Economic Impact studies need to consider NET NEW activity from relocation OU sports

 September 30, 2023

Today's episode of "Can you believe the Hype?"

This time OU Daily included comments from a sports economist. Let's ask for that feasibility study about attracting visitors to an arena.   Remember, it is NET NEW visitors that is relevant for doing  a proper economic impact study.

A UK member of Parliament has been visiting OU this week.  He had to relocate his hotel last night b/c of game-day bookings. Otherwise he would have stayed another week at the Noun vs. staying in OKC.  

This substitution effect is typically left out of feasibility studies which assume all event-related spending is NEW spending.  With the Arena proposal, we need to be mindful that OU sporting events are already occurring in Norman (likely in core Norman).  What is the estimated impact of basketball and gymnastics at Lloyd Noble?

How much will basketball and gymnastics competition day spending INCREASE from relocating the venue 5 miles farther from campus?  It is clear that bigger crowds are not expected given that the proposed arena has a SMALLER capacity (8,000) than Lloyd Noble (12,000).  

I am pretty good at math.  Smaller crowds and premium seating does not suggest more visitor spending in the city as a whole. It does suggest a lot of substitution of where $ is spent in Norman and who grabs that spending (OU for tickets and concessions).  If an arena was profitable then OU would find a private investor to own and operate it (like the UT model). 

Norman is situated at the edge of the metro area and does not have the density for arena/concert venues especially given the competition in the metro area.  Build it and they will come is not a sound strategy.

https://www.oudaily.com/sports/comparing-norman-oklahoma-off-campus-one-billion-entertainment-district-iowa-state-cytown-on-campus-complex/article_68a2b594-5ef7-11ee-92ea-9764f3185466.html?fbclid=IwAR2Hh0WG43eNYkoNBKXGtRgX3LBy2Ntkez7NMxwvDNQMBarNI7j4rl_OtXQ

TIF funding threatens general fund growth

 September 28, 2023

Today's episode if can you believe the arena entertainment district hype? 

The city of Norman perpetually struggles to balance its annual budget and to fund capital projects such as water and sewer infrastructure, emergency response equipment,  and roads and bridges.

Tax increment financing robs the general fund of nominal revenue (replacing taxable activity with spending in the tif) and revenue growth during the life of the tif.

A designated new tax, like MAPS or Norman Forward special purpose sales taxes, protect general fund revenues.  

TIF secures a revenue stream for the TIF projects which is good for getting  financing and borrowing funds. TIF does not secure revenue for general city operations.

IF SEC travels well why propose smaller arena?

 September 24, 2023

Today's episode of "can you believe the arena-entertainment district hype?"

Several leaders in Norman have stated that the SEC fans "travel well." I have asked for evidence of this from individual who I have heard making this claim.  City Manager Pyle said he heard this from OU folks.  Visit Norman leader has not responded to my request for supporting documentation. 

I decided to address this in a DIY fashion.  An easy first cut at addressing this is to look at home vs. away attendance at SEC basketball games.  I picked Ole Miss because their average home game attendance was just a little lower than OU's in 2022. Also the university built a new basketball arena in 2016 so they have sec+newish arena experience as a comparison.   

The one-year snap shot suggests that the "SEC travels well" claim might not apply to men's basketball.  Ole Miss did not sell out, even when playing the big time SEC basketball teams. 

On a related note, the revised UNP Arena plan has been paired down to 8,000 basketball capacity (if you believe the bits of details scattered about) from 10,000 proposed in 2018.  This is more realistic of the types of crowds expected for Men's basketball games.  

Bottom line: even OU Foundation (the UNP land owners and developer of record) is not expecting larger crowds for OU men's basketball games after joining the SEC.   My guess (without being shown the math) is that the feasibility studies estimate spending related to the new arena without subtracting current spending related to Lloyd Noble events.

Cautionary Tale of Kentucky's Yum Center and Power Elites

 September 22, 2023

In today's episode of can we believe the arena entertainment district hype? Why don't the projections pan out as promised?

Kentucky's Yum center is a good cautionary tale about an arena-anchored entertainment district.

Why were the projections (based on input assumptions) so off? 

"It's what happens when a power elite tries to impose something in kind of an autocratic way,'' Wayne said.

https://www.courier-journal.com/story/news/investigations/2018/07/12/kfc-yum-center-billion-dollar-baby/498902002/?fbclid=IwAR1LojkN0r_SjKxkZMwea6cCUyphiR2IufMts7ENq_f6L6NeLVNIs-yyqiI

We don't need a TIF for market rate housing, retail or office space - 80% of speculative private UNP spending

 September 21, 2023

In today's episode of can you believe the arena/entertainment district hype, we get more details about the proposed district. Kudos for the UNP TIF oversight board for asking the right sort of questions. 

