Developer eyes $16.9M in tax increment financing funds for Kalispell mall project

The developer behind the Kalispell Center Mall’s impending transformation is asking for $16.9 million in tax increment financing funds to help pay for the project.

The funds are needed for the Texas-based developer to revamp the largely vacant shopping center into a more attractive, inviting destination featuring an additional hotel, event space and a mix of retail stores that include national brands.   

Without the dollars, the developer would be left with a significant gap in funding, according to an analysis conducted by Economic & Planning Systems, Inc. The firm was recommended by the city to prepare a third-party report. 

The money would come from the West Side Urban Renewal-Core Area Tax Increment Financing Assistance Program and be distributed in phases because the fund does not have enough money to cover the full request at once, according to Community Development Manager Nelson Loring.  

The funds would go toward demolishing the former Herberger’s department store and installing a road where the structure once stood to connect to Third Avenue West. That side of the mall would receive a new facade. Funds will also go toward streetscape improvements on Central Street and Fifth Avenue West.  

The mall is estimated to rake in $22.2 million in property tax increment revenues through 2050, enough to pay back the tax increment investment, according to the report.  

The property’s assessed value is currently $15.75 million and is projected to grow to $130.4 million by 2050 because of the redevelopment and rising market values, according to the report.   

Even with public funds, the developer would still need to raise revenue or lower costs to make the project work. Without the funding, SHOP Companies faces a more than $27.2 million shortfall, according to the report.  

The total project cost is expected to be $65.3 million, most of which is from acquiring the property, and materials and labor costs.  

THE WEST side of the property would undergo the most dramatic changes under the developer’s proposal. The site of the former Herberger’s would see, along with the forthcoming road, five separate buildings go up, with park space added along part of the site’s edge.  

The redesign reduces the leasable area by about 102,000 square feet.  Currently, only 33% of the mall’s 215,000 square feet of leasable area is occupied. 

Fragmenting the building is intended to turn the mall “inside out,” making storefronts more visible from the outside, according to the report.   

SHOP Companies is considering locating the future Kalispell branch of the Flathead County Library on the northwest corner of the property. A hotel is planned just south, along with two retail buildings and an event venue to the east.  

Earlier conceptual drawings showed a park space and paths lined with trees and a water feature running between the buildings. The design submitted in the application for tax increment financing put a larger retail building where the park space existed in earlier drafts.  

The east side of the mall, which will remain standing, would undergo a complete interior renovation as well as facade improvements. 

Extensive interior work will “disrupt mall business operations, resulting in business interruptions and potentially closures and additional vacancies that will need to be re-leased,” said the cost analysis.  

Red Lion Hotel is also part of the redevelopment project.  

Cash flow for the project is expected to be negative until 2029 and then turn positive once leasing begins. The project is projected to be near full occupancy by 2032.  

SHOP Companies originally intended to ask for $23 million in tax increment financing funds, but the figure decreased after plans for renovating the mall’s southern frontage was removed from the request.  

THE MUNICIPALITY’S Urban Renewal Agency reviewed SHOP Companies’ request May 21.  

Board member Mike Brodie questioned whether some expected costs in the request were counted more than once.  

“I see a lot of the same items in each of the sections we have here and trying to make sure that it’s not duplicative,” Brodie said.  

Executive Vice President of SHOP Development Buck Wheeler said they are still working off conceptual designs for pricing. He said it will take another $500,000 in design plans to come back with more detailed pricing.

Brodie struck a note of caution given the size of the request for public funds without more specific construction plans.  

“I want to make this work, but at the same time, I’m also kind of reluctant when it’s such a huge ask,” Brodie said.  

Reporter Jack Underhill can be reached at 406-758-4407 or junderhill@dailyinterlake.com. If you value local journalism, pledge your support at dailyinterlake.com/support.

    Concept design for Kalispell Center Mall. (Courtesy of SHOP Companies)