UNP TIF diverted significant amount from Norman's general fund

 October 28, 2023

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

Let's think about Tax Increment Financing. As we saw with the UNP TIF, the diversion of sales tax revenues to the UNP FUND put the general fund at risk in a very predictable manner. (FWIW I warned against this in 2006!) 

As more activity moves to or chooses to locate in the UNP instead of other parts of Norman, the General Fund receives less sales tax revenue. When the UNP bite got too big, City Council worked to end the diversion.  Again, this was all predictable.  

The TIF advisors (Emily Pomeroy at Center for Economic Development Law) did not advise the city about this. Her job was to estimate the amount of diversion (increment growth) and if this would be enough to pay off borrowing costs.  Focusing just on what is likely to happen in the targeted TIF district is just one part of the needed analysis. 

None of the "studies" provided for Arena 1.0 looked at the impact on the City general fund.  None.

TIF vs Sales Tax (like Norman Forward)

 October 26, 2023

Today's episode of "Can you Believe the Arena-Entertainment District Hype?"

There are important differences between tax increment finance (University North Park used TIF financing) and a special purpose sales tax (Norman Forward projects are funded with 1/2% sales tax).

TIF grabs a portion of sales taxes (or property taxes) generated in the designated geographic district.  The increment is the difference between the baseline tax collections (pre TIF) and the collections once the district is created.    

Instead of sending all of the incremental tax revenues to the general fund some is set aside in a TIF fund just for TIF projects.  

TIF puts the general fund at risk if the growth in the incremental revenues are not NET revenues to the city.  If growth in the TIF district is simply from a shift of where people shop/spend entertainment dollars in NORMAN, then this can create a drain on the general fund.  Money that goes to the TIF would have gone to the general fund if TIF activity is not associated with new sales tax revenues.  

A special purpose sales tax protects the general fund by creating a NEW tax revenue source rather than diverting existing tax revenue.  The revenues from the special purpose tax would go for the TIF projects.  This is how we funded NOrman Forward projects - we had a city wide vote to use the extra 1/2% of sales taxes for NF projects. 

TIF can be created by the vote of just 5 council persons.  In fact, the original vote on the UNP TIF was 5 to 4. The vote to take a super crappy deal to end the TIF tax siphoning was also 5 to 4.  

Upshot: TIF puts general fund at risk (we saw this with UNP TIF) and TIF gets around the need for voter approval.  

In the case of Arena 2.0 - we are talking about an area that does not face an impediment to growth and an area that is the LEAST in need of public investment to jump start more activity.

Busting the SEC Boom myth: Norman's population growth matched ave of 5 SEC cities closest in size

 October 24, 2023

Today's episode of "Can you Believe the Arena-Entertainment District Hype?"  True story from yesterday.

Student:  Professor, I want to do a project on the big Impact the SEC is going to have on Norman.

Me: Where did you get your info about the SEC boom effect? 

Student: News, sports shows, social media... 

Me: Did anyone document the effect by looking at the data?

Student: Well no. 

Me (showing graph below): Take a look at these graphs on population in SEC cities vs. Norman what do you see? 

Student (surprised and confused look): There isn't an effect. 

Lesson: Just because folks say something is true, doesn't make it so.  That is where research and data-driven analysis are valuable.

PS This student is going to do some of his own research to test the hypothesis.  Stay tuned.

Will City Council get a proper economic impact for UNP Arena 2.0?

 October 21, 2023

Today's Episode of "Can We Believe the Arena-Entertainment District Hype?" 

In 2018 City Council hired HVS to conduct an analysis of the studies concerning the proposed UNP Arena project.  The studies included the UNP Master Plan Update by CallisonRTKL, the feasibility study by Convention, Sports & Leisure (CSL), Dr. Dauffenbach's impact projections of UNP property and sales tax revenues, My critique of Budget Supplement (Alternative assumptions using Dauffenbach's method), and Economic and Fiscal impacts estimates by OK Department of Commerce. 

The astounding conclusion was that NONE of these studies provided estimates of net new economic activity (Economic impact) or how the TIF would affect city finances (fiscal impact).   My analysis was meant to highlight this very point. 

HVS also provided a blue print of what a proper impact study would include.  The city declined to hire HVS to do the analysis needed to properly vet the study.  The backroom "Grand Bargain" discussions did not sit well. 

What is different this time? What evidence do we need to vet a $200 million tax expenditure?

(1) Data-driven analysis of how similar projects have worked out.  

