Oct. 19 – A proposal that would allow the creation of new taxing districts that could help cities finance infrastructure improvements – if all property owners within the district agree – will be decided by voters participating in the Nov. 5 general election in Oklahoma.
State Question 833, which was put to a vote by the Legislature, would amend the Oklahoma Constitution to allow cities to create public infrastructure districts that can be used to pay for roads, sidewalks and parks, as well as water and sewer improvements.
Supporters say the measure could help developers with the costs of building housing subdivisions, especially in cities that may not have the bonding capacity to help pay those costs.
Opponents say the proposal is vague because it does not define public infrastructure and lacks sufficient safeguards.
State Question 833 needs a simple majority to pass. If passed, it won’t take effect until at least next year, as lawmakers plan to fill in the details with legislative guidance during the upcoming session, which begins Feb. 3.
For that reason, the Oklahoma Municipal League is staying out of the political fray, said Leslie Blair, director of legislative affairs and communications.
“We have not taken a position on 833 in any way, nor are we against it, nor do we support it, but we are aware of it and we will see what happens,” Blair said. “If successful, we will be involved in further discussions about the guardrails and definitions to be put in place. So it is something we are looking at.”
Senator John Haste (R-Broken Arrow) authored Senate Joint Resolution 16, which designated SQ 833 for a popular vote. SJR 16 easily passed both chambers: 38 to 7 in the Senate and 66 to 27 in the House of Representatives. Haste said lawmakers last session considered drafting legislation that would have included regulations and other details.
“But the decision was not to do it, to dig into all the details until it was actually over,” Haste said in an interview.
If SQ 833 is approved by voters, 100 percent of landowners in one part of a municipality could petition the city to create a PID to fund infrastructure in that area. If approved by a city council or city commission, the PID could issue bonds to finance infrastructure projects in the area. The bonds would be repaid through a property tax assessment of up to 10 mills on the properties in the PID. (A “mill” equals $1 in taxes for every $1,000 in taxable property value.)
“We put some things in there, like up to 10 million, because this is present in Missouri, Texas, Utah, Colorado, where they used this,” Haste said. “And we felt like that was one of the safeguards or guardrails that we wanted to put in place, is that the most you could do would be 10 mills.”
Haste said Oklahoma has a housing shortage across the state. One of the main barriers to new housing construction is the need to include critical infrastructure. PIDs would help cities finance needed infrastructure, he said.
“It’s another tool in the tool belt to help the state as we grow — to be able to use it for housing, but it’s also something that gives a choice,” Haste said. “It will help us as we grow, as I say, as a state, but it gives you a lot of options. And like I said, if someone doesn’t want to participate, if they don’t have to, and if they want to, there’s an opportunity.”
While SQ 833 sounds promising, voters should be cautious, said Rep. Andy Fugate (D-OKC), who posted a video on Facebook criticizing the measure.
“It proposes a new tax district and (authorizes) a new property tax to fund public infrastructure within that district. Unfortunately, the state question does not define public infrastructure,” Fugate says in his video. “Without guardrails, this state issue is an easy trick that produces a handful of profits at the expense of the rest of us. Just imagine that.’
As proposed, a PID could be used by one or more developers on a piece of land within a municipality who want to implement a property tax to cover bonds for infrastructure projects on that piece of land.
“It could be roads. It could be trails. It could be sidewalks, water, wastewater, things like that,” Haste said. ‘Especially in cities that are growing a lot, they may or may not have the connecting capacity to help with this. So what they can do is go to town. First of all, it has to be in a So if it’s not built in, it can’t be used.”
The developer or developers would ask the city to set up a PID that would allow bonding.
“Then they would have to submit a variety of documents in support of this, as well as the governing documents related to the bond and so on,” Haste said. “And if the city approves it and allows them to move forward, what would happen: you’re going to buy a lot within that project to build a house. (…) So here they will tell you that, okay , now we have this tire and so you will be rated so many mills.
Haste said a $10 million appraisal on a $300,000 home would be about $300 a year.
“Now you’re told this and you say, ‘Well, no, I’m not interested in paying that,’” Haste said, noting that a future parcel owner could simply decide not to buy the parcel.
Property owners outside the PID would not have their property tax bills affected, he said.
“It’s only those who benefit from the amenities, those who benefit from them are the ones who pay for them, not anyone else,” Haste said.
PIDs can also be used in existing developments, he said.
“Maybe sewage or water, something needs to be replaced, or there are roads and so forth that the development is responsible for,” Haste said. “What they can then do is potentially bond to pay for that. But in that case they would have to get 100 percent buy-in from every surface owner within that project. So even someone could say, ‘No, I’ll do that not.’ want to do that,’ and that wouldn’t happen. So that’s when I talk about choice. You should have the choice to participate or not.”
A PID wouldn’t work in a subdivision where the city is responsible for things like streets, water, wastewater and sidewalks, he said.
“Where I do see it is you’re in a development, and the development is responsible for those roads, or those sidewalks, or whatever, or they want to add things, and that’s where I could see there being a is done, because they’re going to have to pay for it anyway,” Haste said. “And so, being able to build a bond makes it a little more enjoyable for them. It is not against the city’s capacity, and the city does not guarantee payment.”
Relying on lawmakers ‘with a promise to do things right’
In an interview, Fugate said it’s easy for voters to misinterpret State Question 833 by assuming it creates guardrails that don’t actually exist, such as the assumption that “public improvements” mean infrastructure for the general public.
“That’s just not the case,” he said. “A developer could use this to build amenities – you know, a park, a pool, a golf course – within an exclusive community. And while they meet the definition of a “public improvement,” they are not available to the general public. audience, per se,” Fugate said. “It would be trivial for them to do that if a developer were to buy the entire area that would be part of that public infrastructure district. That means the petition comes from one person.”
That one developer, or one person, would still have to get approval from a city council or commission.
“But that city council could be swayed by the argument that they’re going to have this high-end exclusive community as the crown jewel for the larger community,” Fugate said. “And so then they would sign that.”
Fugate said another concern people have about SQ 833 is that those who live in a PID — homeowners who pay more property taxes than other city residents — could be less likely to vote for other property tax proposals, such as school district bond issues.
Additionally, Fugate said voters should be skeptical of SQ 833 because it means the Legislature is getting involved in the details.
“Voters don’t trust the Legislature with their money,” he said. “And they certainly don’t trust lawmakers with a promise to do things right.”
Fugate said he doesn’t think PIDs would provide much help in developing housing for low-income residents. It seems impractical that low-income residents would move to a development or subdivision with higher property taxes, he said.
“If we’re really interested in developing housing options for low-income people, we need to look at two things,” he said. “No. 1, we should be looking at additional tax credits that could be used to make that happen. And we should be looking at ways to prevent corporate purchases that are driving up the cost of housing today.”
