Kalispell considers new tax-increment district

The Kalispell City Council will hold a workshop tonight to discuss the formation of a new tax increment financing district in the area north and west of downtown.

The workshop takes place after a special council meeting.

Kalispell officials have spent two years investigating the possibility of creating a tax-increment district in the area near the Burlington Northern Santa Fe railroad tracks, west of Main Street.

Given that such districts have a finite lifespan, however, they were reluctant to create one until they had a project that would benefit the area.

Community Development Director Susan Moyer said two possible projects have been identified: One is related to the proposed expansion of Kalispell Center Mall, and the other is a 4,500-seat junior-league athletic facility.

"These projects may or may not happen," Moyer cautioned.

Either one, though, would help jump-start the district by redeveloping part of the area and by creating a tax increment.

"So now is the time to start looking at forming a district," Moyer said.

Tax-increment districts are one of the few tools available to cities in Montana to encourage economic development in older, run-down areas.

When a district is formed, property tax payments to the county and school district are capped for at least 15 years.

As redevelopment and re-assessments take place within the district, they generate additional property tax payments over and above the cap.

This incremental revenue goes to the city. It can be used only for specific purposes - infrastructure development, land acquisitions or demolition costs - and must be spent on projects inside the district.

The intent is to create a pool of money that the city can use to attract new development and redevelopment within a blighted area.

Kalispell has two active tax increment districts. One is on the west side of town, centered around Gateway West Mall; the other is on the south side, surrounding the city airport.

An earlier district in the downtown core ended in 2002. Tax-increment revenue is no longer being collected from that area.

Tonight's workshop focuses on a C-shaped district that would surround, but not include, Kalispell Center Mall.

The northern edge of the proposed district would run along Idaho Street, from Main to Seventh Avenue West. The west margin would run from Idaho south to Second Street. The south edge runs along Second Street between Seventh and Second avenues west.

The eastern boundary runs north along Second Street West to Center Street, jogs west to Fifth Avenue, then north to the railroad tracks, east again to Main Street and then north to Idaho.

"This area was in the [former] downtown district, but never got the redevelopment that the rest of downtown did," Moyer said.

Given that the proposed district doesn't include the Kalispell Center Mall property, it precludes the city from offering any financial assistance for the proposed expansion and upgrade of the WestCoast Kalispell Center Hotel.

However, Moyer said WestCoast Hospitality Corp. is also exploring the possibility of adding new retail shops or parking areas on the north side of the railroad tracks.

Anything done north of the tracks potentially would be eligible for tax-increment assistance, she said.

(WestCoast Hospitality recently announced that it had sold a 50-percent interest in the mall to Spokane-based GVD Commercial Properties. The two firms are reportedly exploring various options for expanding the mall.)

Moyer said she's also had conversations with some local investors who are considering buying a junior-league athletic franchise.

She wasn't free to say which sport, but the group is looking at building a 4,500-seat arena, with a potential capacity of 8,000 seats.

"The intention of the developers is to use this facility as a community center on a year-round basis when sporting events aren't scheduled," Moyer noted in a letter to the council.

Besides these two projects, Moyer said creating a new tax-increment district would give the city the flexibility to assist with other potential developments in the area.

She didn't specify what these other projects might be, but during the last few years, proposals have included a regional performing arts center, a new county library facility, and other possibilities.

Tax increment could be used to assist projects such as these, helping to keep them in the downtown area.

Depending on council feedback tonight, Moyer said creating a new district would require public hearings before the Kalispell City Planning Board, as well as the council itself.

A formal redevelopment plan for the district would then be created. Finally, the council would approve the creation of the district and adopt the redevelopment plan.

Although both would be affected by the formation of the district, approval by Flathead County or School District No. 5 is not required.

In theory, both entities are supposed to benefit from tax-increment districts.

The idea is that tax-increment assistance encourages more redevelopment in a blighted area than would otherwise occur. Taxable values within the district are therefore much higher when the district sunsets - meaning the county and school district eventually collect more tax revenue from the area than they would have collected if the district hadn't been formed.

It's unclear, though, whether districts really work that way.

Kalispell, for example, collected more than $30 million in tax increment during the 23-year life of the downtown district.

There's little doubt that the city as a whole, and the downtown area in particular, benefited from this financial infusion.

However, less than 10 percent of the money was used to attract new, taxable development. More than half of it went for nontaxable public infrastructure improvements. Consequently, it's questionable whether the county and school district were any better when the district ended.

School officials previously have expressed doubt about the ultimate benefit of tax increment districts.

Today's workshop takes place at City Hall. It will be held after a 7 p.m. special council meeting.

Reporter Bill Spence may be reached at 758-4459 or by e-mail at bspence@dailyinterlake.com