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.