Omni Hotel

[BDP]

No debt is the envy of many Cities and their mayors.

And it seems that large state of the art convention centers and hotels around the country built with bonds is the envy of our city leaders.

[kevinpate]

... by saying - "I hope and pray everyone in Oklahoma City metro area is safe from the horrible weather you all had Wednesday. OMG."

Wednesday had its moments, but if that storm had been in junior high, the av clubbers would have made fun of it and tossed empty film reels at it.
Gotta admit though, you know you're in Oklahoma when a single day's forecast includes wind, rain, hail, a tornado or three, and an earthquake.
Oh, yeah, and tigers. Must not forget the tigers.

I used to love that line in Twister about We got cows! But Tigers, yeah, that's a whole new kind of special.

[Urbanized]

We also don't have any way to pay for the necessary convention center parking.

That is an absolute statement..? I think it is safer to say that there is not yet a publicly-identified way to pay for it, or to say that there is not an immediately obvious way to pay for it. That holds true for a lot of things.

And I am NOT trying to be cryptic. I'm just saying that I have seen a lot of rabbits pulled out of hats over the years.

[Pete]

That is an absolute statement..? I think it is safer to say that there is not yet a publicly-identified way to pay for it, or to say that there is not an immediately obvious way to pay for it. That holds true for a lot of things.

And I am NOT trying to be cryptic. I'm just saying that I have seen a lot of rabbits pulled out of hats over the years.

No, that's completely fair.

I was just raising the point because the City has already identified the garage as one of the projects needing funds from the proposed south CBD TIF, and in their initial estimates seem to be counting on TIF dollars to pay for all if not most of it.

[Spartan]

We unequivocally cannot know this. I agree that it is a great tool to use to entice development, and I do believe it helps bring in development that may otherwise not come in, or may come in on a lesser scale/degree than what is ultimately delivered because of TIF. But this is a belief, not a fact, and more than anything, it is a reality that is subject to manipulation and getting taken advantage of. If Clayco builds their full project for half the TIF they asked for, that doesn't make TIF look good.



There is literally a 5x6 block of streets in OKC that qualify at the level of "urban" context that you're speaking of. Everywhere else there are notable to significant holes in the urban fabric.

And let me remind you that they're about to do a TIF for C2S. if that encompasses much area at all, we're talking about a bunch of land that has NOTHING built on it, and a bunch of land that is going to get developed regardless of the existence of TIF.

Again, I don't think anybody here is opposed to TIF, but it's a far less transparent way for the government to steer money to whatever end they choose.

Furthermore, there are potential ways to make TIF work even better for the City:

For instance, we use TIF money as a basis for loans made to developers: We can loan out 2.5 to 5 dollars for every TIF dollar we collect and set interest rates competitively in order to attract more development.

You're not hearing me on a lot of things, but you obviously understand TIF well enough to be dangerous so don't take that as an insult. The first thing is that TIF usually requires some negotiation, and the reason for that is because you can structure it so that a "fair share" still goes to schools and other holy cows (so we can pretend the affected housing is feeding school enrollment). Because TIF is negotiated, it's been my experience on projects that I've worked on, that the process will allow for a review of project finances and then they will try to get you the TIF you need, and not the TIF you don't. Project finances don't ever plan for profit for this reason; it's called "developer's fee." It's a totally legitimate expense for the developer's time and effort, since he/she usually has a team of employees that also gotta eat.

As for urban context, the funny/sad thing about downtowns as command post is that the land speculation usually prevents, rather than enables, real estate development. The land underneath most downtown buildings, usually, is worth more than the building on top of it, unless it's Devon Tower. Just think about the former Downtown Ford's recent market appraisal. For one, I still can't get my head around the fact that they operated a car lot for decades on land that is worth $100 MILLION. Wow. Only in OKC.

I also thought that OKC did occasionally use the TIF fund to make bridge loans? That's actually a pretty innovative/conservative use of TIF. Most projects just get it. Regarding the Clayco 4-towers, especially with the 2 residential towers that they say will be delivered (and surely the TIF will be structured to ensure), do you really think that entire development is feasible in OKC without subsidy? I hate to say it, but I don't. High-rise residential NEW construction says a LOT about a real estate market.

