Several downtown property owners, angry that they were denied the ability to complain or challenge the amount of the baseball stadium assessment, filed suit against the City of Tulsa, claiming the only issue they could challenge was the accuracy of square-footage calculations.
Part of the assessment, which runs until 2039, will fund $25 million of the $39.2 million construction cost of the ONEOK Field for the city’s Double A baseball team, the Tulsa Drillers.
A $25 million revenue bond, issued in December, will be repaid by the assessment fee. The first bond payment is in November.
The lawsuit claims properties of the plaintiffs will not benefit or benefit only a fraction from the assessment. It constitutes taking of their respective properties without just compensation, according to attorney Kent Morlan, who is volunteering his time on the part of the property owners.
“We believe the process is unfair,” Morlan said.
The City Council OK’d the fee on June 4. The fee jumped from 3 cents and requires the hundreds of property owners within the Inner Dispersal Loop to pay the new 6.5 cent annual fee, not just on the land they occupy but also on the buildings that sit on the property — a duplication of the footprint created by the buildings, opponents say.
“This case has more legal warts on it than a dill pickle,” Morlan said. “And I am going to use every one of them.”
ONEOK Field, located in the northeast corner of the IDL, benefits properties surrounding it, Morlan said. Yet property owners located more than a mile away are being hit with the fee while property owners immediately north of the highway are not subject to the fee.
“Using the IDL is arbitrary and capricious,” Morlan said. “Some of these property owners are being dinged pretty hard.”
Citing a 1,000-percent increase in property assessment, Morlan said the assessment is not just unfair, it is unconstitutional.
Tulsa County and the City council sought a legal opinion from Oklahoma Attorney General Drew Edmondson. The AG’s office only offered “advice” on May 22 that assessments must be proportionate to benefit. Tulsa County, which at first objected to the annual assessment, saying county properties did not stand to benefit from construction of the ballpark, did agree to pay $159,782 for the 11 properties within the IDL. The Tulsa City/County Library at Fourth Street and Denver Avenue, will be assessed $14,203 for the 135,000-SF building and the two acres the library occupies.
The city has ruled that any protests to the assessment had to be made during a two-week period last July after the City Council created the assessment district.
City spokesmen declined to make any comment on the lawsuit.
“Assessing properties farther away from the ballpark is not logical,” Morlan said. “The city will have a difficult time proving property a mile away from baseball stadium will have any benefits.”
Two-thirds of the total, 4.3 cents, goes toward construction of the ballpark. The other third, 2.2 cents, pays for landscaping and sweeping downtown.
Other property owners support assessment and declined to join the lawsuit.
Victor R. Wandres, director of leasing for Kanbar Properties, 15 E. Fifth St., Ste. 2400, said the company’s assessment jumped 75 percent and that Kanbar will end up paying about $6 million over the next three decades — a fourth of the $25 million total.
“We are not involved in the lawsuit,” Wandres said. “I know nothing about the lawsuit.”
Kanbar Property Management represents 15 buildings and more than 2.2 million SF of office and retail space. It is the largest property management company in downtown.
“We support the assessment. It does mean a steep increase for our properties, but our properties are centered around the former Bartlett Square area and we were paying on the higher side of the previous assessment anyway,” Wandres said.
Pay It Forward
Some downtown building owners say one of the problems with the new fee is that property owners are limited in how much of the added cost they can pass onto tenants.
Much of the increase will be shouldered by the owners, Wandres said.
“It depends on the lease,” Wandres said.
Kanbar owns the Arco Buildings, 119 E. Sixth St., which have not had a tenant since the 1990s.
“It is a great art deco treasure,” Wandres said. “But there is no one to pass those costs onto.”
Wandres said he was paying attention to how the city services portion of the agreement would be managed. The city’s contract with Downtown Tulsa Unlimited ended June 30, and Tulsa contracted with Oklahoma City-based Unlimited Sweepers and Cleaners LLC.
A new downtown coordinating committee is expected to oversee the maintenance and cleaning.
“We are concerned about who will be in control of the services portion, how that is going to work and who will hold onto the purse strings,” Wandres said. “I hope it will be the ones paying into the system.”
Either the tenants or landowners ought to be in control, he said.
“They are the best ones, we believe, who can shape how services should be split up,” he said.
Morlan argues the city made a bad legal decision to go forward with the creation of the trust, sale of the bonds and signing of the contract with Manhattan Construction without regard to litigation.
“What will the City Council do?” Morlan said. “They let the state Supreme Court decide it. In the end, their side will prevail and my people will have to pay — or my side prevails and this legal house of cards collapses. They will have to come up with some mechanism to pay for the bonds. Will they try to transfer that loss back to the city like they did with Great Plains Airlines?”
Great Plains Airlines, a Tulsa-based regional airline with a hub in Oklahoma City, was founded in 2001. It filed bankruptcy three years later after a bid for assistance through the Air Transportation Stabilization Board was rejected. The city was liable for several million dollars in bonds.
“People are saying what the city is doing is wrong,” Morlan said. “They are seeing a 30-year mortgage on their property.”
Unfair does not mean unconstitutional, however.
“It tends to,” Morlan said. “But it does not mean these people will win. The courts are the courts, and they make their own decisions based on their values.”
Good for Downtown
Wandres believes in the future and waves off the idea the assessment will be a detriment to growth.
“Oh, quite the opposite,” he said. “With the BOK Center, construction started on the ballpark, people are excited about downtown.”
Progress on Vision 2025 projects at the Mayo Hotel and the Mayo Building are adding residential housing, adding 140 lofts to the residential mix. The Philtower remains near 100 percent occupancy. Interest in pre-leasing at both Mayo locations is higher than expected.
“The whole Fifth Street corridor is experiencing growth,” he said.
Is downtown approaching a critical mass?
“I hope so,” Wandres said. “We are running out of retail.”
Wandres mentioned a start-up restaurant/deli, Buns and Roses, at 111 W. Fifth St., Ste. 100, and Standley Systems Standley, a Chickasha-based copy machine business going into the former IBC bank location, also at 111 W. Fifth St.
“Tulsans are resourceful. They are ready for a change. They have seen the great things that the BOK Center has brought us,” Wandres said.
Kanbar is not in the development business exactly, but is working on growing the population.
“We want to entice larger tenants to relocate from outside the state,” he said. “This is a slow process and not a great time, with the state of economy. But over the next five years we hope to encourage more moves to downtown and to make it a very small business friendly community.”