What did the AG advise on the ballpark assessment?

[DowntownNow]

Below is from an email from an opponent of the current ballpark assessment effort.  It would appear this was forwarded to the City Council sometime recently.  I know there is a huge push right now on both sides of the issue but the analysis of the AG's letter of advice made sense the more I read it.  In the end, the comments challenge the validity of the current assessment and the means by which the Council may act that contradicts the City Attorney's.   It also came with the AG's letter of advice but its 20 pages, if anyone would like the entire 20 page AG letter posted, let me know.  This is long enough. 

In the end, there appears to be a number of procedural errors in the way this has been done and the protections that should have been provided to the IDL property owners that object to the assessment. 

The Deputy AG that prepared the advice letter states her opinions are in conflict with the City Attorney's on a number of issues. 

Where will this all end up?  I'm guessing multiple lawsuits...led by the County.

ISSUE #1

AG Letter - Page 2 & 3

"I note, in passing, that in Exhibit "A" to Resolution 7571, Federal property and property owned by a religious organization and used primarily for religious purposes is excluded from assessment. While there are grounds for excluding federal property, Atty. Gen. Opin. 82-142 concluded that, under the Act, a municipality must include church property in a special assessment when such property is benefited by the improvement financed by the assessment."

'An "assessment" is not the same as a "tax," and governmental entities or churches that are not subject to taxation must nevertheless pay assessments for municipal improvements.'

Councilors:

If it is the Council's and the Mayor's conclusion that all downtown IDL property may be assessed as every parcel will realize a benefit from the improvement to be financed, then according to the aforementioned AG's Opinion, all church property located within the IDL must be included in the special assessment by the municipality or the assessment district is in error and the City is in violation of the Act.


ISSUE #2

AG Letter – Page 3

"special assessments must be rationally related and corresponding to the benefit conferred upon the subject property. That is, assessments must be proportionally based on special benefits to property within the district."

"the actual assessment levied against property realizing a benefit must be in proper
proportion to benefits conferred."

Councilors:

What is the "special benefit to any particular property within the district?"

By what process has the Council, as the governing body, addressed that a blanket assessment is both rationally related and corresponding to the benefit conferred upon property?


ISSUE #3

AG Letter – Page 3

"Such assessment must be determined by the city governing body before the special assessment is actually levied, and the affected property owner is entitled to a "full and fair hearing, before such board, as to all matters affecting such property, or the benefit thereto ...."

"Thus, a governmental entity such as the State, a county, or a school district has the same right as any other property owner to appear before the municipal governing body and be heard as to the extent of benefit conferred on its property, and the fairness of the proposed assessment."

"The procedures specified in statutes relating to creation of an improvement district and designed for protection of property owners must be strictly construed in favor of the property owners, and failure to follow all statutory requirements may render the entire proceedings void."

Councilors:

At the April 9, 2009 City Council meeting, wherein objections to the assessment by property owners were to be heard, several property owners had their objections silenced by Council Attorney Drew Rees based upon an incorrect legal opinion from the City Attorney.  The statute affords any affected property owner a "full and fair hearing" before the Council, not the City administration as is being recommended utilizing the Toll Agreements.  It also provides that such hearing shall include "all matters affecting property or the benefit thereto..." – thus including any protest of assessment based on the level of realized or relational benefit.

Failure to abide by the Statutory requirements designed to afford the protection of property owners "may render the entire proceedings void."


ISSUE #4

AG Letter – Page 7

Section 39-107 provides:

39-107. Notice of creation of improvement district

A. The notice as to creating an improvement district shall:

1. Contain the time and place when the governing body shall hold a hearing on the
resolution to create the district;

2. Describe the improvement to be constructed and the general location thereof; and

3. State that any interested person may ascertain in the office of the municipal clerk:

a. a description of the property to be assessed, and

b. the maximum amount of benefit estimated to be conferred on each tract or parcel of land.

