Q & A

Frequently Asked Questions (and other Information) about Arena TIF Project in Norman, OK

What is TIF?

Tax Increment Financing is a way to pay for a capital project without a vote of the people. The growth in tax revenues collected in the increment district are used to pay for approved project costs. TIF funds cannot be used to pay for city, county, or school needs.

Where is the Arena TIF District?

There are two overlapping TIF increment districts in northwest Norman between Robinson and Tecumseh Roads along I-35. It extends south of Rock Creek to include 11 properties adjacent to the new Young Family Athletic Center which were in the original TIF #2 district (the Target anchored retail strip).

How much will the Arena District cost Taxpayers?

The maximum authorized tax spending is $600 Million for up to 25 years. TIF #4 grabs 100% of sales tax growth and TIF #5 grabs 100% property tax growth in the district. “The amount of total authorized collections and expenditures are $600,000,000.” (Project Plan, page 6)

How will the $600 million in tax revenues be spent?

The project plan authorizes spending $190 million for an 8,000-seat arena and 1,200 spot parking garage, $40 million on supporting public infrastructure including an events plaza, and up to $370 million in financing costs (Project Plan, page 8). The arena’s anchor tenants will be OU men’s and women’s basketball and women’s gymnastics. The boutique arena would downsize from Lloyd Noble and would be the smallest in the SEC.

What is proposed for the entertainment district?

The arena and parking structure would anchor a plaza and 140,000 square feet of retail and restaurant space (about the size of a big box store, or 1.5 blocks of Campus Corner). The TIF District is segmented for other possible uses.

Other proposed uses already existing in the vicinity, including a 150-room hotel, and approximately 500 apartment units (equivalent to the Terra and Sooner Station combined). The more speculative things would be based on market demand - up to 180,000 square feet of commercial office and additional apartments or up to 177 medium density housing units.

How much parking will there be?

The proposed parking structure would have 1,200 spots. Surrounding surface lots would also be available for events.

Who owns the land?

OU Foundation owns the land on which TIF revenues would be spent, plus additional land outside the project improvement area. The arena could be owned by a newly formed Cleveland County Trust. OU Athletics would have no ownership in the arena. The City of Norman would have no ownership control of the arena.

Who are the Developers?

OU Foundation owns the land and operates the UNP, LLC. OU Foundation has engaged Rainier Partners, a Texas developer. A Cleveland County trust has been formed to operate the arena and parking structure. The Norman Increment Finance Tax Authority plays a role in overseeing the development agreement.

If the City of Norman is not borrowing the money, who is?

The City is not taking out a loan or issuing bonds directly. The borrowing would go through a third party, a Cleveland County Trust. The City will commit revenues collected in the TIF district to pay for “development financing costs” which includes $230 million in principal plus up to $380 million in interest.

Is there such a thing as a risk free $600 million project?

NO. The development agreement states that it is a “large, high-risk venture” than can only be economically feasible with public assistance in financing $230 million in principal to build an arena (page 1). There is a high-risk that OU Foundation’s proposed goals are not achieved.

What is the risk to taxpayers?

All the tax revenues collected in the TIF district would go towards paying off the principal and borrowing costs. The city is only obliged to pay what is collected and not more than $600 million. There is no risk of spending MORE than $600 million. However, there is a risk that OU Foundation’s plans and goals are not achieved. If say $100 million has already been diverted to the TIF fund, then the city would not be able to get this back. There is no money back guarantee. There is also the risk that taxpayers spend $600 million for development that would have happened without an arena.

Will the TIF tax diversion burden the City Budget going forward?

YES! The TIF will redirect sales tax revenues, the City’s primary revenue source, to pay for an arena. The arena TIF grabs tax revenues from 11 properties south of Rock Creek. These are adjacent to already developed lots and the Young Family Athletic Center. They will develop without the arena. The city, county, and schools give up the revenue growth from these properties. Also, if the TIF attracts activity from businesses outside the TIF, then city tax revenues would also be reduced going forward. The TIF hit is estimated to be over $1 million annually after stabilization.

Will the Arena take business away from existing Norman businesses?

YES! The entertainment district is expected to a draw a substantial amount of customer spending from existing Norman businesses outside the TIF. Estimates from reports informing the project plan suggest an average of 45% of activity in the Arena TIF would have happened naturally without a new Arena.

Will the Arena TIF hurt School funding?

YES! The Arena TIF would take 100% of school taxes collected in the TIF district. A substantial share of TIF revenues would have occurred naturally, without the Arena project. A rough estimate is that the TIF project would take $100 million of school taxes away from Norman Schools. To get this number, take the $389 million in estimated property tax collections (project plan), multiply by share of property taxes that flow to schools (60%) then multiply by the projected natural growth without an arena (45% - the average of the two studies).

Why didn’t Norman Residents get to vote on the Arena Plan?

The Local Development Act does not require a public vote to establish a TIF district. A simple majority of city council (5 of 9) can create a 25 year legal obligation to spent $600 million in tax dollars on the Arena project. In contrast, bonds and sales tax increases or special purpose sales taxes require voter approval. TIF is a mechanism for getting around a public vote.

What is a Referendum Petition?

Citizens have the right to bring to a vote a legislative action of their city. If enough signatures are collected from registered Norman voters, the TIF Project Plan ordinance would be put on a ballot as early as February. The non-profit, Oklahomans for Responsible Economic Development, is spearheading the referendum petition initiative. For more information see responsibleok.com.

Want more information?

Professor Cynthia Rogers has a blog with analysis and commentary about TIF and school funding: https://tif-ed.blogspot.com. Professor Rogers is a Norman resident and professor of Economics at the University of Oklahoma. She specializes in local economic development, public finance and program evaluation.