[Urban Pioneer]

KC to announce 800-room Hyatt convention hotel downtown | The Kansas City Star The Kansas City Star

[Teo9969]

You're not hearing me on a lot of things, but you obviously understand TIF well enough to be dangerous so don't take that as an insult. The first thing is that TIF usually requires some negotiation, and the reason for that is because you can structure it so that a "fair share" still goes to schools and other holy cows (so we can pretend the affected housing is feeding school enrollment). Because TIF is negotiated, it's been my experience on projects that I've worked on, that the process will allow for a review of project finances and then they will try to get you the TIF you need, and not the TIF you don't. Project finances don't ever plan for profit for this reason; it's called "developer's fee." It's a totally legitimate expense for the developer's time and effort, since he/she usually has a team of employees that also gotta eat.

OKC already has used some TIF money to go to the schools. They've allocated 5.6% for schools. I'm sure they've used some on other CAPEX for entities that would normally use those tax dollars. I think TIF-2 has been incredible and a great use of the resources, and Devon used a TIF to put massive money into P180. TIF has done a lot of great things for OKC and I would be adamantly opposed to stopping its usage.

As for urban context, the funny/sad thing about downtowns as command post is that the land speculation usually prevents, rather than enables, real estate development. The land underneath most downtown buildings, usually, is worth more than the building on top of it, unless it's Devon Tower. Just think about the former Downtown Ford's recent market appraisal. For one, I still can't get my head around the fact that they operated a car lot for decades on land that is worth $100 MILLION. Wow. Only in OKC.

I also thought that OKC did occasionally use the TIF fund to make bridge loans? That's actually a pretty innovative/conservative use of TIF. Most projects just get it. Regarding the Clayco 4-towers, especially with the 2 residential towers that they say will be delivered (and surely the TIF will be structured to ensure), do you really think that entire development is feasible in OKC without subsidy? I hate to say it, but I don't. High-rise residential NEW construction says a LOT about a real estate market.

1st, that car lot wasn't worth $100M for decades. Most of downtown was worth less than half of what it's worth today even 15 years ago.

And I think you're mishearing me too. You seem to think I would be against Clayco or anybody receiving TIF. That is not the case at all. I would be fine with Clayco receiving TIF funds. If they were requesting something in line with what was normal (5.5% to 7%) I wouldn't think twice, just give it to 'em. But to ask for 12.5% of the second largest development project in recent OKC history…I need to know more about what they're doing to benefit the city, other than just building a few (admittedly nice) buildings. Obviously the City is in conversation, and you hope that they're fighting for the right things, but there's no M.O for this as it is all relatively new. Two people in charge of doling out hundreds of millions of dollars.

Again, I come back to C2S. They want to start a TIF on land that is maybe 2% full of development with any longevity. So if C2S takes off in the next 10-15 years, none of the new AV tax revenue coming in is allocated to providing those services for these places.

Anyway, the main point that I'm trying to make is we need to have a conversation about what TIF is (for the interested masses who have no idea) and how it is going to serve OUR city. I don't quite care that people have dealt with this in the past. Our situation is unique, and we need to keep that in mind before we use ideas that may not be the MOST beneficial thing for our city, even if it was a smashing success in others. We need to have this conversation because the city is considering multiple TIFs that address districts that are entirely unlike the areas already in a TIF district. Not all TIFs are created equal, and we need to make sure we're developing these TIFs with the disparate parameters in mind.

We also need to make sure that we're handling the process the way it needs to be handled. To think that most TIF that has passed has gone by the desks of city councilors who don't even know what TIF is should be concerning to everyone. And I don't say concerning because of wrong-doing, which has nothing to do with it. I don't care about whether or not wrong-doing is happening. I care about whether wrong-doing is even possible. These processes need to be open, transparent, and understandable for moral reasons as it pertains to government, and there need to be safe-guard mechanisms that ensure that they can't function any other way than exactly as we want them to.

[betts]

H

And they paid what for it…like <$400M?

That's >100% return on an obscenely massive investment in less than a decade (and honestly, I think it's pretty close to a 200% return). That's better than any of them could have ever hoped for.

