Railroad track removal one option for TIF money

The Kalispell City Council has taken a first step toward possibly expanding the size of the Westside Tax Increment Financing District. But the clock is still ticking for city officials to find a project.

Regardless of any expansion, the 14-year-old tax-increment district sunsets in March 2012.

The only way the city can extend the district’s life is to issue new debt for a project in its boundaries, which would extend it for the life of the debt.

That has been a hard sell to council members, who have said they want to see the district sunset, and have called ongoing efforts to find a project “a stretch” to spend nearly $2 million of tax-increment funding that essentially is up for grabs.

It also has been a tough pitch for tax-increment financing supporters. They have said there is enough blight in and around the district to warrant expanding it, but for more than a year have been unable to identify a project.

The city planning staff recommends expanding the district to include the Flathead County Fairgrounds and a mile-long block of land that runs from Seventh Avenue to the eastern city limit, bordered to the north by Washington Street and to the south by First Street. The hope is that expanding the district could help capture a project.

At its last meeting, the council voted to forward that idea to the city Planning Board, which will come back with a recommendation this fall.

If the district sunsets, close to $2 million of increment collected over the years would be paid out to taxing entities including, the city of Kalispell, Flathead County and Kalispell Public Schools.

Meanwhile, proposed TIF projects have included improvements to the fairgrounds, repairing aging water and sewer lines, installing new streets and sidewalks, addressing roughly 19 acres of vacant land and two dozen Brownfield sites, and even removing or relocating the railroad tracks that run through the downtown area.

Council has expressed perhaps the most interest in getting rid of the railroad tracks downtown.

The tracks are a significant contributor to blight, discouraging investment and the redevelopment of surrounding properties, city planners said.

Relocating the tracks and the two businesses that use them is “one of those 30-year projects we keep never solving,” Planning Director Tom Jentz said to council members at their last meeting.

There is renewed interest in the idea because the Flathead County Economic Development Authority has $1.147 million of federal funding available to buy up to 80 acres of land for a shovel-ready industrial park with rail access.

The Flathead County Economic Development Authority is presently investigating a property directly adjacent to the city limits, said Kellie Danielson, president and chief executive officer of the development authority.

“If it can help the businesses that the city is interested in asking to relocate so those tracks can be taken out, then great,” Danielson said.

“We have had discussions and will try to support that if we can. But we’re going to do this rail park whether it has to do with the city pulling up the tracks or not, because this is something needed in the county.”

The proposal for the city to piggyback onto the project is far from certain.

An earlier effort to buy property for a rail park near Columbia Falls fell apart. And discussions over the property near Kalispell are still in their infancy, awaiting an appraisal that will start real negotiations.

Danielson said the goal is to have something finalized by year’s end.

City Manager Jane Howington said the city has talked with the two businesses that use the tracks and the railroad company.

“There are all kinds of tools to use without [the city] footing the entire bill,” she said.

But it’s not clear how the project would be able to materialize before March.

“I like the idea of removing the tracks [but] I don’t see how it’s fundable or feasible or who’s going to pay for it,” council member Jeff Zauner said.

Council member Tim Kluesner agreed and said the city should make the project a longer-term goal.

“I’ve had people give me some great sales jobs on this, but there’s nothing concrete, nothing written down. Let’s consolidate this into a vision and plan for the next 15 years, start a new TIF and do it . . . Instead of grasping for this $2 million out there hanging on a tree,” he said.

Fairgrounds manager Mark Campbell said he has plans for close to $1 million of exterior improvements that could be eligible for TIF funding. “It’s out there for them to think about, but completely their choice,” he said.

The project would improve gate entrances, install landscaping with trees and vines around the fairgrounds and build a roughly one-mile walking and bike path along the fence line.

Plans for a number of internal improvements are not as far along, Campbell said.

Council members have been skeptical, adding that the county has not said if it wants to partner on a project or even have the fairgrounds included in an expanded TIF district.

Several council members have said they would refuse to spend city money on the county-owned fairgrounds.

“What’s the reason for including them, a non-tax-revenue-producing area?” Kluesner asked city planning staff at the last council meeting.

Jentz replied that the fairgrounds is a prominent property in the city limits and a potential resource that is unsightly, aging and going unused at times.

“If you make it a healthy contributor and it starts to bring people in, it would start doing tremendous things for hotels and restaurants . . . It’s the entrance to the west side of our community. The bigger question is why was it left out in the first place?” Jentz said.

Several council members have said the city should let the Westside TIF sunset and start a new tax district if a project materializes.

But keeping the Westside district alive beyond March could help ensure that there is funding available if or when a project appears, advocates said.

If the district sunsets and a new TIF district is formed, it could take years for property values inside the new district to rise enough to generate a significant increment.

The Westside TIF is projected to generate close to $400,000 of increment this year, according to city budget documents.

That revenue stream could be leveraged to bond a project, said Tom Lund, of the Urban Renewal Agency.

“Once you sunset it and lose that increment, your bonding ability goes away and then you really do have just $2 million,” Lund said.

Expanding the Westside TIF to cover several dozen more city blocks could also come at a cost.

That would cap taxable property values in a larger area, and funnel revenue taken in beyond those caps into the TIF fund, potentially placing more pressure on city and school general fund budgets that are already tight, opponents have said.

“Whenever you freeze an area and get more expansion you’ve still got to provide those services and it comes from the pockets of the taxpayers,” said council member Bob Hafferman, who has said he wants to see the Westside district sunset.

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.