"Thus, as will be later discussed, 39-107 provides the basic notice to affected property owners that an improvement district is proposed to be created, provides a description of the property to be assessed, and an estimate of the maximum benefits to be conferred on each affected parcel of land."

Councilors:

As of today, June 3, 2009, there is no statement to the maximum amount of benefit estimated to be conferred on each tract or parcel of land on file within the city clerk's office and as required by State Statute.  As Example, please see the attached "Exhibit A," the only thing on file with the City Clerk's office pertaining to individual parcels and tracts.  As indicated, this information fails to provide the maximum amount of benefit estimated to be conferred on the tract or parcel. 

As such, it would appear the City failed to provide proper notice under the statute and failed to afford the property owner of vital information they may have used to determine if the proposed assessment was in fact, rationally related and corresponding to the benefit conferred upon their property.

Had the City provided the information as required by Statute, it may have allowed a property owner the wherewithal to file an objection within a timely fashion.  Such omission would seem to be in violation of the State statute and against affording property owner protections under those statutes.


ISSUE #5

AG Letter – Page 8

Section 39- 108 provides:

39-108. Hearings on creation of district--Protests and objections

A. At the hearing of the governing body on the proposed resolution creating a district, any interested person or owner of property to be assessed for the improvement may file a written protest or objection questioning the:

1. Propriety and advisability of constructing the improvement;
2. Estimated cost of the improvement;
3. Manner of paying for the improvement; and
4. Amount to be assessed against the individual tract or parcel of land.

B. The governing body may recess the hearing from time to time so that all Protestants may be heard.

C. At the hearing, the governing body may:

1. Correct any mistake or irregularity in any proceeding relating to the improvement;
2. Correct an assessment made against any tract or parcel of land;
3. In case of any invalidity, reassess the cost of the improvement against an abutting tract or parcel of land;
4. Delete any tract or parcel of land, protested by the owner, from the district; and
5. Recess the hearing from time to time.

Councilors:

Section 39-108-4 provides that a property owner had the opportunity to protest or object to the amount to be assessed against the individual tract or parcel of land at the time of the "creation" hearing, however, this information was not provided to property owners until after the creation of the assessment district on July 10, 2008.  Property owners did not receive notice of the estimated assessment until later receiving an estimated assessment by mail. 

Section 39-108-C.1 would seem to suggest that the Council can act to correct any issue, mistake or irregularity relating to the improvement during any proceeding.  Therefore, churches could be made a part of the assessment district (as discussed in Issue #1) or the mechanism by which the assessment is to be levied can be re-addressed.

Section 39-108-C.4 provides that the City Council had the authority to "correct an assessment made against a tract or parcel of land" and "to delete any tract or parcel of land, protested by the owner, from the district."  City Legal has repeatedly informed the Council that you did not have this authority, preventing you from addressing many of the issues. 


ISSUE #6

AG Letter – Page 9

Pursuant to O.S. 39-110, "The assessment...shall not exceed the estimated
benefit to the tract or parcel of land assessed."

Councilors:

If the assessment cannot exceed the estimated benefit to the tract or parcel of land assessed, how is this calculated?  The Mayor has postulated that the real benefit is increased property value.  In real estate, property value is unique by parcel and speculative at best.  A standard, quantifiable, hard number increase cannot be provided to every piece of property across the board, therefore, how is it being determined that the assessed value will not exceed the benefit?

In the common example for a special assessment, homes along a city block are assessed the cost to improve a sewer line that will allow each home to tie in for the benefit of service.  There are 10 homes, the estimated cost is $100,000...therefore, each home will be assessed $10,000 for the improvement as they will realize a rational and proportional benefit.  How can this be accomplished based on real estate speculation?


ISSUE #7

AG Letter – Page 11

Pursuant to 39-111-B, "at the hearing, the governing body shall hear all objections which have been filed as provided in this section and may recess the hearing from time to time and, by resolution, revise, correct, confirm or set aside any assessment and order another assessment be made de novo."

