THE OIL FACTORAND ECONOMIC INSULATION
2016 HAS BEEN A YEAR of uncer- tainty for oil-based metro economies like Oklahoma City, and as oil prices fell throughout 2015 and into early 2016, the preemptive bloodbath got pretty nasty. Analysts predicted that Oklahoma City and other oil-based economies, like Houston, could spiral right into a freefall if oil prices did not solidify soon. They also threw in jabs about fracking, and in February, a number of local employers in Oklahoma City did warn that they were packing up shop and either cutting jobs or moving elsewhere. Despite these setbacks, however, the Oklahoma City housing market has con- tinued with relatively steady growth and may actually represent opportunity for a careful, savvy real estate investor willing to do his or her research and only buy when the time and the property are right.
tives for residents in the area. Furthermore, a change in oil price trajectory could shore up the economy before it slides too far. Even better, most experts appear to think that the worst for oil may be over. With oil prices now rising once more, albeit still far lower than peaks from a few years ago, sentiment in the city and globally about oil is far more positive than it has been. One energy investment portfolio manager recently went so far as to reassure “CNN Money” that we have “reached a bottom in oil.” At a 13-year low of $26.05 a barrel at mid-February, that certainly seems possible, but by the end of the month, oil prices had spiked 30 percent after Saudi Arabia, Russia and other producers agreed to temporarily and tentatively freeze output. Simply improving market sentiment—even without dramatically changing market
First, any investor considering Oklahoma City needs to deal with the elephant in the room: oil prices. It is undeniable that falling oil prices have a negative effect on Oklaho- ma City’s economy. In February 2016 alone, three separate companies cut more than 1,000 jobs in the area due to downsizing, although arguably only about half of those jobs were linked directly to oil prices. The good news is that in today’s metropolitan, oil-based economies the “insulation period” for housing when oil prices fall extends nearly two years. When homeowners lose their oil- and energy-re- lated jobs or experience financial difficul- ties because of oil prices, they do not tend to immediately experience disaster. While Oklahoma City’s large economy is indisputably tied to oil, there are alterna-
URBAN PLANNING AT ITS FINEST: A Brief History of MAPS
I n 1993, Oklahoma City debuted its public-private capital improvement program known as the Metropolitan Area Projects (MAPS). The program has gone through three incarnations since that time (MAPS, MAPS for Kids and MAPS 3), and all three receive funding from a self-imposed, regularly reapproved one-cent sales tax on the city’s resi- dents. The final project of the current MAPS incarnation, MAPS 3, is scheduled to be completed in 2021. MAPS has a stellar history of self-regulation and has not ever extended a sales tax beyond the initial projection and still has been able to complete projects past the termination of any one sales tax. All MAPS projects are built debt-free in order to avoid burdening future taxpayers. Twenty years after the program’s debut, the Oklahoma City Chamber of Commerce commissioned a study to explore the effects of the MAPS program on the city. In addition to tangible additions to the skyline and infrastructure, such as Bricktown Ballpark, the city’s motorbus Trolley Transit System, the Brick- town Canal, the Cox Business Services Convention Center, the Ford Center Arena, the Civic Center Music Hall and a city Li- brary/Learning Center, the MAPS program has been credited with massive retail and hospitality services growth in the area. For example, the commission determined that the Oklahoma City Health Center, multiple new downtown hotels, entertain- ment venues, office buildings and a Bass Pro mega-sporting goods store were all directly tied to employment opportunities
and the rising attraction of the Oklahoma City downtown area. Of course, it is easy to lay claim to this type of development and more difficult to back that claim up. The Chamber of Commerce used a system by which it identified influxes in the population of what it called “the creative class” and “sophisti- cated consumers of place” in addition to economic models to directly tie MAPS to secondary and tertiary growth. The present manifestation of MAPS, MAPS 3, has a vot- er-approved tax duration of seven years, from 2010 to 2017, and was approved in December 2009. Construction does not begin until funds are already in place, so construction duration will last from 2012 to 2021 with a total budget of $777 million. MAPS 3 projects include improvements and additions to the convention center, a downtown public park, modernization of the streetcar and transit systems in the area, improvements to the Oklahoma State Fairgrounds, Senior Health andWellness facilities, Oklahoma River improvements and maintenance and addition of hiking trails and sidewalks. Investors can certainly rest easy knowing that the municipal government is, insofar as any government can be considered reliable, demonstrating a long-term and effective dedication to improving the location of that investor’s real estate invest- ment. Any local government that displays such dedication and commitment to debt-free development in a productive and trackable manner deserves commendation and consideration when you evaluate where to place your investing dollars.
108 | think realty magazine | may :: june 2016
Made with FlippingBook Online document