(2) A comprehensive economic and fiscal impact analysis that estimates revenues without the relocation of the arena and with the relocation.  

See highlights of the HVS analysis in the comments below. 

In 2018, the then city council hired a firm without any vested interest in the project, HVS. 
https://arenadigest.com/2018/06/19/proposed-ou-arena-projections-review/

City Council Minutes, June 26, 2018 where HVS analysis was presented. chrome-www.normanok.gov/sites/default/files/documents/2020-12/2018-06-26_city_council_conference_minutes.pdf

HVS presentation is included in conference agenda (pages 28-58) chrome-https://www.normanok.gov/sites/default/files/documents/2020-06/2018-06-26_city_council_conference_agenda.pdf

The Data don't support SEC Boom Hype in one graph!

 October 17, 2023

Today's episode of Can You Believe the Arena Entertainment district hype?

You probably have heard Arena boosters claiming that OU joining the SEC will change everything, including population. 

Do the data support the boomtown hype?  NOPE.  

This one graph pretty much

tells the story. Norman has been doing well compared with SEC towns.

Misleading return on investment narrative

October 16, 2023
Another episode of "Can you believe the arena-entertainment district hype?"

Dear City Council, 

 If you give me $200,000 in tax dollars, I will (sometime in the next 25 years) build a $1 million home in Norman.

Just imagine, each $1 of public spending would lead to $4 of total direct spending in Norman. That is a 4 to 1 ratio of private to public spending.  

When can I sign a contract to get $200,000 of taxpayer $ ?  

Neighbors, this is the narrative that Team Norman leader (NEDC pres. Mr. McKinney) is trying to sell to City Council.  Don't be fooled.  Private spending does not have a $1 for $1 return to the public coffers.

Is relocating arena in UNP likely to create NET new activity?

 October 16, 2023

Today's episode of Can You Believe the Arena-Entertainment District Hype?

Can we plunk $200 million of tax payers dollars into a field to move stuff there? Absolutely.  

Will a project bring overall growth to Norman vs. just redistributing where activity is located in Norman? That is the more fundamental question for deciding how to spend tax dollars.

The proponents of public spending and ownership of a UNP arena have noted (1) the UNP district is the biggest retail shopping strip in the state (see it's doing great) and (2) public spending on the North land would attract private investment.

Both of these are true statements, but they overlook the most important factor.... (1) did UNP development lead to overall growth in Norman vs. just redirecting where growth occurred? and (2) would private investment in a UNP arena district create a positive NET benefit for the City as a whole?  

Data-driven analysis and research suggests the answer is NO to both of these questions.

(1) When we look at sales tax revenue growth in the UNP and the City as a whole, we do not see a TIF bump. Instead we see that as UNP grew, the rest of Norman experienced flat growth.  Looks like pure cannibalization.  (see THE graph below).

(2) How much private investment will $200 million in public spending in the UNP bring to the CITY AS A WHOLE?  We don't know how MUCH private spending will occur - $800 million has been suggested, but if and when this happens is just speculation. Recall, we never got the promised lifestyle center that was promised for the UNP TIF district. And we never got reimbursed for putting in the supporting infrastructure. 

The conclusion from data-driven research which looks at what actually happened after sports facilities were built suggest that these projects do NOT payoff from the public budget perspective.  

It is IMPOSSIBLE to calculate return on investment based on speculation of what might (or might not) follow a $200 million public expenditure. 

What we can do is look at the return in terms of tax base on the UNP Development brought to us by OU Foundation and friends.  Recall that the TIF siphon was ended early because it hurt the city budget which could no longer absorb a 10+% diversion to the UNP TIF fund.

If we were going to pick an area of Norman that would most benefit from an infusion of public spending, where would we pick? Right next to an area that is thriving and will be supported going forward with the Norman Forward spending on the Young Family Athletic Center? 

My vote would be to spread some love (via public expenditure) for (1) grocery store/coop near Lindsey and 12th ave SE and (2) improve our transportation service so folks can get to jobs, stores, etc. 

PS - I will see if I can get updated data for this graph.

Responding to McKinney's deflections

 October 15, 2018

Today's episode of Can You Believe the UNP Entertainment District hype?

Mr. Lawrence McKinney responded to my guest column. 
 Lots of deflection (and some accusations).  

No ONE is stopping OU Foundation from sharing the details of their plan with the public or City Council.  