Councilors:

Pursuant to this Statute, and clearly emphasized by the Deputy Attorney General, the Council has the authority (despite City Legal's opinion) to set aside the assessment as is currently drafted and create a new one by drafting and approving a resolution.  It would afford the Council the opportunity to address all concerns upfront and avoid potential litigation. 


ISSUE #8

AG Letter – Page 17

"Representatives of the City and of holders of stadium bonds urge that, if a landowner fails to challenge the creation of the district and the assessment method in the first phase, such landowner is estopped from complaining about the amount of the assessment on a particular parcel of property and a determination of the benefits conferred on that particular parcel in the second phase.  I (Dep. Atty. Gen.) disagree."

"By the plain language of 39-111 , I conclude the intent of the Legislature is to provide owners of affected property, both public and private, an opportunity to challenge the amount of benefit ascribed to their particular parcel(s) of property, and accordingly, the amount of assessment to be levied against it."

"If that is not the legislative intent and a landowner cannot challenge the amount of the particular assessment, then the landowner is left with only the ability to challenge mathematical or scrivener's errors, or the proceedings leading to the preparation of the assessment roll. Such a result is contrary to the plain language of 39-111, and leads to an absurdity. Further, a landowner might well be able to allege and prove a denial of due process or arbitrariness, on grounds the city failed to provide proof that the benefit to each parcel of land is in proper proportionate amount. See, Weston, supra."

Councilors:

Despite what City Legal has suggested and repeatedly instructed, there is protection for property owners within the Statutes to have their objections heard by City Council.  While they may not have objected to the creation of the assessment district, they are still afforded the right to object and be heard during the assessment period assuming they filed written objections which many did. 

Any lack of affording property owners that right is subject to quick reversal through litigation as opined by the Deputy Attorney General and the Council will be back at square one to reassess the situation, and by resolution, seek to revise, correct, confirm or set aside any assessment and order another assessment be made pursuant to 39-111-B.

Conclusion:

If the Statutes allow far more protection of the property owner in this matter than what is being granted presently, and the threat of pending litigation is real, based on the current formula and plan, why not take the time to re-address the issue now utilizing the authority granted under the statutes?  The Council must be independent of the Adminstration's influence in this matter as they have clearly demonstrated a bias to garner approval as the assessment is currently designed, going so far as to instruct and opine based on false legal arguments of statutes that are written in plain language.   

Forcing small business and property owners into costly litigation to defend their rights and resolve what could easily be fixed by the Council, does a disservice to those individuals as Tulsa citizens, taxpayers, constituents and the entrepreneurs Tulsa and the many administrations of City government have said downtown desperately needs.  These people helped downtown survive when others left, now in passing this, they are summarily being given the back of the hand and that is unfortunate.

Lastly, I would like to call your attention to the Deputy Attorney General's final words in her letter that had been emphasized repeatedly throughout her letter:

In response to Parties' Question #6:

Q:  Since Resolution 7593 was approved prior to the hearing provided for in 11 O.S. § 39-111 and its subsequent ordinance, does its provision in Section 2, which states: "The City shall not waive the assessment (including penalties) of any property subject to assessment under the District or the collection of any such assessment," violate 11 O.S. 39-111 to the degree it restricts the City Council's authority to "revise, correct, confirm or set aside any assessment and order another assessment be made de novo"?

A: Yes. Under my construction of 39-111(B) the governing body of the city can, and in proper circumstances should, take such action to revise assessments prior to adoption of the final assessment ordinance.

So what does everyone else think?

[shadows]

The AG made a recommendation equal to the hand washing at the trial of Jesus. 

If passed with emergency clause how is the use of the clause defined in the state statutes?

[waterboy]

I think the Mayor has made a mistake and doesn't know how to extricate herself from this mess. Frankly, she just needs to back off, devise a method satisfactory to all the parties such that a fair assessment is levied or face annihilation at the polls during the next race. People are mad and it appears they have right to be.

I was glad to see that the one glaring omission that I pointed out in earlier threads was addressed by the AG-

...a municipality must include church property in a special assessment when such property is benefited by the improvement financed by the assessment.

