City transferring its share of Gateway property

With all of its debts paid and a call center employer in place, Kalispell is handing its stake in the former Gateway West Mall off to the Flathead County Economic Development Authority.

The two entities worked together in 2000 to buy and refurbish 60,000 square feet in the mall. Their aim was to attract Stream International, a company that opened a call center in the space and brought about 300 jobs to the otherwise languishing retail property.

Stream pulled out after a few years. But it was quickly replaced by TeleTech Holdings, a publicly traded company based in Englewood, Colo., that also opened a call center there.

Nine years later, TeleTech remains one of Flathead Valley’s largest employers with more than 500 employees in Kalispell.

“It’s been a huge success and it’s done everything the people who put it together wanted it to do,” City Attorney Charlie Harball said about the economic development project. “FCEDA joined with the city on the concept that we had an empty space becoming a dark box and as a way to take care of that.”

Kalispell issued $2.5 million in bonds to buy and refurbish the mall space and used money from its West Side Tax Increment Finance District to pay the debt, which was retired in 2010. The city spent another $477,000 in tax-increment money in 2005 to buy more parking north of the mall for TeleTech employees.

The Flathead County Economic Development Authority used money from its property tax levy to help pay for the project. It also took on maintenance of the property and agreed to be the point of contact with TeleTech.

Now that Kalispell’s debts are paid, the city wants to turn its ownership in the mall and parking lot over to the economic development authority.

“The city is seeing this as a job well done — that we’ve done our part and FCEDA should be able to take this over. And they are ready, willing and able to do that,” Harball said. “It doesn’t make sense for us to remain in a management role.”

TeleTech’s 10-year lease for the mall space comes up for renewal in March 2014. One entity owning and managing the property would simplify maintenance and oversight as well as lease negotiations.

Kellie Danielson, president of Flathead County Economic Development Authority, said the intent is to negotiate another lease with TeleTech.

The mall space is publicly owned and tax-exempt, but because it is leased to TeleTech the company must pay beneficial use and personal property taxes that go to the city, county, schools and state.

TeleTech pays no rent for the space if employment and wage targets are met. But a lease clause requires the company to pay at least $140,000 in taxes and imposes a “deficiency tax payment” to make up the shortfall if needed. Those deficiency charges have totaled about $50,000 a year.

Under a proposed property transfer agreement, Flathead County Economic Development Authority would keep any money TeleTech or another company pays beyond those beneficial use and personal property taxes until it builds up a $300,000 maintenance reserve fund.

It would then pay 25 percent of that additional money back to the city of Kalispell, “in consideration for the city transferring its property interests.”

A memorandum of understanding was hashed out through several months of negotiations between Kalispell and the economic development authority. It goes to the Kalispell City Council for a vote on Monday and lays out an agreed-upon process for the transfer to be finalized in coming weeks.

THE REST OF the former Gateway West Mall is privately owned by American Capital Group in Santa Barbara, Calif. Much of the space has been leased to various nonprofit groups including United Way as the Glacier Community Center.

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