City of DEL CITY: Funding flood hazard remediation using tax increment financing (TIF) 2012 OFMA Annual Conference FLOOD RESILIANCE: The New Face of Floodplain Management September 18, 2012 Tulsa, OK

Overview This presentation details the use of Tax Increment Financing (TIF) under the Oklahoma Local Development Act as a funding mechanism for flood hazard remediation. A brief overview of the Local Development Act outlines the basics of Tax Increment Financing in Oklahoma. A real world case study is presented that shows how TIF financing was used to remediate flood hazards on Crutcho Creek and Crutcho Creek Tributary B. While this remediation activity paved the way for creation of a commercial mixed-use development at I-40 and Sooner Road, it also had positive impacts in adjacent areas and dramatically decreased real world flooding. This presentation also previews Del City’s Increment District #2, which has been approved to remediate blighted conditions on property at I-40 and Scott Street, including flood hazard related to Crooked Oak Creek.

What is Tax Increment Financing? Tax Increment Financing (TIF) is an economic development tool used to direct public funding to remediate certain conditions that keep a property from being developable to its full potential. The funding source is known as a “tax increment”, or the increase in tax collections from a given property as a result of development or redevelopment. Because tax increment financing relies on the generated increment, not the total tax collection, it is revenue neutral to taxing jurisdictions. In Oklahoma, communities are authorized to use Tax Increment Financing by the Oklahoma Local Development Act.

Oklahoma Local Development Act The Local Development Act (62 O.S. § 850 et seq.) allows for creation of an increment district and apportionment of tax increment revenues to foster development “in those cases where investment, development and economic growth is difficult, but is possible if the provisions [of Tax Increment Financing] are available.” Cities, towns and counties may establish districts and create project plans, issue bonds or notes, apportion current and future tax revenues, enter in to contracts with developers, acquire and dispose of property, clear and improve property and construct or contract for public improvements.

Oklahoma Local Development Act (cont’d) Areas within an increment district must be either a reinvestment area, a historic preservation area, or an enterprise area. “Reinvestment area means any area located within the limits of a city, town or county requiring public improvements…to reverse economic stagnation or decline, to serve as a catalyst for retaining or expanding employment, to attract major investment in the area or to preserve or enhance the tax base…” (62 O.S. § 853) The Local Development Act sets forth specific steps that must be taken by the local government when creating an increment district. These steps include consultation with all other affected taxing jurisdictions (relevant when ad valorem taxes are being pledged) and a number of public hearings.

Structure of Del City Increment District #1 Del City Increment District #1 is structured using sales tax increments, use tax increments and hotel/motel tax increments as the funding source. Uniquely, no property tax increment is being used to fund the development. The TIF District’s Project Plan calls for ½ of the sales tax (3.5%), all of the use tax (3.5%) and ½ of the hotel-motel tax to be dedicated to repayment of notes issued for the cost of the remediation and public improvements. The ½ of sales tax is actually designated as 7/8ths of the general (non-dedicated) sales tax and none of the limited purpose sales tax.

Structure of Del City TIF (cont’d) The TIF did not require upfront payment or bonded indebtedness from the city. The Redeveloper expended funds to pay for the public improvements and was issued notes upon completion. The TIF notes are repaid solely from the tax increments generated by the development. The maximum repayment time is 25 years. If funds collected from the tax increments are insufficient to repay the notes within 25 years, the notes will not be repaid. If funds collected from the tax increments are greater than expected, the notes will be repaid faster. No city revenues are pledged to repay the notes other than the funds collected from the tax increments.

Large parcel of undeveloped land at I-40 and Sooner Road. Del City TIF District 1: Crutcho Creek Floodplain Remediation Project Plan Large parcel of undeveloped land at I-40 and Sooner Road. Commercially attractive due to interstate frontage and proximity to Tinker AFB. Undevelopable due to floodplain issues.

TIF 1: Pre-project Conditions

TIF 1: Project Plan

TIF 1: Flood Risk Remediation Measures Channelization of main channel of Crutcho Creek. Rechannelization of Crutcho Creek Tributary B, including straightening and relocation. Creation of mitigation measures required for 404 Permit, including siltation pond and some habitat restoration. Creation of a 25 acre pond for flood storage. Outlet/inlet structure and bypass channel allow water level in pond to match water level in main channel of Crutcho Creek once above normal flow. Pond ranges in depth from 3’ to 7.5’.

TIF 1: Effects on Flood Hazards Extent of floodway was significantly reduced. SFHA was nearly eliminated in development area and markedly reduced in neighborhood. Actual flooding has been nonexistent at Vickie street bridge.

TIF 1: LOMR

TIF 1: Effects on Adjacent Properties LOMR removed all of the commercial development, 34 houses and a middle school from the SFHA, with 19 of the homes having been removed from the floodway. Subsequently, a number of parcels have been removed by LOMA based on the revised BFEs.

TIF 1: Current Project Status

Del City TIF District 2: Eagle Point Apartments Remediation Project Plan TIF District seeks to remediate blighted apartment complex and vacant floodprone land. Project Plan calls for creation of a hotel and convention center and retail sites. Location is I-40 and Scott Street, at the I-40/I-35 Junction.

TIF 2: Pre-project Conditions

TIF 2: Project Plan

TIF 2: Planned Flood Risk Remediation Measures Channelization of Crooked Oak Creek and installation of in-channel storage. Installation of stormwater detention facility to serve existing impervious surface (apartments), planned impervious surface (site redevelopment plus development of currently vacant area), and to collect stormwater from upstream neighborhood and prevent it from entering the creek during peak flow. Will require 404 Permit and CLOMR. Will also require coordination with City of Oklahoma City.

Conclusions Tax Increment Financing can be a viable tool for flood hazard remediation in situations where flood-prone land is being developed or redeveloped. Benefits of risk reduction within the TIF District can impact the entire community, not just the project area. Floodprone areas are easily classified as “blighted” and thus eligible for tax increment financing under the Oklahoma Local Development Act. The Local Development Act permits a number of funding sources to be used to remediate blighted conditions, including property (ad valorem), sales, use and hotel/motel tax increments.

Questions? Tom Leatherbee, MCP, AINS, CCEA, CFM Director of Community Services City of Del City 3701 SE 15th Street Del City, OK 73115 (405) 671-2803 tleatherbee@cityofdelcity.org