The attempt to create a statutory review committee BEFORE sharing details with the public is political strategy.  The SRC won't give a "fair" assessment.  The SRC Committee will have mostly folks who directly benefit from further subsidizing UNP development and creating a TIF (the school district gets to shelter some property taxes from its cut of the state equalization formula.)   

Why not start with review by the UNP TIF oversight committee? This committee has experience with TIF, the UNP and lots of professional knowledge (economist (not me), lawyer, banker, builder, etc.)

Let's also be careful about "promises" of private investment and certain public spending up front.  The last UNP promise was for an upscale "Lifestyle" center shopping area.  Not an inch has been built and OU Foundation/developer did not have to pay back the penalty for failing to do so. 

Let's measure success following the strong towns approach - how does a project impact the City budget.  Moving where retail growth occurs within Norman does not improve city finances.  Growth in the UNP was likely to happen without a TIF (the consultants noted this in 2006).

Based on our recent experience with UNP developers, how likely is it that $800 million in private investment will actually happen? Projections and promises are not certain ROI.

It is not hard to be against any public funding for relocating the OU Basketball arena based on a review of careful empirical research.  These types of projects don't pay off for professional sports, why would college based venues be different? 

The "other" things that MIGHT happen at the new arena are also PROMISES of "success" in drawing new events in a highly competitive environment.  

Advocates for the UNP arena have offered "projections and promises" as a counter to research on actual impacts on arenas-led development.  

Let's ask for a quality check on those who are making projections.  How reliable have their previous projections and feasibility studies been? (Remember OU Foundation projected a Lifestyle center development in the UNP that never happened).

Don't be fooled by the we need housing arguments either.  The only way to get affordable housing is by intentional design.  The filtering model- build new housing to increase supply and put downward pressure on price - only works if you hold demand steady.  If new housing is for new people moving to Norman, then the increase  in supply won't create affordability (Basic econ 101 - supply AND demand matter).

Don't be fooled by the padding of the project to make the public investment look small.  $200 million is a LOT of tax revenue. 

Tax Increment Financing siphons tax dollars for spending in the TIF district.  There is no promise that we will get net new tax revenue and there is a great chance that the gains in UNP will be offset by losses in activity and businesses in the rest of Norman. 

Fool me once, shame on you.  Fool me twice, shame on me. 

(I wasn't fooled with the UNP promises in the first place, but 5 members of City Council were).

Here is Mr. McKinney's article:
Guest Column: Laying the Cornerstone


Responses to Mr. McKinney: 

LETTER: Mr. McKinney's numbers on entertainment district lack supporting data by Andrew Cullen, October 18, 2023

LETTER: Personal attacks don’t sit well by Paul Thomas Arcaroli, October 18, 2023

Evidence suggests Pro Sports arenas don't payoff, why would 8,000 seat college arena be different?

 October 14, 2023

Today's episode of Can We Believe the Arena-entertainment district hype?

If pro-sports venues are not found to increase economic activity, then why would we think relocating and downsizing to an 8,000 seat capacity OU basketball facility would be different? 

There has been a LOT of research on the economic impacts of sports stadiums/arenas.  These largely fail to find strong positive impacts and place a high level of doubt about the credibility of marketing studies (CSL, Legacy, etc.) which project large economic gains. (There are many reasons why the "studies" paid for by the advocates project unrealistically large gains.  "What do you want the answer to be boss?" ) 

Here's a really neat study that tests the hypothesis that arenas largely redistribute economic activity, but don't generate net increase.  This peer reviewed economic analysis looks at the relocation of the Dallas Cowboy's stadium and its impact on the losing area (Arlington) and the winning area (Dallas-Fort Worth).  Yep, they find negligible positive impacts on the City budgets. 

"We also find that the new stadium increased spending in the accommodation, food services, and entertainment industries, but these were offset by relatively large losses in retail spending."

PS - it also cites my research 🙂 

Bottom line: using public tax dollars to relocate OU basketball from campus to the north area of the UNP district makes no economic sense.  

https://link.springer.com/chapter/10.1007/978-3-031-39248-1_9?fbclid=IwAR00vf9S3clLL_OkS-L09Ygz5zYw4j7Dv1I2lwwuqpakm_JpTB4udS_bK_M

Do SEC Basketball Teams travel?

 October 13, 2023

Today's episode of Can You Believe the Arena-Entertainment hype?

Arksansas had the largest average home game attendance among all the SEC men's basketball teams last year. They reported 19,200 paid attendance at every game.  Wow!

