So How is TIF Money Being Spent?
Over the past couple of weeks I've delved into how tax increment financing (TIF) is employed downtown, especially as the city prepares for an expected $142 million request from Clayco in association with its plans to build four towers, including an OGE Energy Corp. headquarters, all together to be valued at $553.2 million.
Clayco is asking that a new TIF be created for this development. A separate new TIF district also was created for Devon Energy Center, but all of that money was budgeted for downtown streets, parks, sidewalks and a fund to draw companies to move downtown.
Before getting into how the money has been spent, let me go through the basics one more time.
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. The increase in property taxes resulting from new development after a district is formed is invested back into the area, and when the 25-year term is done, the schools, libraries, vocational schools and city-county health department all get a bonanza in increased property taxes that might otherwise have not existed.
So my first emphasis is this -- when we are talking about increased property taxes in a TIF, we are not talking about an increase in the tax rate. We are talking about increases that occur as a result of rising property values.
TIF districts are created to level the playing field when it comes to overcoming the costs of dealing with contaminated land, expensive land assembly, structured parking and upgrading aging infrastructure in the urban core. The city’s first TIF district has played a key role in the emergence of a health sciences corridor just east of downtown that is now home to more than 17,000 high-paying jobs.
The downtown TIF, meanwhile, is set to expire in 2026. I requested a summary of expenditures from the city and counted 41 projects funded to date that total $89,612,260.
So how has the money been spent?
A total of $25,340,740 was allocated for residential projects, with the largest recipient, the Steelyard Apartments, pending final approval by the Oklahoma City Council on Dec. 16 for $4,060,000. The Steelyard project, by all accounts, was not financially feasible without public assistance due to the presence of contamination underground and the need to move a large, old sewer line. This is the kind of project proponents point to as an example of how TIF financing can be key in turning really messed up properties into community assets.
On the flip side, I can see how critics might look back at the $2.5 million given toward construction of structured parking as part of the Legacy Apartments development, now renamed Avana Apartments.
Mike Henderson built Legacy at Arts Quarter, 301 N Walker Ave. in 2007. The 303-unit property sold a year later for $39,097,000 -- or $129,033 per unit, a state record.
That's an awfully sweet and profitable quick flip for a development that supposedly couldn't have happened without the use of TIF assistance.
But wait, the property sold again last year to Charleston, S.C.-based Greystar Real Estate Partners for $48.75 million - about $161,000 per unit. Add in a less than enthusiastic community response to the complex's design, and Legacy might just be a poster child for critics of TIF.
Commercial recipients, meanwhile, include perhaps the most popular of the projects - the 2006, $54 million rehabilitation and restoration of the historic Skirvin Hotel. The city used $9.65 million to assist in redevelopment of the landmark, and has a complicated agreement that will allow it to recoup millions if or when the building is sold by current owner Marcus Hotels and Resorts.
Another $5.3 million is allocated toward the conversion of the Fred Jones Assembly Plant into a 21c Museum Hotel, and $4.75 million for redevelopment of the long dormant Journal Record Building.
All three building are historic assets where the cost of redeveloping the properties in a way that retains their character is not cheap.
Public infrastructure allocations total $17.65 million and include $2.65 million for creation of a railway quiet zone along Automobile Alley and Capitol Hill.
Schools, libraries and the county also benefitted from the TIF, with schools receiving $6 million for projects including the new John W. Rex Elementary, improvements to Emerson Alternative School, and a new headquarters for Oklahoma City Public Schools.
The city's approach to granting TIF assistance has evolved over the years. The Legacy project, in particular, is a reminder of the need to ensure that such assistance makes for a successful project, but isn't going to turn into part of a quick windfall on a development that falls short of community expectations. As Clayco negotiates its request with the city, it does so with a City Hall that is far more experienced in determining what's a fair deal and what may create way too much of a sweet flip at taxpayers' expense.