Council tweaks, OKs proposal to sell armory

Kalispell laid down its supposedly final terms Monday to sell the old Montana National Guard armory to a developer wanting to build a hotel and conference there.

That developer must agree to or try to get the city to change those terms by the end of the month.

The Kalispell City Council tweaked a proposed agreement Monday that the city staff and Ohio-based Gateway Hospitality Group had hammered out for the developer to buy the site for $1.216 million.

Gateway - partnered with longtime hotel businessman Joe Guilbault of Lakeside - wants to build a 148-room Hilton Garden Inn, a conference center, an upscale restaurant and a casino on the 3.4-acre site nestled between U.S. 93 and the Kalispell City Airport. The complex would target upscale groups staying in the area for several days.

On Monday, the council approved 7-1 the general

concept of selling the site to Gateway and gave preliminary approval to a detailed sales agreement, which included some Monday additions. However, Gateway must agree to the terms before the sale is made.

The Kalispell business community strongly supports the project.

"I, for one, believe this is one of the best projects to come along," council member Bob Herron said.

Council member Bob Hafferman cast the sole dissenting vote because he disagrees with some measures adopted to help the sale. Council member Randy Kenyon was absent.

After the Monday meeting, Guilbault said the developers have no problems with most of the proposed sales agreement.

However, Guilbault is concerned about a recent change in the agreement that says the complex must pay a minimum of $130,000 annually in a combination of property taxes and payments-in-lieu-of-taxes. Guilbault said he will have to consult with his partner, Gateway's chief executive officer Bob Voelker, about that requirement.

The complex is expected eventually to pay $260,000 a year in property taxes to Kalispell. But it could take three to four years for the complex to operate at its full potential, Guilbault said.

The tentative agreement says if the complex's property-tax bill is less than $130,000, the venture will pay extra to ensure a minimum of $130,000 annually goes to the city. That requirement would become effective immediately after the city and Gateway sign the agreement.

Guilbault is unhappy about having to simultaneously pay property taxes and payments-in-lieu-of-taxes for awhile, because traditionally one method or the other is used in tax situations.

"It's a concern because I don't understand how it is fair," Guilbault said.

He thinks the complex should pay taxes on its value for that year.

Guilbault also didn't like that the city would get 10 percent of the net profit if Gateway sells the site. However, City Manager Jim Patrick said Gateway suggested that approach in its talks with Kalispell.

Some council members grumbled that the city gave in earlier to some Gateway deal-breaking demands, and they were reluctant to give up more ground.

The proposed sale will either be consummated or fall through by the end of this month.

If both sides sign the sales agreement in May, construction will begin in June and likely would be finished in summer 2007, Guilbault said. The $12 million to $15 million complex is expected to employ from 112 to 150 people with a predicted annual payroll of $2.7 million.

The council is scheduled to hold a final vote on the modified sales agreement later this month.

Meanwhile, Gateway has an option to buy a local liquor license - an option that will expire May 31.

Kalispell has 31 establishments with state liquor licenses, while Montana has put a limit of 14 liquor licenses in the town. The annexation of many taverns led to the excess liquor licenses.

That means Gateway must buy a liquor license from an existing Kalispell establishment. It has an option with one establishment to do so until May 31. Guilbault declined to say how much the venture plans to pay for the license, other than the price is several hundred thousand dollars - which is the going rate for liquor licenses.

Because a liquor license is expensive, the traditional way to recoup the costs with little overhead is to install a casino with a drinking establishment. Gateway plans to put a small casino in its complex.

That creates a potential zoning violation, because the complex would be within 300 feet of Lions Park - too close, according to the Kalispell zoning laws.

However, the City Council approved creating a planned-unit development zone for the complex. This is essentially a contract in which Gateway is allowed to have the casino in return for putting its only entrance inside the restaurant. Also, the casino won't be allowed to have outdoors signs. Guilbault is also unhappy about that ban but said it was a minor problem.

Hafferman voted against this arrangement, arguing that the city should change the 300-foot buffer requirement, not circumvent it.

Also, Hafferman opposed the city agreeing to pay as much as $890,000 to demolish and clean up the armory - contending that should be Gateway's responsibility. The other seven council members overruled him, saying the money comes from a set-aside fund intended to aid this type of development.

The proposed complex is in a tax-increment funding district. That means some property taxes from that area are set aside to tackle infrastructure improvements to help businesses in that area. One legal use of that money is demolition work.

Council members disagreed on legal language that would put the $1.216 million in purchase money into an interest-bearing account to eventually pay for a community center.

Some members argued that the council has not agreed on whether to build such a center and said the money could go to other potential uses.

Other council members argued that a community center is a major candidate for the $1.216 million. They contended that the council would have to allocate the money formally to some project at a later date - making the community-center language irrelevant in a future appropriations vote.

That argument won. If the sale goes through, the $1.216 million will go into a community center account, with council members understanding that the allocation differences are unresolved at this time.