TIF Districts

[DoctorTaco]

There was some discussion at the last school board meeting of OKCPS cutting a deal with the city to use some of the TIF money from these newest TIF districts to construct a new downtown school (probably in the Core to Shore area). Seems like a savvy idea to me, especially with the overcrowding in south side schools and the widely-stated public desire for a middle school option in the area.

[AP]

^I saw that Ben Felder tweeted about that and I asked if it was a High School that was discussed. They were discussing a Middle School? I'm really on board with that.

[DoctorTaco]

^I saw that Ben Felder tweeted about that and I asked if it was a High School that was discussed. They were discussing a Middle School? I'm really on board with that.

I don't think they specified which type of school. I was just speculating.

[Pete]

There was some discussion at the last school board meeting of OKCPS cutting a deal with the city to use some of the TIF money from these newest TIF districts to construct a new downtown school (probably in the Core to Shore area). Seems like a savvy idea to me, especially with the overcrowding in south side schools and the widely-stated public desire for a middle school option in the area.

In TIF #2 (the current district that covers all of downtown), $4 million of the $126 TIF budget goes to OK public schools.

Since the district would typically receive 59.22% of the property tax, that would be over $74 million of the $126 million taken by the TIF. So they get $4 million vs. $74 million.

And that $4 million must be spent within the TIF district boundaries.

[DoctorTaco]

In TIF #2 (the current district that covers all of downtown), $4 million of the $126 TIF budget goes to OK public schools.

Since the district would typically receive 59.22% of the property tax, that would be over $74 million of the $126 million taken by the TIF. So they get $4 million vs. $74 million.

And that $4 million must be spent within the TIF district boundaries.

These details could still be negotiated, no?

[Pete]

These details could still be negotiated, no?

Details could be negotiated in the proposed new TIF's, not the existing ones.

And, law requires that TIF money be spent within the boundaries defined when the district is established.

So, any urban TIF would force the school district to use the money downtown.

[BoulderSooner]

In TIF #2 (the current district that covers all of downtown), $4 million of the $126 TIF budget goes to OK public schools.

Since the district would typically receive 59.22% of the property tax, that would be over $74 million of the $126 million taken by the TIF. So they get $4 million vs. $74 million.

And that $4 million must be spent within the TIF district boundaries.

I am almost positive that they get 50% of the indirect incrament in TIF 2

[Pete]

I am almost positive that they get 50% of the indirect incrament in TIF 2

The $126 million in the TIF represents the indirect element as well.

[Pete]

Citizen?s list of TIF questions raise serious issues about who benefits | Red Dirt Report

But he and his neighbors have concerns that there is a power shift going on in Oklahoma City that is leaving many of its residents out of the discussion about the city’s future.

“Many of us are concerned that the power of the city is taking the approach of ‘trust us’, but we have an obligation to ask questions,” he said. “More public involvement should be there and I think that it’s being rushed through.”

[Plutonic Panda]

BIDs for south-side business: OKC Council approves funding to develop districts | The Journal Record

[ljbab728]

BIDs for south-side business: OKC Council approves funding to develop districts | The Journal Record

That is a little different than a TIF.

City of Oklahoma City | Business Improvement Districts

[Pete]

BTW, the City Council will be asked on Tuesday to approve a $200,000 TIF award for new HVAC equipment for the Underground; the downtown tunnel system.

[Plutonic Panda]

OKC?s TIF trend provides grounds for debate | The Journal Record

[Pete]

OKC’s TIF trend provides grounds for debate
By: Brian Brus The Journal Record March 26, 20150

OKLAHOMA CITY – The tax increment financing concept has become trendy in Oklahoma City, with at least four new TIF districts in discussion by city leaders, raising concerns for some council members.

The First National Center on Robinson Avenue, for example, could benefit from some sort of financial boost to convert its street-level access and historic bank lobby space on the second floor to something more useful, Councilman James Greiner said. A temporary tax increment levied on stakeholders within the immediate vicinity and earmarked for redevelopment might work, with the assumption that improvements would attract more business and benefit everyone.

That’s the “but-for” premise Greiner can get behind, he said: Development is unlikely to occur but for TIF investment. He and Councilman Ed Shadid don’t always see eye to eye on weekly agenda items, but that is a point on which they both agree.

“TIFs have been an effective tool in increasing development interest in blighted areas,” Shadid said. “The state statutes are very clear on that. But there’s a huge risk of it being used outside of that stated purpose.”