Inclusion of these property owners in the collection plate will help equalize benefit to cost ratios. Failure to acknowledge that this process was forced, imbalanced and possibly illegal, simply means the taxpayer will take up the slack should the city lose in a court battle.

In short, I am losing faith with the mayor.

[FOTD]

I think the Mayor has made a mistake and doesn't know how to extricate herself from this mess. Frankly, she just needs to back off, devise a method satisfactory to all the parties such that a fair assessment is levied or face annihilation at the polls during the next race. People are mad and it appears they have right to be.

I was glad to see that the one glaring omission that I pointed out in earlier threads was addressed by the AG-

...a municipality must include church property in a special assessment when such property is benefited by the improvement financed by the assessment.

Inclusion of these property owners in the collection plate will help equalize benefit to cost ratios. Failure to acknowledge that this process was forced, imbalanced and possibly illegal, simply means the taxpayer will take up the slack should the city lose in a court battle.

In short, I am losing faith with the mayor.

Great post.

Looks like you may have pinned the tail when you state, "I think the Mayor has made a mistake and doesn't know how to extricate herself from this mess"...plus, the local ward politics must have worn her down. Not good.

[Wilbur]

Once again, the Tulsa World has published the amount of money that will be raised by the assessment tax increase.  Once again, the ballpark portion is $64M+, yet the amount the city has said will go to the ballpark is $25M.  Once again, I will ask, where is that other $40M going?

[Wrinkle]

Once again, the Tulsa World has published the amount of money that will be raised by the assessment tax increase.  Once again, the ballpark portion is $64M+, yet the amount the city has said will go to the ballpark is $25M.  Once again, I will ask, where is that other $40M going?

In general terms, half of that $40M is the basic downtown services assessment ([log]rolled into the ballpark assessment). The other half is cost of financing over 30 years. But, it is interesting to note that ballpark bonds were issued at 6% or greater in a sub-5% market. That's a 20% premium over market, and cities (one of the most stable bonds) usually receive around a 20% discount vs market, so there's a 40% swing premium in the financing.

I'd be interested in knowing what default factor was used by the Mayor in predicting revenues from this assessment (tax). iow, how many downtown businesses will fail or be driven out of downtown due to this assessment (tax)?

[DowntownNow]

Wilbur and Wrinkle...under the planned assessment, the TW quoted $64 million figure is the generated assessment fee for the stadium constrcuction portion of the assessment only.  This does not include the $33.5 million that will cover the downtown services.  The assessment is based upon approximately 50million square feet of assessable footage within the IDL.  That figure does not take into account any of the church owned lands or properties that according to the Attorney General's Opinion issued in 82, must be included in any assessment district.

The amount to be assessed could have been reduced by half if the Tulsa Stadium Public Trust would have utilized the donated $30 million dollars for first expenditures, leaving only the balance of the $39.2 million for construction and the $2.8 million for land acquisition...a balance for bond issuance of $12 million.

As it stands, Kaiser owned BOK stands to earn a projected return of $47 million in interest over 30 years through its loan to the Kaiser funded and controlled Tulsa Community Foundation.  As of today, Kaiser has only donated $2 million to the Trust.  Nice $45 million return on investment. 

Remember that only the TCF was willing to purchase the bonds as a result of the way the bond agreement was written by the Trust.  Chase Bank and a private equity fund were interested but could not bid based upon the terms which were likely outside the mainstream norm, taylored to fit the TCF...evidenced by the Trusts request at the time of approval by Council to issue the bonds that if no one bid, they could approach a charitable trust.

[Wrinkle]

Wilbur and Wrinkle...under the planned assessment, the TW quoted $64 million figure is the generated assessment fee for the stadium constrcuction portion of the assessment only.  This does not include the $33.5 million that will cover the downtown services.  The assessment is based upon approximately 50million square feet of assessable footage within the IDL.  That figure does not take into account any of the church owned lands or properties that according to the Attorney General's Opinion issued in 82, must be included in any assessment district.

