POSTED ON APRIL 22, 2009:
Who's on First? What's on Second?
And now two foul balls appear to hinder the city's dreams of a downtown stadium
Two pieces of news last week may portend the unraveling of an overly complex deal to build a new minor league baseball stadium in downtown Tulsa. The first is the addition of the City of Tulsa as a defendant in a suit involving urban renewal land adjacent to the ballpark site. The second is passage of legislation that would cut a large chunk out of the Stadium Trust's expected $25 million in assessment revenues.
For the record, I'm happy the Drillers are moving downtown, and the location, connecting the Brady Arts District, the Blue Dome District, Greenwood and the OSU-Tulsa campus, is just about the best they could have picked. With nearly 70 home dates per season and a view of the skyline, the stadium should work well with nearby businesses to generate synergy that brings Tulsans downtown, connecting north, south, east and west Tulsa to the city's center.
But I'm not at all happy with the way the deal has been handled, from the hurry-up pressure on the City Council, to the secrecy surrounding the donors and their designs on land surrounding the ballpark site, to the outlandish provisions of the Stadium Trust indenture, to the reprehensible treatment of Will Wilkins, the developer whose company had an exclusive negotiating position (so he thought) on Tulsa Development Authority (TDA) land across the street from the site.
The week's bad news for all of us downtown ballpark backers could have been avoided had Mayor Kathy Taylor and the donor group focused on building a ballpark, rather than trying to control the surrounding property as well.
Last fall Novus Homes LLC, W3 Development LLC, and principals of the two companies--Will Wilkins and his mother, Cecilia Wilkins--filed suit against Tulsa Development Authority for breach of contract involving TDA's termination of the exclusive negotiating period with Novus Homes LLC for redevelopment of the vacant the half-block west of Elgin Avenue between Archer and Brady Streets. Novus Homes planned a lofts and retail development on the site, which is now part of the land the stadium donors plan to redevelop in connection with the new downtown stadium for the Tulsa Drillers.
Last Tuesday, April 14, the plaintiffs expanded their suit to include the City of Tulsa as a defendant, citing actions by Mayor Kathy Taylor which, the plaintiffs allege, were unlawful and resulted in the TDA's premature termination of their exclusive negotiating period for the land.
(Now that the City's a defendant, does this mean that Taylor can offer to settle with the Wilkinses for $7 million like she did for BOk in the Great Plains Airlines suit?)
The amended petition states: "Beginning in late May, 2008, City of Tulsa Mayor Kathy Taylor began inserting herself into TDA operations related to this downtown Tulsa location, without TDA approval. The TDA viewed Mayor Taylor's interference as 'irregular,' and TDA Commissioners were 'concerned' and 'surprised' by her 'irregular' interference in their operations." The statement cites the November 11, 2008, deposition of TDA Commissioner John Clayman.
The petition goes on to allege that Taylor was "personally renegotiating and amending existing TDA contracts" without the TDA's authorization, effectively usurping the role assigned by state law to the TDA commissioners.
There's an indication of this in the agenda for the June 27, 2008, special meeting of the TDA. Item 2 involves ratifying a contract amendment between TDA and the Greenwood Community Development Corporation (GCDC), an amendment executed by the head of the GCDC and "the Mayor of the City of Tulsa on behalf of the [TDA]."
GCDC had a contract with TDA to buy the site for a mixed-use development. Did Taylor cut a deal with GCDC to free up the land for the ballpark without prior authorization from TDA, taking it to TDA for approval as a fait accompli? If so, it would seem (in my opinion) to contradict Taylor's reported public statements that she has never given direction to TDA.
The U.S. Department of Housing and Urban Development (HUD) just recently smacked Tulsa for entanglement between city and TDA in the administration of federal block grants. Now it seems that city government is in danger of another spanking, this time via the state court system.
Curve Ball, Catches the Corner
The second piece of bad news for ballpark backers was the State Senate's passage on Thursday, by a 47-1 vote, of a Senate committee substitute for HB 1424. The Senate version, authored by Sen. Randy Brogdon (R-Owasso), makes property owned by the state, any county, or any charitable nonprofit exempt from assessments for an improvement district.