That value is only meaningful if you sell the team. Anyone who can afford to pay that kind of money here is already a part owner. So to realize that kind of profit they would likely have to sell the team to someone wanting to move it. That value is also partly predicated on comps based on what other teams have sold for and the current success of the Thunder. A losing team with lackluster attendance for a few years would put the current owners in the cellar with the other poorly performing small market teams.

[soonerguru]

I appreciate Ed Shadid's willingness to stand up to powerful interests when he believes they are taking advantage of taxpayers, but I do not believe his siren is warranted about the convention hotel. While it is true MAPS voters were not asked for money for a hotel -- or parking garage, as Pete reminds us -- that in itself is not the overarching offense Ed is making it out to be. I have said for several years that in order to get the quality of hotel we want (like the one that was recently announced in Kansas City) to anchor our convention center investment, it would take some creativity and public involvement.

But it is patently untrue to suggest that TIF funds are "diverting money from schools." It is an intellectually dishonest exaggeration. How can funds that don't currently exist for schools be "diverted?" Secondly, TIF funds are the only property tax funds controlled by the CITY, allowing the city's representatives to decide how they are used. Property tax flows to the county otherwise.

As Spartan has pointed out, any TIF funding requires a negotiation with the City. I'm comfortable that we are not going to find an enterprising developer who wants to speculate on building a major convention hotel without some public backing. As to now, (and possibly to Ed's point), we are a somewhat unproven convention destination.

None of this is to say that I don't think we should carefully scrutinize every TIF recipient. We should demand high standards. We should use TIF to stimulate investment when we would not otherwise get it. And, when we do elect to provide TIF assistance, we should ask for as much as we can from the recipient.

I'm actually more comfy providing TIF assistance to the hotel than I am to the OG&E development, because I believe OG&E is probably going to build its building regardless of TIF investment.

More to the point, if we are going to build a convention hotel, let's entice a leading brand and build something that will still be in demand (and meet convention needs) a decade or more from now.

[krisb]

I believe Ed is much more interested in public awareness and discourse than the specific financials of these projects. It's all about the public process versus something akin to oligarchy. These town halls are meant to spark healthy debate more than anything else and in so doing, holds the City more accountable for their decisions.

[soonerguru]

I believe Ed is much more interested in public awareness and discourse than the specific financials of these projects. It's all about the public process versus something akin to oligarchy. These town halls are meant to spark healthy debate more than anything else and in so doing, holds the City more accountable for their decisions.

I agree, but I think Ed would be more effective if he were to avoid exaggeration or intellectual dishonesty.

[Teo9969]

H

That value is only meaningful if you sell the team. Anyone who can afford to pay that kind of money here is already a part owner. So to realize that kind of profit they would likely have to sell the team to someone wanting to move it. That value is also partly predicated on comps based on what other teams have sold for and the current success of the Thunder. A losing team with lackluster attendance for a few years would put the current owners in the cellar with the other poorly performing small market teams.

Harold Hamm is not a part owner and he could afford to trade CLR stock for half the NBA…

There are plenty of other people in this town (and others) who could afford to be minority owners who are not. If someone pitched in $100M for x shares, and sell x÷5 shares for $50M, they have $50M cash (minus Capital Gains taxes) and still own a significant portion of the team. (Assuming of course that the ownership group and the NBA are okay with such a transaction).

[Teo9969]

But it is patently untrue to suggest that TIF funds are "diverting money from schools." It is an intellectually dishonest exaggeration. How can funds that don't currently exist for schools be "diverted?"

This is patently untrue. Your assumption is based on 1. The idea the no development would happen sans TIF. 2. An errant denial that taxes on properties that are already built, whose values are increasing every year in downtown (and subsequently their AV taxes), aren't being diverted. If Building A had a tax liability of X in year 2000, and in year 2015 that tax liability is x+15i, then of that 15i, 50% is going to TIF and 50% is going to its normal purposes. That value was going to increase regardless of the TIF, especially considering that most of the TIF that was doled out in the first 12.5 years was not a major contributor to the increase in value of downtown real estate. So, unequivocally without question, YES, that money was diverted from schools (and other functions).

None of this is to say that I don't think we should carefully scrutinize every TIF recipient. We should demand high standards. We should use TIF to stimulate investment when we would not otherwise get it. And, when we do elect to provide TIF assistance, we should ask for as much as we can from the recipient.

