aye, but 17M plus a three year voter approved extension of MAPs3, ala MAPs4WARD! would be likely to git r done

[iron76hd]

Anticipation of higher population, anticipation of a better economy (this isn't going to last forever), anticipation of more tourism and therefore, more tax revenue and finally - - anticipation of inflation which will raise prices resulting in more tax revenue - albeit revenue with less bang for the buck.

Every economist I've listened to like this morning has said we are looking at about 6-10 before we see any real significant recovery. Will you pass your "Crystal Ball" to them please.

[Midtowner]

Every economist I've listened to like this morning has said we are looking at about 6-10 before we see any real significant recovery. Will you pass your "Crystal Ball" to them please.

How many of those economists even saw the housing crash coming?

Economics is often described as a science, but their prognostications tend to be only slightly more accurate than those who gaze into crystal balls.

[bombermwc]

Yeah because the economic predictors have such a great track record. These are the same guys that said we'd keep building and the bubble didn't exist. Failed arguement man.

[Spartan]

Thanks for the explanation Larry!

I am still worried about the very small contingency and the low-ball cost estimates, but that is another matter.

That's a valid concern, but I think if you look at the original MAPS projects, they had the same concerns with those. I think that the way OKC has gone about the MAPS projects they actually end up costing less for us than these projects have cost other cities.

For example, the Ford Center will be one of the NBA's best arenas when finished -- final price tag around $200 million. Compare that to $400 million for some NBA houses.

The Brick was also built on a shoestring budget, and has been named the top AA Ballpark two years in a row. So go figure there.

The reason the MAPS projects are cheaper, aside from lots of accountability and oversight and efficiently managing the costs, is because the money accumulates in an account and the city pays cash for the construction. There's no loan, there's no bond, nothing to pay off.

I would still like to see some more study done on how much more expensive a project like the Bricktown Ballpark in a different city, not being paid for by MAPS, would have cost..

We built the Brick for $34 million, Memphis built AutoZone Park, which have nearly identical number of seats, for $80 million. They opened within a year of each other, too.



AutoZone Park - $80 million



Bricktown Ballpark - $34 million (MAPS)

[kevinpate]

I would still like to see some more study done on how much more expensive a project like the Bricktown Ballpark in a different city, not being paid for by MAPS, would have cost..

Somewhere between more than double, less than quadruple?

[okcpulse]

The Brick was also built on a shoestring budget, and has been named the top AA Ballpark two years in a row. So go figure there.

Just a small correction, The Brick is an AAA ballpark. But I very much agree with your post.

[CCOKC]

I had to look really closely at the Autozone park to make sure it wasn't the brick. It is a remarkably similar configuration with a view to match.

[Spartan]

AutoZone is a great facility, but I think that the Brick has won more awards. So go figure.

Now let's make this argument about MAPS 3. Possibly one of the best convention centers in the nation, Pittsburgh just recently built the David L. Lawrence Convention Center for $350 million, which is more than the $280 million we've budgeted in MAPS 3 for ours. BUT that said, Pittsburgh's center was the nation's first LEED-certified convention center, and it encompasses 1.5 MILLION square feet.



We're talking about $280 million for a convention center that is 450,000-500,000 sf large that we're paying cash for. For some reason I tend to believe we can get a better convention center and pay less.

Pittsburgh's incredibly-impressive convention center has drawn top events to Pittsburgh. Here's a rundown of some events, several of which have been attended by the current president (either Bush or Obama)..
David L. Lawrence Convention Center - Wikipedia, the free encyclopedia

Urban League Convention w/ George W. Bush (2003), NRA w/ Dick Cheney and Ted Nugent (2004), Election Rally w/ George w. Bush (2004), United Methodist Church National Convention (2004), Alliance for American Manufacturing w/ Hillary Clinton and Barack Obama (2008), U.S. Chess Federation (2008), Democratic Party Platform Convention w/ Howard Dean and Janet Nepolitano (2008), AFL-CIO Convention w/ Barack Obama and Caroline Kennedy (2009)... and last but certainly not least, the G20 Convention.

So if we ever want OKC on the world stage, hosting something like the G20 Convention .. we need a convention center like this. Period.

[Larry OKC]

The reason the MAPS projects are cheaper, aside from lots of accountability and oversight and efficiently managing the costs, is because the money accumulates in an account and the city pays cash for the construction. There's no loan, there's no bond, nothing to pay off.

Spartan, you ARE kidding right? Efficiently managing costs? You mean "managing costs" so they were "only" 47.75% higher than what voters were told? LMAO

I won't repost it here (it is a lengthy one) but EVERY MAPS project has had borrowed money involved (not the majority of it, but borrowed money none the less).

