Critic slams city's tax calculation
Jack Fallon says council should not have forgiven loan to Kalispell Center Mall
A longtime critic of Kalispell's tax policies argued Monday that the city government manipulated dollar figures to forgive a loan to the Kalispell Center Mall.
Jack Fallon of Evergreen said that the city's tax revenue from the Kalispell Center Mall was smaller in 2006 than it was in 1996 - the opposite of what the City Council was told Dec. 4 when it voted on the matter.
At Monday's council meeting, council member Tim Kluesner asked the city staff to look into that claim.
On Tuesday, City Attorney Charles Harball confirmed Fallon's contention, but added that the mall still fulfilled the city's conditions that led to the Dec. 4 decision to let the mall not repay the remainder of the loan.
In 1996, the city loaned $890,000 to mall owner WestCoast Hospitality Group for it to buy land next to the mall and north of the railroad tracks, tear down grain elevators on that land, and expand the mall there.
At the time, the city government wanted to encourage investments in the downtown mall so it would be more likely to stay open after a big shopping center - such as Bucky Wolford's proposed mall north of West Reserve Drive - opens north of town, Harball said.
The city still has that stance.
WestCoast Hospitality bought the land and demolished the elevators. But removal of the tracks stalled, and the mall could not expand north.
Instead, WestCoast Hospitality spent several million dollars on other mall construction and improvements.
When the money was lent in 1996, conditions for that loan were supposed to be declared satisfied if the mall's assessed value increased by $6.6 million - resulting in an increase in property taxes from that site. At that point, whatever was not repaid on the $890,000 loan would be forgiven.
On Dec. 4, the City Council declared that the mall's improvements fulfilled the spirit of the 1996 agreement. Consequently, the remaining $630,000 left to be repaid was forgiven. On that day, the city staff told the council that the mall's annual property-tax payment increased from $353,296 in 1996 to $467,933 in 2005 - saying the mall's tax payments had risen.
But on Monday, Fallon produced Flathead County tax records that showed the mall's property-tax bill decreased from $353,2965 in 1996 to $349,266 in 2006 - saying that the mall's improvements did not meet the tax-revenue condition of the loan.
Fallon contended that the city should have waited until the mall's 2006 improvements - such as the Heritage Bank branch - were calculated in its 2007 tax bill before deciding whether the 1996 agreement was satisfied.
Harball said that the tax figure given for 2005 was an "honest error" in which the city's staff copied the wrong figure from a document. He said Fallon's 2006 figure of $349,266 is correct.
However, Harball said the mall made a good-faith effort with its investments - improving the mall's financial survivability when Kalispell's northside goes through greater business development.
On Monday, council member Jim Atkinson said: "I still think that $6 million in investments in the mall and [Red Lion] hotel is enough to satisfy the intent of the [1996] agreement."
Meanwhile since 1996, Montana changed the way it taxed property, resulting in significant decreases in tax revenues from all business properties. The decrease in mall taxes is reflected by similar tax drops in other Kalispell business properties, Harball said.
However, Fallon argued that the city, county and schools ultimately are losing revenue from the forgiven $630,000 - while the mall has benefited from the decreased tax bill.
He wrote in a letter to the council: "I am wondering, 'Who is laughing on the way to the bank on this one?'"