Yes, all 2 of us that are in charge of the hundreds of millions of dollars should do that…hopefully they do. But there's not a lot of margin there to remove error.

I'm actually more comfy providing TIF assistance to the hotel than I am to the OG&E development, because I believe OG&E is probably going to build its building regardless of TIF investment.

Just their building or all the buildings in the complex?

-------

Nobody is seeing this TIF thing as something in its infancy. Nobody is talking about what the future of TIF looks like. And nobody is saying that Ed Shadid is the savior of OKC with this "town hall". But if you can name me one other notable OKC figure other than Pete Brzycki who is trying to start a two-way conversation about this publicly where there is counterpoint to those in charge of what is now a 15-year old project, I'll give you $5.

[soonerguru]

You seem to be using optimistic numbers to make a somewhat obtuse argument. How often does the value of empty dirt increase, and regardless of its increasing valuation, is it not in our city's collective best interest to develop that dirt into something we can use?

You seem upset by TIF. What are you proposing we do besides vent? Should we just bag the hotel and hope for the best? Should we do away with TIF altogether and just let the county control all of our city's contributions to the area property tax base? What do you think should be done differently?

This is also a problem I often have with Ed. He can point out problems he sees but never seems to offer a solution other than talking and venting.

[Spartan]

Why is this an Ed debate? You guys are doing this thing you always do whenever someone tries to change thinking.. You all do it to me, whenever I throw something critical out, the response is about Spartan and not what Spartan said.

Krisb - instead of saying "Well Ed said this..." Why don't you just own the comment yourself? Let's have a debate about TIF, and let's welcome anyone to contribute to our understanding (especially Ed who has a lot to offer here), but Ed himself is NOT the issue.

This drives me crazy that you all ALWAYS do this. Separate the person from the issue.

[Pete]

I haven't mentioned this yet but I will be speaking at the Town Hall on TIF's scheduled for 5/21 at the Tower Hotel.

Cathy O'Connor was invited but she declined (nothing against Ed, just didn't feel like it was appropriate) so Shadid asked me since I had researched all the details about OKC.

I will just be presenting on how TIF's work in OKC; not taking a stand for or against.

The event starts at 6:30 on that Thursday and will also feature Greg LeRoy, Executive Director of Good Jobs First.

Would love to see some OKCTalk turn-out:

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

[hoya]

You seem to be using optimistic numbers to make a somewhat obtuse argument. How often does the value of empty dirt increase, and regardless of its increasing valuation, is it not in our city's collective best interest to develop that dirt into something we can use?

You seem upset by TIF. What are you proposing we do besides vent? Should we just bag the hotel and hope for the best? Should we do away with TIF altogether and just let the county control all of our city's contributions to the area property tax base? What do you think should be done differently?

This is also a problem I often have with Ed. He can point out problems he sees but never seems to offer a solution other than talking and venting.

1) The value of empty dirt does increase. At the very least it will increase with inflation, all other things being equal. Remember we're talking about a 25 year period. Let's say we had a TIF that started in 1990, with a property that was worth $100,000 (so roughly a $1000 in property taxes each year). Today it would be worth $186,000, but you'd still be paying the same dollar amount you did in 1990. So by the end of the TIF, you'd be getting about half the tax income (in value) from the land that you did before. You're also not getting any benefit if property values go up in general. Empty dirt in Bricktown is a lot more valuable today than it was in 1990, but the schools aren't getting any of that increase.

2) The city is obviously better off getting a big hotel or skyscraper or whatever on that lot rather than empty dirt. But now that downtown is growing quickly and we've got empty lots rapidly filling in, are we better off using TIF funds rather than letting things develop naturally? In other words, you have a big piece of dirt. Joe the builder wants to put something there. With TIF money, he plans to build a 20 story building. Without TIF money, he'll only build a 10 story building. Is the city better off skipping out on 25 years of tax dollars to get those extra 10 stories? The choice downtown is no longer between a big empty patch of dirt and a skyscraper -- it's now between a cool development and a less cool development + 25 years of taxes.

[Teo9969]

You seem to be using optimistic numbers to make a somewhat obtuse argument. How often does the value of empty dirt increase, and regardless of its increasing valuation, is it not in our city's collective best interest to develop that dirt into something we can use?