You do realize that MAPS 3 projects are already nearly $6M in bond debt? Anyway, more details here: http://www.okctalk.com/okc-metro-are...tml#post276682

[Spartan]

Larry, I'm not going to argue semantics with you. I'm not even going to bother looking it up for myself because I don't care. The bottom line, the pricetag, speaks for itself.

$34 million for a AAA stadium in OKC, paid for by MAPS. $80 million for the same stadium in Memphis, paid for by bonds. That's all someone has to say on the subject matter of fiscal accountability and efficiently managing costs with MAPS.

[Chance23]

Yeah because the economic predictors have such a great track record. These are the same guys that said we'd keep building and the bubble didn't exist. Failed arguement man.

Economists have predicted 9 of the last 5 recessions, you know.

Seriously though, there were some that predicted the bubble would burst and others that scoffed at them. I saw a debate online that actually aired on Fox News before the crash. They had three panelists, one of whom predicted it would crash when it did and the others (including the host) chastising him for the prediction. It's like trying to predict ending records at the beginning of the season. You can arm yourself with the tools and analyze every factor you have. Everything may make perfect and complete sense, and yet you still come out wrong.

Economics is great at analyzing why things went the way they did, it's still inexact. The future will always throw curveballs to people who try to predict it.

[Spartan]

Economists have predicted 9 of the last 5 recessions, you know.

Seriously though, there were some that predicted the bubble would burst and others that scoffed at them. I saw a debate online that actually aired on Fox News before the crash. They had three panelists, one of whom predicted it would crash when it did and the others (including the host) chastising him for the prediction. It's like trying to predict ending records at the beginning of the season. You can arm yourself with the tools and analyze every factor you have. Everything may make perfect and complete sense, and yet you still come out wrong.

Economics is great at analyzing why things went the way they did, it's still inexact. The future will always throw curveballs to people who try to predict it.

This post is kind of like the following:

[Person is told that doctors have proven that smoking is harmful.] You know, doctors are great at trying to figure out what's wrong with you and not getting you any better. I mean, people are still dying. If doctors were so great, why do people still die? Why are people getting sick still? It's an inexact science and an inexact application. Therefor, I shall still smoke cigarettes.

[betts]

Actually, I'm voting yes because I see absolutely nothing voting no will contribute to the economy here. At least by voting yes, we create a mini-government stimulus, and we create jobs. If it is true that Whole Foods is coming here (please let it be true!), that means that one business is expanding here despite the recession. If we're the city that is still a little more recession proof, this is our chance to do a bit of catch-up. We're behind, so we can't stop working to get better, IMO.

[PennyQuilts]

Why are people getting sick still? It's an inexact science and an inexact application. Therefor, I shall still smoke cigarettes.

I drive my husband crazy by telling him that smokers are comfortable living in denial.

I'll probably stick to supporting home grown grocery stores to the extent I can. Although I like what Whole Foods has said about the health care proposal.

[Spartan]

Well Whole Foods is a lot more of a "home grown" store than Wal-Mart is. That's who most people give their money to for groceries. Really the only home-grown grocery stores we have are IGAs that nobody goes to, and Homeland.

[bluedogok]

Spartan, you ARE kidding right? Efficiently managing costs? You mean "managing costs" so they were "only" 47.75% higher than what voters were told? LMAO

Well, MAPS I was always underestimated because they tried to come up with a figure they could sell to a skeptical public after years of other failures like the String of Pearls. Everything was lowballed in the hopes of it passing, I don't think that is quite the same situation now as there is more data to back up assumptions than there was at the time of MAPS I.

For the most part costs were managed much better on MAPS I projects than they were on regular city/county/state projects and definitely better than the OKC School bond projects before the MAPS for Kids projects. I don't have any knowledge on how they were handled since I was not involved in any of them.

As far as debt affecting projects and costs, what OKC has is nothing compared to what Dallas has gone through, the American Airlines Center costs/debt service are really what kept JerryWorld from replacing The Cotton Bowl at Fair Park. The AAC was built for 420 million and opened in 2001, so it is a contemporary. It was a 50/50 split between the City of Dallas and the Mavericks and Stars organizations. Having been to events in both, the Ford Center just "works" better in my opinion, too many "design features" in the AAC create problems for moving people in/out. Yes, it was "nicer" but I think it is easier to add niceties to something that functions well...but maybe that stems from too many years of doing industrial/functional architecture and not being focused solely on design.