He and Greiner said a TIF district seems inappropriate for the development of the recently razed Stage Center near the Devon Energy Center. Clayco, a Chicago developer with plans to build towers for OGE Energy Corp. on the property, approached City Hall in January with a request for $69 million in assistance.

“I want there to be an explanation for why a TIF is needed for something to be built there,” Greiner said. “That site is very valuable land that obviously someone wants to develop; they had a plan to begin with. So it’s hard to justify a TIF district.”

Brent Bryant, the city’s economic development program manager, said he couldn’t discuss details of ongoing negotiations with Clayco, but it’s possible the Stage Center area could be incorporated into a larger TIF district that would also support the development of parking space for a new MAPS 3 convention center. Bryant said that concept is being referred to as the South Central TIF; Shadid calls it a TIF within a TIF, because the City Council already approved a TIF district for the Devon Energy Center in 2007.

Another TIF district being discussed is the Core to Shore area between the planned downtown boulevard and the Oklahoma River, which could support new businesses and residential growth around the planned 77-acre central park. And Bryant confirmed that he’s heard mention of a potential TIF district on the south side of the river, although he has not been involved in any discussions about it.

Cathy O’Connor, president and CEO of the Alliance for Economic Development, said in an email to City Manager Jim Couch that other developers are pushing for districts of their own.

“I had a meeting with Kirk and Blair Humphreys last week that I need to talk to you about,” she wrote to Couch in September. “They want a TIF district and want it created now. My priority is Core to Shore first, but there is a bigger picture here that I need to talk to you about.”

O’Connor could not be reached for comment by deadline Thursday. Blair Humphreys is heading the development of the area around the former Downtown Airpark as a residential mixed-use concept known as the Wheeler District anchored by a social meeting space with a refurbished Ferris wheel.

“Everything that the city has planned for Core to Shore, they want to do for in the Downtown Airpark site,” Shadid said. “And the only reason I see is that (the Humphreys) own the land. So why should the city deviate from its 50-year plan of taxpayer-supported growth around the Core to Shore park to help someone else compete against that development? It’s very troubling, to say the least.”

Shadid said one of the aspects that concerns him most about TIF districts is that school districts will lose out on valuable property tax revenues. It’s the “but-for” clause gone awry, he said: Although schools wouldn’t normally benefit from increased taxes in a blighted area but for a TIF district causing economic development, they also miss out on standard market adjustments on those properties. Most TIF ordinance language simply earmarks the tax increment to development without yielding any percentage points to schools to compensate for inflation. Over the life of a 20-year TIF, that effect could be worth hundreds of thousands of dollars to a struggling inner-city school district, he said.

“We need to take a close look at what’s happening to the TIF concept and keep it true to the original intent,” Shadid said.

[Pete]

Ed Shadid is organizing a Town Hall meeting about TIF's:

Greg LeRoy, Executive Director of Good Jobs First, has spent decades studying state and local economic development incentives. Dubbed “the leading national watchdog of state and local economic development subsidies”, Mr. LeRoy promotes corporate and government accountability in economic development and smart growth for working families.

With OKC moving towards the creation of a Tax Increment Financing Zone to finance a publicly subsidized convention center hotel and parking garage, it is critical that the public understand best practices in cities throughout the U.S. so as to understand the potential ramifications to the taxing jurisdictions from whom the funds would be diverted, such as OKC Public Schools, libraries and the City-County Health Department.

After a presentation by Mr. LeRoy there will be ample time for questions from the audience.

https://www.facebook.com/events/1382378602090337/

[BoulderSooner]

Yet another "town hall". Where he brings in only 1 side of the story and a guy that already has a clear position. With out regard to our city or our situation.

This should promote just the kind of discussion that Ed wants. Ie one sided

[Pete]

But you could also say that this other side hasn't even been discussed by the City or local media. All we hear about is why we need TIF's and various public incentives because the City employs a bunch of people whose entire job is develop these incentive programs then dispense the money. There is zero discussion or information about the downside or even the particulars of these various programs, and no way of tracking and evaluating their effectiveness.

And in many ways the situation is even more extreme in OKC because we have almost no parameters on how money is dispensed.

All of this is why I took a lot of time to talk to the City about TIF Districts and to understand exactly how they work here. And I'm completely convinced that the people making final approval -- the City Council -- do not understand these matters very well at all. Several of them told me so.

Now, we are talking about vastly increasing the number of TIF Districts and the amount of money diverted from other taxing jurisdictions, primarily the public schools. It's long past time to broaden the conversation. The other side has been well-represented for a long time.

[Jersey Boss]

Stay on this Pete. It appears that the city is under the same pressure by big money to provide TIFs as the state is in to provide more and more tax credits. I appreciate your attempts to shine a light where others relish the dark.

