Tread carefully toward tax district

Does the city of Kalispell need another tax increment financing district?

That's the latest multimillion-dollar decision facing the Kalispell City Council.

The proposal on the table is to create a district on three sides of Kalispell Center Mall west of Main Street. The district would over time generate a special revenue pool for infrastructure improvements, site clearance and other incentives intended to encourage private investment.

Two possible projects - one related to the proposed expansion of the mall and the other a proposed 4,500-seat junior-league athletic facility - have been raised as justification for setting up a tax increment district now.

Under such a district, property tax payments to the county and school district are capped for at least 10 years.

As redevelopment and reassessments take place within the district, additional property tax revenue goes entirely to the city. It can be used only for specific purposes - including infrastructure development, land acquisitions or demolition costs - inside the district.

It's a way for a city to pay for improvements that can't be financed any other way, but it's not painless.

Much of the pain would be borne by School District 5 and Flathead County.

The school district already is facing budget limits that could hamper plans to make the revamped Kalispell Junior High into a true middle school; the county is strapped financially in a lot of areas.

Neither the schools nor the county are likely to be overly enthusiastic about seeing their revenue from part of downtown held in check for a decade.

If the district works as intended, of course, after that decade taxable values are higher due to redevelopment, and the county and schools eventually collect more money.

The challenge for city leaders is to ensure that viable projects are funded with tax increment money, that supposedly "blighted" areas are really improved, and that the community benefits.

The dangers from tax increment financing are that the money becomes a virtual slush fund for obscure projects - or that the money piles up and suddenly has to be spent before the district timetable expires (remember Streetscape?).

And the primary aim of the tax increment should be remembered: It's to stimulate private investment and new, taxable development.

The previous downtown tax district should provide a lesson. Over 23 years, the district collected almost $31 million in tax increment. Some of that money went to obvious improvements - infrastructure for Kalispell Center Mall and Tidyman's, for example - but a mere 10 percent was used to attract that new, taxable development that is at the core of tax increment.

A new tax district needs to do better than that.

We urge the city to proceed cautiously. Maybe a tax increment district will work in this area, but it's wise to look carefully before leaping into a long-term financial commitment.