County taps jail savings for rail-park loan

The Flathead County commissioners on a 2-1 vote have approved an $8 million loan that uses the lion’s share of the county’s savings for a new jail to move the Glacier Rail Park forward.

The loan to the Flathead County Economic Development Authority will be used to partially fund a $14.2 million relocation agreement between the authority and CHS. The authority board on Wednesday approved the loan deal.

Using money set aside for future construction of a new jail, about $7 million, plus money from other county funds to total $8 million, was an about-face from a long-standing plan that involved the economic development authority largely financing the CHS relocation through the issuance of revenue bonds. Last November the commissioners unanimously approved a resolution for port authority revenue bonds needed to finance the relocation of CHS to the rail park.

In the end, though, Commissioners Phil Mitchell and Gary Krueger felt the county would be better off loaning the money at 4 percent interest for 20 years instead of a 30-year loan guarantee for the bond payments.

Mitchell and Krueger on Monday voted in favor of the loan agreement, while Commissioner Pam Holmquist opposed the plan, saying she doesn’t believe the commissioners can authorize a loan for that amount of money without voter approval.

Krueger, who came up with the idea of directly loaning the money and vetted the plan through the county’s legal counsel, said he fully supports the loan agreement because Glacier Rail Park is an industrial center that will create economic development for the county.

Mitchell said the idea of a direct loan “has been a hard one for me to swallow,” but he voted in favor of it because he’s interested in the economic development of the county and that “long-term, it’s a good decision, a solution to help us move forward.”

The loan agreement cites Section 7-14-1105 of the Montana Code Annotated, which authorizes a county to lend money to an agency such as the Flathead County Economic Development Authority.

CHS is leasing 10.4 acres in the new rail park off Whitefish Stage Road and will begin construction in June on a grain facility, fertilizer plant and multipurpose building. As part of the relocation agreement, the economic development authority will purchase CHS’s properties near downtown Kalispell for redevelopment.

Kim Morisaki, business development director for Montana West Economic Development, an organization contracted by the Flathead County Economic Development Authority to provide economic-development services, said it has been the authority’s intention since 2014 to bond for the CHS relocation. But Morisaki sees the big-picture benefit of a direct loan.

“It’s better for taxpayers if [the authority] borrows money and pays it back at 4 percent interest than if we bonded nationally and the interest we paid would go outside the state,” Morisaki said. “It makes more sense if you look at where the money is going. As a taxpayer I see the logic of it.”

The bottom line, according to authority President and Chief Executive Officer Jerry Meerkatz, is that the county and the authority got the deal done.

“We worked hard with the commissioners to make it happen,” he said. “This [loan agreement] is the one they felt was the best solution, and I’m fine with that and quite frankly, money kept in the county is a good thing.”

County Administrator Mike Pence said the future timeline for a new jail facility “is a little bit of a moving target.” The county will recoup much of the jail set-aside money — roughly $6 million — with principle and interest payments by the 10th year of the 20-year loan, he said.

“It’s a commitment of years, but it’s also a return on investment,” Pence said.

Krueger told the Daily Inter Lake: “That fund will be made whole.

“We don’t know if we can have a jail built in 10 years from now anyway,” Krueger said. “Quite honestly ... if we don’t loan the money, the [rail park] project would die. The negative effects that would have at this snapshot in time would be hugely more drastic” than putting off jail construction in the future.

Krueger said he “tried to find every possible way” to fund the authority loan without tapping the jail savings account, but no other funding mechanism seemed workable. At the same time he said he was getting phone calls from rail park supporters who told him “this thing has to go.”

The county funds the economic development authority with a two-mill annual allocation, which last year totaled $483,000. This year the county opted to give the authority a flat dollar amount of $490,000. During discussions with authority officials, Holmquist learned the county was being asked to guarantee the two-mill funding in order for the authority to sell bonds for the CHS relocation.

In voting against the loan agreement, Holmquist said she felt the county was put in a “tough situation.

“We’re damned if we do, damned if we don’t,” Holmquist said. Having to commit long-term to a specified level of funding gave her pause, she said, because of potential county budget crunches as state and federal funding cuts push more funding on the county’s shoulders.

Several taxpayers have contacted the Inter Lake with concerns about the county’s decision to raid the jail fund to pay for the CHS relocation.

Ronald McCormack of Bigfork said he believes the decision to loan that kind of money should have been “aired before the public” before the deal was made. If the county were to need money for initial jail planning, now the money’s gone, he said.

Features Editor Lynnette Hintze may be reached at 758-4421 or lhintze@dailyinterlake.com.