[Pete]

I posted this on the Convention Hotel thread as well, but I will be speaking on the 5/21 Town Hall meeting on TIF Districts:

https://www.facebook.com/events/1382378602090337/

Greg LeRoy, Executive Director of Good Jobs First, will be the main speaker. While he will be talking about TIF's in general, I will focus on the particulars in Oklahoma City. How they are structured, how decisions are made, what projects have benefitted, etc.

Cathy O'Connor was invited but declined due to conflict of interest.

The meeting will be at the Tower Hotel on Thursday 5/21 starting at 6:30PM. Would love to see a lot of people from OKCTalk attend, learn and join in the conversation.

[Teo9969]

Another thing to consider about TIF:

A property can only increase 5% over time. If a whole area explodes in value, then anytime a sale occurs of a particular building, the taxable market can be reassessed and subsequently skyrocket.

A building recently sold on Western for $780k. The 2014 Market value was $476k and the taxable market value was $228k. The new assessment and taxable market value is now $779k. That's an increase of over 200% in taxes collected on that property.

So take First National of instance:

Assessed value in 2014: $3,250,000 and Taxable Market of $3,250,000.
Assessed value in 2015: $7,442,919 and Taxable Market of $3,412,499.

The sale is going to take place @ $23,000,000.
If the assessed value jumps to the sale price, then the Taxable Market will also jump to $23M. (I imagine the value jump will not be so substantial in this particular case)

That would make their ~$43k/year tax payment jump to ~$288k/year.

Of that extra aprpox $250k/year, $125k goes to TIF. $125k/year, 60% of which goes to a school means that in a very real way, TIF is taking away what amounts to 2 teacher salaries from OKC schools every single year, all off one building. (Absolutely no argument can be made that TIF is the reason FNC is selling for $23M even if TIF ends up being used to redevelop the building).

Any building within the TIF district that has sold in the last 5-10 years (and there have been a lot of them), especially if it was owned by an entity for longer than a period of 15 years, has seen an incredible increase in taxable market value. This is likely one of the many things that the original planners of TIF didn't take into account when planning for TIF, and why there is all of the sudden 3x+ the original amount planned for.

[AP]

Thank you for painting this picture. I don't understand how anyone could argue that TIFs are taking real money from OKCPS.

[Pete]

^

That is all absolutely correct.

And as a reminder, even a 5% annual increase in property value represents a 339% increase in property taxes over 25 years, the typical length of a TIF assessment.

[Urbanized]

CPI adjustments are generally around 3% pretty consistently. That is why I suggested that one way to fix the problem (at least partially) might be to apply a CPI adjustment each year, to be captured by original taxing entities.

[TexanOkie]

Any building within the TIF district that has sold in the last 5-10 years (and there have been a lot of them), especially if it was owned by an entity for longer than a period of 15 years, has seen an incredible increase in taxable market value. This is likely one of the many things that the original planners of TIF didn't take into account when planning for TIF, and why there is all of the sudden 3x+ the original amount planned for.

They don't need to take that into account because there are other appropriate checks on this. Establishing a TIF district doesn't provide an endless pot of money for however long a city or county is able to keep the TIF district in place--the TIF district is tied to a specific project budget in a project plan and once that project budget has been expended, the TIF district ends even if it hasn't yet been 25 years. That budget is supposed to be based on the projected revenues the district will provide (though it can be less). Often governmental entities are optimistic with the projections, but the review committee and government body when adopting the project plan is supposed to assess the financial impact of the plan, including whether the budget and projected revenues are realistic.

Therefore, when buildings are sold and re-assessed resulting in higher taxes, the TIF budget should be met quicker and the TIF district should end sooner. Also, as an additional check on the administering government's ability to sneak around by gradually increasing the budget to account for above-expected performance of the district, any amendment to the project plan that increases the TIF budget by 5% (on a cumulative basis, not each individual amendment) or more requires the amendment to go back through the same review committee and approval process that the original project plan had to.

Any problems with TIF, if there are any, are not with TIF itself--TIF is only a tool--but instead with the political process and accountability of those making decisions with regard to how TIF money is to be used.

[Pete]

They don't need to take that into account because there are other appropriate checks on this. Establishing a TIF district doesn't provide an endless pot of money for however long a city or county is able to keep the TIF district in place--the TIF district is tied to a specific project budget in a project plan and once that project budget has been expended, the TIF district ends even if it hasn't yet been 25 years.

Just so you know, that is not how TIF's work in OKC.