Does that mean that SEC teams sell out when Arkansas comes to town?  NOPE, not even for the teams with the largest fan bases, Tennessee and Kentucky. 

Remember, OU wants the City to build (and pay for) what would be the smallest basketball venue in the SEC, with 8,000 capacity (from what I heard).  This is just a bit more than last year's average home game attendance at OU Men's basketball games. 

Even OU does not anticipate larger crowds for men's basketball after switching to the SEC based on their own plans.

Do SEC basketball teams sell out away games? Tennessee doesn't

 October 9, 2023

Today's episode of can you believe the UNP arena hype.

Part of the narrative used to grab tax dollars for a city-owned arena is that "the SEC travels well." The implication being that joining the SEC will lead to more visitors spending $ in Norman. 

If anyone has documentation that SEC basketball travels better than Big 10, the relevant information for the arena scheme, then please share. 

What do we know? When Tennessee travels, there were only sellout crowds for 2 of the 9 SEC away games.  

The proposed 8,000 seating capacity arena is smaller (about the same as Ole Miss) than the crowds that went to see Tennessee play when the team traveled to other SEC arenas.

KU has winning tradition in good old Allen Field house

 October 8, 2023 

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

What makes for a successful basketball program, is it the building or is it the tradition of winning?

Allen Field house is in on campus, right across from the business school (similar to OU's football stadium location).

Allen Field house opened in 1955 and was renovated in 1986, 1994, 1999, 2001.  Below are details of the latest renovation plan. 

KU certainly has no problem being successful with its old school facilities.  

https://www.facebook.com/watch/?v=730777998721391

Guest Article: Can You Believe the UNP Arena Entertainment District Hype?

October 6, 2023

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

Thank you to the  Transcript for publishing my article. 

https://www.normantranscript.com/opinion/guest-column-can-you-believe-the-unp-arena-entertainment-district-hype/article_f86fce5e-639e-11ee-bd95-37ab819eab87.html?fbclid=IwAR3e-7ULDhsHFixU7j6KuMyCYoZbPRdh4BDRuWtbfXXylurJf8Sz5g0WDsg

Narratives vs Facts about UNP TIF displacement

 October 4, 2023

Today's episode of "Can you believe the UNP Arena hype?"

There are facts and there are narratives about facts. It is important to know the difference. 

Fact: an empty field along the fast growing interstate did not need public subsidy to create a power retail shopping center anchored by Target - which was moving there with or without the TIF.  Even the consultants at the time noted that the area would develop without TIF.

Fact: not a single INCH of the promised high end retail/lifestyle center has been built.  Not an INCH.  Neighbors you can revisit the promises - "lifestyle" center was the promise not  what we got - an dressed up strip mall with a bunch of stores relocating from the rest of Norman.  

Fact: retail growth, hotels and restaurants in the UNP area is undeniable. The real issue is whether there has been NET growth in Norman as a whole because of the UNP TIF tax diversion.  Did the UNP growth come at the expense of growth in other shopping areas - Ed Noble parkway?  See graph in the comments below which suggest that UNP growth cannibalized growth in the rest of Norman. 

Fact: it is hard to trick markets.  We see growth in SE Norman along Classen and Highway 9 - in undeveloped land without a TIF.  Retail follows market demand. 

Fact: TIF funds are not free money. These are taxes that are diverted from the General fund. At one point the UNP was siphoning about 10% of the general fund.  If we divert 10% of funds to get 7% of GF tax revenues - is that a positive payoff?  

Fact: When we divert general fund revenues, we can't do other things - increase police force, keep up with bridge/road maintenance, etc.  

Fact: there is no evidence that relocating where OU Basketball and gymnastics competitions are played  will lead to NET new spending sufficient to generate a return on the investment to TAXPAYERS.  When the City of Lincoln Nebraska paid to build a new off campus arena with entertainment area, they did not see a change in their growth trend in taxable sales from bars/restaurants, hotels, or car rentals.   

Should Norman do it again? is the better question.  And should taxpayers get to vote on a cost that is bigger than the 15 year Norman Forward program?

[Response to Chip Minty's column in the Norman Transcript]
https://www.normantranscript.com/opinion/guest-column-can-norman-do-it-again/article_b152fa92-6208-11ee-9dd2-37c7d0a0125b.html?fbclid=IwAR3iMGjK-lQOPqzZcdIlC9Irux0mFleKCrGl4KX9XmM86qYeTOo3NMxRSvc