New Towers to Require Requested Record Amount of Tax Increment Financing
High-rise development proposed for city-owned property south of where Stage Center stood will include a request for a record-high amount of tax increment funding.
The Oklahoma City Urban Renewal Authority is expected to decide Monday whether to name either Indianapolis-based Milhaus or Chicago-based Clayco as developer of the property, which spans the food court plaza for the annual Festival of the Arts, office buildings that are home to the Myriad Gardens Foundation, the Arts Council of Oklahoma City and other arts-related non-profits. The development also would require clearance of La Luna Mexican Restaurant.
During presentations earlier this month, Urban Renewal commissioners made it clear they had questions they wanted answered before deciding the matter. One of the biggest questions was how much tax increment financing might be required.
Now we know.
Clayco is preparing to start construction on a 25-story office tower and 26-story residential tower this next year on the north half of the block, formerly home to Stage Center. If the company is seeking TIF for that development, which includes the corporate headquarters for OGE Energy Corp. , such intentions have not yet been revealed.
And this deal is for the matching towers Clayco is completing to develop on the south half of the block.
Clayco is asking $29 million in TIF for the proposed 25-story office tower, which they forecast to cost $216 million. The company is asking $9.25 million for the planned $70 million, 26-story 253-unit apartment tower.
Clayco's latest schedule calls for construction to start on the office tower in August, 2015 and be complete by June, 2017. Construction of the residential tower would be triggered by the ability to lease the north residential tower.
We're looking at a total $38.25 million in TIF with this - or 89 percent of the anticipated ad valorem taxes that would be generated by the development.
Milhaus, meanwhile, proposes building an $80 million 20-story, 300-unit apartment tower with 15,000 square feet of retail space. Milhaus is asking for $21 million in TIF - 96 percent of the forecasted ad valorem taxes from the project.
Now, let's do a refresher on how this whole TIF program works.
What's a TIF?
A tax increment finance district, also known as a TIF, allows a city, town or county to use tax money generated by a new development to pay for public improvements in the development area. Improvements associated with redevelopment projects can be supported by bonds, with the debt to be repaid by money generated within the TIF district.
When the downtown TIF was created, it called for a portion of such proceeds to still be used for special projects deemed necessary for the taxing entities within the district. So over the years we've seen TIF used to assist in construction of the new downtown elementary and the county was able to use the funds to help pay for repairs of collapsed sewer lines at the jail.
To my knowledge, the requests for TIF by developers have never topped $10 million. This past year Heritage Trust, led by Bond Payne, was approved for $4.75 million for redevelopment of the east half of the The Journal Record Building, at NW 6 and Robinson Avenue. The deal calls for $26 million to be spent on renovating the building and $7.2 million for construction of a 409-space parking garage.
Louisville, Ky.-based 21C Museum Hotels, meanwhile, received unanimous approval earlier this year for $5.3 million in tax increment financing toward a $51.5 million conversion of the Fred Jones assembly plant at 800 W Main into a hotel and contemporary art gallery. The city council also approved $3 million in tax increment financing to Milhaus to build a 327-unit apartment complex at NW 10 and Shartel in Midtown.
Will the TIF requests cause any hiccups in what is set to be the most extensive expansion of the downtown skyline since the early 1970s? Will equally aggressive requests be made by Clayco for the north half of the block? Will more TIF be requested for a tower I expect to be announced for Main and Hudson?
Stayed tuned kids. This is where downtown development gets serious.