Half of Deep Deuce filled in with projects that received no TIF funds. Of the over $200 million dollars invested (or proposed to be invested) in DD in the last 15 years, developers have received less than $10M, and most received it simply because they applied for it. It was not the difference between the project happening or not (though maybe it helped increase scale). TIF was not the driving force behind Deep Deuce's success, yet maybe 5% of the district is paying 50% of their taxes to TIF while the rest are paying 100% of taxes to TIF, and that's a substantial amount of money. A conservative estimate says that's around $2M/year out of those 15ish blocks.

TIF receives money from every building in downtown OKC whether it was built in 1915 or 2015, not just the new builds.

You seem upset by TIF. What are you proposing we do besides vent? Should we just bag the hotel and hope for the best? Should we do away with TIF altogether and just let the county control all of our city's contributions to the area property tax base? What do you think should be done differently?

This is also a problem I often have with Ed. He can point out problems he sees but never seems to offer a solution other than talking and venting.

So because we don't have solutions ready in hand, you propose we just not talk about it, most especially because Ed Shadid is the one trying to start a conversation?

I have at multiple points in this thread said I'm not opposed to TIF. Indeed I support TIF, and I would prefer the money be in the city's hands rather than the county's provided we have a plan in place that makes *best* use of the funds. That plan is not currently in place. TIF in OKC is haphazard at best, as evidenced by quite a few instances not the least of which is the fact they predicted $47M in TIF-2 Budget and we're now sitting at $126M budget and climbing every year. That's nearly a 200% margin-for-error.

There are literally no rules regarding who gets TIF money, except that a request that receives approval be located within specific boundaries. If I applied for $35M in TIF funds to build the world's largest brothel to be placed in C2S, all I have to do is convince 7 key people that it's a good idea. That's the extent to which our established parameters safe-guard us. (BTW, I imagine a pretty great business argument could be made for that idea...)

I'm "dying on this cross" not because I'm opposed to TIF. I'm doing so because I'm opposed to the astounding opposition to this discussion being started just because it's by Ed Shadid. That's preposterous. Right now OKC-TIF is this random thing that very very very few people really know anything about…Just $125M+ that "the city" can use at its complete discretion. Once again, All I'm saying is we need to put parameters and safeguards in place to make sure that this increasingly massive amount of money is serving the city to its very best interests. The problem with you asking for me to give solutions is that we haven't even identified potential problems. We're living in a dream world where hundreds of millions of dollars change hands with no potential for waste or error.

And to be clear, I would prefer someone other than Ed Shadid start this conversation, but, well, no other city leaders are stepping up to the plate.

[Just the facts]

If we would just stop subsidizing spawl we wouldn't need TIFs because higher density development would be the default free-market choice.

[Pete]

Kansas City just announced an 800-room convention hotel. Looks like their max obligation is $50 million.

New 800-room convention hotel coming to downtown Kansas City - KCTV5

[Motley]

The article says, plus other city and county tax incentives. What would those incentives be?

[Pete]

The article says, plus other city and county tax incentives. What would those incentives be?

Sales tax reinvestment, tax abatement, financing help, grants, etc.

Will be very interesting to see the full details as it will help provide a window into what OKC is going to have to do.

[Motley]

The $50million cap appears to cover operating losses over the next 25 yrs. How much does Dallas subsidize for the losses on the Omni convention hotel?

http://frontburner.dmagazine.com/201...hotels-losses/

[adaniel]

I can't speak for this specific project, but Kansas City has been extremely aggressive in its use of TIF's and incentives. My guess is this developer is probably spending very little of his own money here:

http://www.showmeinstitute.org/docum...financing.html

To answer you question Motley, the city of Dallas is subisdizing around $22.5 million a year for the Omni Convention Hotel. The grand plan is to sell the hotel to a private company after a few years but it seems based on some highly optimistic assumptions.

How Government Subsidies Are Hiding the Omni Convention Center Hotel?s Losses | FrontBurner | D Magazine

[Motley]

If even Dallas has to subsidize, TIF assistance is an unfortunate, but necessary, cost to compete with other cities. I hope the OKC hotel is better looking than the one planned for KC.