DUNCAN – A proposal to establish a tax increment financing district near the intersection of Plato Road and U.S. Highway 81 has won first-round approval from the Duncan Planning Commission.
The commission voted unanimously Thursday to recommend moving forward with the proposal, which will be submitted to the Duncan City Council for review.
The council will host the first of two public hearings on the subject during Tuesday’s meeting, set for 5:15 p.m. in the council’s chambers. The second public hearing will take place June 9.
City officials have proposed creating a TIF district on the property north and east of the intersection of Plato Road and U.S. 81, according to information from City Hall. The zone would not include the First Bank and Trust Co. site on the northeast corner of the intersection.
A developer has already approached the city about the potential of turning the property near Plato Road and U.S. 81 into a commercial hub, which lines up with the city’s interest in expanding its retail base, said attorney Nathan Ellis with the Oklahoma City-based Public Finance Law Group. He said developers in smaller markets or their investors typically expect a certain rate of return on their investment, which is often difficult to achieve.
As a result, those communities must decide whether to offer developers some kind of incentive package or see them take their project to another city, Ellis said.
“So, that’s really the purpose of this TIF district is to put together a structure so that the city can offer what the developer has identified as the necessary incentive in order to make this project be able to come to fruition,” he said.
Economic development
A tax increment financing district, commonly known as a TIF district, is an economic-development tool used to promote capital investment in undeveloped or underdeveloped areas. The city uses part of the property and sales tax revenue generated by businesses in the district to pay for public improvements and other eligible projects in that zone.
The government entity that establishes the TIF district borrows money to invest in the development, typically through either financial incentives or public improvements, according to the Oklahoma Department of Commerce. The loan is repaid with part of the tax revenues generated by the district.
Once the loan is repaid, the TIF district ends and its tax revenues are distributed among the taxing jurisdictions that were affected by the district.
The city would capture 90% of the sales tax revenues generated by the TIF district and 50% of the proceeds from district-related property taxes, otherwise known as ad valorem taxes, Ellis said. Those dollars must be spent on TIF-related projects, such as public improvements within the district.
The remaining 10% of sales tax revenues from the district would be allocated to the city for other purposes spelled out in the city’s sales tax ordinance, Ellis said. The remaining 50% of property tax revenues would be divided among the entities affected by the district, which are Stephens County, the Stephens County Health Department, Duncan Public Schools and the Red River Technology Center.
City officials estimate that the TIF district would last for 16½ years and would generate approximately $24.5 million in tax revenues in that time. But the city could dissolve the district earlier if it generates $18.3 million, which is the amount of the proposed incentive package for the project, before 16½ years elapses.
The balance of the $24.5 million – roughly $6 million – would be returned to Stephens County and divided equally among the taxing jurisdictions affected by the TIF district, Director of Community Development Nate Schacht said in an email.
Attracting developers
Fifteen major retailers have expressed interest in opening a store in Duncan, but the city has nowhere to put them, said City Manager Chris Deal. He said establishing a TIF district is the first step toward attracting retail developers and revitalizing the U.S. 81 business corridor.
“We don’t have a chance to attract that type of investment unless we put something in it ourselves,” Deal said. “And for us, the TIF district is the most pragmatic way to financially accomplish that.”
Eric Swanson is an award-winning journalist with more than 20 years’ experience covering local government and criminal justice in Oklahoma, North Dakota and Kansas. He can be reached at eric.swanson@swoknews.com