The change strikes at the heart of the ballpark financing plan. The new stadium and surrounding development is to be funded by $30 million in donations, $25 million from an assessment on property within the Inner Dispersal Loop and $5 million in lease payments. According to a presentation on the City's Web site, $5 million of that will come from assessments on property owned by the state, the county, the city and their agencies, money that will ultimately come out of taxpayers' pockets.
By my calculations, assessments on state and county agencies account for nearly 8 percent of the total.
Assessments are like taxes, in that they are imposed and collected by government, but while taxes are meant to fund facilities and services for general benefit, assessments are intended to finance facilities and services that benefit the specific property owners who pay the assessment.
In the olden days, that's how streets, sewers and sidewalks were financed. The cost of the improvement was divided among the owners who directly benefited from it, based on street frontage or some other measure of proportionate benefit.
State law (the Improvement District Act, Title 11, Article 39) authorizes cities to create improvement districts. Tulsa currently has two improvement districts with special assessments: Downtown Tulsa and Whittier Square. The current downtown improvement was created in 1981 to maintain the no-longer-extant pedestrian mall and to provide general services for downtown, such as security, shuttles, landscape maintenance, and sidewalk and street cleaning. The assessment was based on square footage and proximity to the Main Mall.
Oklahoma City uses a similar approach to calculating proportionate benefit for its downtown improvement district, which encompasses five sub-districts (Automobile Alley, Bricktown, Central, Civic/Cultural, Deep Deuce), each with its own assessment rates.
The OKC formula is based on the property's assessed value (which is always zero for government and non-profit property) and frontage on the street and on amenities like streetscaping. Two amenities bring higher frontage rates: the Bricktown Canal and the underground walkway system.
State, county and city agencies and non-profits pay the frontage-based assessments. State law exempts Federal property and property owned by religious organizations and used primarily for religious purposes.
The key is that the assessment must be proportionate to the benefit. Those advocating an exemption for county and state property point out that the existence of a ballpark won't provide any benefit to the county jail or the state office building.
Even if Brogdon's amendment dies in conference committee, there are potential legal and constitutional problems which could undermine the assessment entirely, leaving the stadium trust without a source of revenue to repay the money it's already borrowed to build the ballpark.
Unlike a street or a sidewalk, a ballpark provides no direct benefit to owners of assessed property. At best, a nearby owner of commercial property might hope to command higher rents or to sell for a higher price, but that benefit is speculative, indefinite and somewhere off in the future. Any benefit for owners on the other side of downtown is even more speculative and remote.
Contrast that with a new street or a shared parking lot, which would provide an immediate and tangible benefit to the assessed properties.
By not corresponding to a definite benefit to assessed properties, the ballpark assessment may violate principles established in past Oklahoma and U. S. Supreme Court rulings about special assessments.
Imagine this: Suppose someone at the opposite end of your street, a mile away, wants to build a backyard pool. He's got pull at City Hall, so he convinces the city to assess everyone on the street to pay for it. You won't be able to use the pool unless your neighbor lets you in, and even then he'll charge admission. The justification for making you pay is that the pool adds value to the big-shot neighbor's house which indirectly improves your property value.
In their lawsuit against the city and the mayor, E & F Cox Family Trust et al v. City of Tulsa and Kathy Taylor (CJ-2008-4850), a group of downtown property owners argue that a similar sort of inequity exists with the stadium assessment. If the court finds in their favor, the entire stadium assessment could vanish. Without a source of revenue, who would be liable to repay the bonds that have already been issued?
All of these problems could have been avoided if ballpark backers had been content with building a ballpark. It wasn't necessary to burden downtown property owners with an assessment. It wasn't necessary to squeeze the Wilkinses out of a chance to build their loft development. The $30 million raised by the donors combined with $5 million in lease revenues would have been sufficient to build a perfectly pleasant stadium. A special zoning district, like the one in Oklahoma City's Bricktown, could have ensured compatible development in the surrounding area without the stadium trust acquiring the property.
Last week the City Council asked the District Attorney to ask the Attorney General for an opinion on the many legal issues surrounding the stadium assessment, before they approve the assessment roll. That's good, but it would have been better if a majority of councilors had insisted on getting answers to those questions before approving the assessment district last July.
One can appreciate the initiative to make something nice happen for downtown and the difficulty of putting a deal together quickly. But legal safeguards are there for a reason. Officials appear to have cut corners at their--and our--own peril.
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