Budget direct Anthony Francisco: “20% is from public sources…and I’m good enough at math to know that 20% of a billion is 200 million, so that’s a sizable investment of public resources,” 

"Out of the $800 million private funding, 60% will go towards housing, 10% to retail, 10% to office space and 20% to the arena, he continued."

Neighbors, don't be fooled by the $1 billion figure.  80% will go to private development.  60% housing shared is entirely independent of an arena. We don't need a TIF for stuff that can happen without an arena. 

Let's focus on the $200 million price tag for the arena. 

If most of the public funds would come from a TIF and be mostly used for an arena, then we are talking a $360 million arena project of which the public would contribute more than half (56%).  Keep in mind the bulk of the risk will hit the city budget if net new revenues do not materialize as promised. (Perhaps this is Mr. Francisco's concern given our experience with the UNP TIF).

https://www.normantranscript.com/news/proposed-entertainment-district-intended-to-be-part-of-tif/article_bc00dbf8-573b-11ee-bbe5-1b7e49aac41b.html?fbclid=IwAR2o39BTaiwMzw2cMw3MxlQiOFkaU_KAd1mFNZ_7JabTAvKYGO6leeZbnQA

We don't need to spend $200m on a new arena for $10m weather museum startup

 September 19, 2023

Today's episode of can you believe the arena-entertainment district hype? 

A weather museum and experience venue WOULD be something new and Unique in Norman.  Next to the airport makes sense because the YFAC (Young Family Athletic Center) will draw folks and this could be an add on to their visits for sport competitions.  

We don't need to build an arena to support this sort of project.  It does not have to be an addon to a $200 million public investment. From statements made previously, they are looking for $10 million public subsidy to attract donations.  

Has anyone seen the feasibility study for this? I would be interested in the details of the revenue and cost estimates.

https://www.oudaily.com/news/national-weather-museum-unveils-plans-for-new-site-to-be-included-in-norman-s-proposed/article_4a48b1e0-5649-11ee-84ef-ffb8c1e95874.html?fbclid=IwAR1yu-kRjeEKDm-PM3KGn2RGvjRxdolX2SrguX4S2qUcX6BaL44DGb2Jg34

(Dis) honest messages can influence voter support for UNP Arena TIF

 September 16, 2023

Can you believe the Arena Hype? episode of the day... 

In May of 2018, Pat McFerron, President of Cole Hardgrave Snodgrass & Associates, sent a report to the "Yes! UNP Steering Committee".

The report concerned voter opinion about the UNP development and how different informational messages impacted opinions. 

Apparently telling folks that the TIF project won't create new taxes is a winning strategy for gaining support even if this leaves out the overall impact on revenues which are available for the general fund.

"When told that creating a TIF does not increase taxes on other Norman residents, 71% say they would either "definitely" (52%) or "probably" (19%) favor this package. Only 18% say they would "definitely" Oppose."

A TIF does not magically create new tax $s unless the project generates NET NEW tax revenue above and beyond the project costs and accounting for impacts on non-TIF areas.  

If a TIF project largely relocates activity  then it is not creating NEW tax revenue, but merely shifting where taxes are collected.  When shoppers go to UNP instead of other stores in Norman, then the general fund would get shorted sales taxes which go to the TIF instead of the general fund.  

Consider that the biggest activities for the proposed UNP arena already occur in Norman.  28% of the arena usage would be for OU basketball and gymnastics. Only the incremental INCREASE in spending related to relocating these activities would lead to increased tax revenues. 

Please don't be fooled by being told the unicorn fairy tale that the UNP TIF won't impact tax revenues.  If activity shifts to TIF which grabs tax dollars, then the general fund will have less $ for services. 

Mayor Larry Heikkila let's have an "intellectually honest" discussion and make sure we analyze the overall impact on city finances.  There is no free lunch!

Will joining SEC create population boom?

 September 7, 2023

In today's edition of Can we believe the Arena Proposal hype? Let's consider the claim that joining the SEC will change everything.

One way to assess this is to look at what happened to the cities hosting the last two teams which switched to the SEC,  Missouri and Texas A&M.  (This was the first SEC expansion since 1991 when Arkansas and South Caroline joined)

The graph below uses Decennial Census data.  We see that Columbia and College Station had faster growth in the decade before the transition compared with Norman.  This faster growth was not sustained after the transition.  

This simple look at the population data does not support the claim that joining the SEC made a huge impact on the population of these comparable SEC towns.  

Should we expect the transition to have a different impact on Norman?