The amount to be assessed could have been reduced by half if the Tulsa Stadium Public Trust would have utilized the donated $30 million dollars for first expenditures, leaving only the balance of the $39.2 million for construction and the $2.8 million for land acquisition...a balance for bond issuance of $12 million.

As it stands, Kaiser owned BOK stands to earn a projected return of $47 million in interest over 30 years through its loan to the Kaiser funded and controlled Tulsa Community Foundation.  As of today, Kaiser has only donated $2 million to the Trust.  Nice $45 million return on investment. 

Remember that only the TCF was willing to purchase the bonds as a result of the way the bond agreement was written by the Trust.  Chase Bank and a private equity fund were interested but could not bid based upon the terms which were likely outside the mainstream norm, taylored to fit the TCF...evidenced by the Trusts request at the time of approval by Council to issue the bonds that if no one bid, they could approach a charitable trust.

I know you're a stickler for research and getting the facts right, but are you sure about the $64M being only for ballpark? I understood that was total collections, but haven't kept up with it lately.

If so, then the $25M costing $64M seems excessive. $25 at 6% for 30 years comes in at about $54M, with an installment of around $1.5M/mo. Now, wondering if the extra $10M is related to City Hall.

Much more savings could be achieved by timing, the whole $25M didn't need to be upfront. In fact, as you state, the $30M 'donation' should be used first.

[Wrinkle]

Actually, it all makes perfect sense when one considers this being done is not really for the benefit of the city's citizens.

[DowntownNow]

Wrinkle, yes, I am quite sure the numbers I stated are the true ones...unfortunately.  Had the Trust used the $30 million in 'donations' first and reduced the issued bond in half, it would have reduced the debt service also in half creating a far lesser burden on IDL property owners.

After reading the AG's advice, I am still of the firm belief that this BID district as is will be tossed out after pending litigation.

As a result of the illegal means of creating the assessment and the cherry picking of exceptions, more owners may now file lawsuits, no longer constrained by the guidelines of the statutes related to objection since the assessment itself through it creation can be viewed as illegal.  Mark my words, the exception of church property will come back to haunt the City and the ballpark backers since the assessment was not fairly distributed as prescibed by Oklahoma law.

[DowntownNow]

And Wrinkle, you are right...the only one's this assessment and ballpark construction are benefitting is George Kaiser who owns BOK thats providing the bond financing, and those donors that have friends and relationships with thier hand picked developers....sad really.

[Wrinkle]

Wrinkle, yes, I am quite sure the numbers I stated are the true ones...unfortunately.  Had the Trust used the $30 million in 'donations' first and reduced the issued bond in half, it would have reduced the debt service also in half creating a far lesser burden on IDL property owners.

After reading the AG's advice, I am still of the firm belief that this BID district as is will be tossed out after pending litigation.

As a result of the illegal means of creating the assessment and the cherry picking of exceptions, more owners may now file lawsuits, no longer constrained by the guidelines of the statutes related to objection since the assessment itself through it creation can be viewed as illegal.  Mark my words, the exception of church property will come back to haunt the City and the ballpark backers since the assessment was not fairly distributed as prescibed by Oklahoma law.

Having a little more trouble with the numbers.

$25M/6%/30-yr mortgage resulting in $1.5M/mo makes 50M Sq Ft cost about $0.36/SqFt/Yr.

That's less than 2.6% of a $14.00/Sq Ft Lease Rate.

Isn't the full assessment like 6.5%/Sq Ft?
Or, was it $0.065/Sq Ft?

Either way, something seems off.


btw, that extra $10M ($64-$54M) is often and typically eaten up in what's been called "cost of issuing bonds". 15.6% up front "cost of issuing bonds" would be called piracy anywhere else.


EDIT:
Slipped a digit in my mortgage calcs....$150,000/mo NOT $1.5M/Mo
And, the cost then, becomes $0.036/SqFt/Yr not $0.36. BIG difference.