Legislative committees consider changes to tax increment financing; local governments opposed to limiting local control

State legislators considered three draft bills related to tax increment financing during a Wednesday morning committee meeting.

None of the bills made it out of committee yet and there was wide opposition to two of the three bills during public comment.

The effort on TIF related bills will likely continue in the 2019 legislative session.

One of the bill was developed with help from a working group that included the Montana League of Cities and Towns, local government representatives and those working with urban renewal districts, among others.

That bill would clarify the role of municipalities in tax increment financing districts and would require impact analysis if the creation or expansion of a TIF district would result in 35 percent or more of the jurisdiction’s certified taxable value being tied up in TIF district.

TIF districts create specific areas of targeted development or urban renewal where a base tax level is set and the tax increment on improvements within the district go into a special fund to be used for public improvements within that district.

Great Falls currently has five TIF districts and in 2016, those districts included $5.265 million in taxable value was included in those districts, with $1.135 million in TIF incremental value, according to a report from the Montana Legislative Services Division. The city’s total taxable value in 2016 was $91.319 million that year, according to the report.

Local officials have expressed concern over discussions at the Legislature that would change or restrict TIF programs, which most city officials view as an economic development tool when implemented well.

The Great Falls City Commission just last week approved $150,000 in TIF funds for a storm water project in the industrial complex that includes Malteurop and ADF.

City approves $150,000 of tax increment financing funds for storm drain project

TIF funds are also being used to support the new development at West Bank Landing and the city planning department will likely request TIF funds in the near future to address major repairs and security improvements in the city’s two parking garages.

Commissioners clash over tax increment funding request for downtown

Kelly Lynch, deputy director/general council for the Montana League of Cities and Towns, told the joint meeting of the Revenue and Transportation and Local Government Interim committees that they support the first draft bill to make sure there’s a process in place to prevent abuse of the TIF program.

Lynch said the working group came up with a process that allows cities, counties and school districts to have discussions with the local public on whether a TIF district is a good idea for the community.

The working group also looked at streamlining the administration of different types of TIF districts to apply consistency across the board, but the group found there are reasons for variation, Lynch said.

“The reflect what the local community wanted to do,” Lynch told the legislators.

But the League doesn’t support the other two draft bills that would put restrictions on TIF funds after the 15th year and another addressed access to private property.

“At the outset, we are not clear what these two bills are trying to fix,” Lynch said.
The League doesn’t support the restriction on funds after the 15th year since it often takes time for the districts to amass enough tax increment to start doing infrastructure projects.

The third draft bill addressed a provision that had been codified in 1959 and last amended in the 1960s, Lynch said, and there had been no reported cases involving that provision since.

“It appears to be an attempt to undermine local government,” Lynch told lawmakers.
Several legislators expressed concern that TIFs would take funding away from school districts, but Lynch, other speakers and some lawmakers said that the base 95 mills goes to school districts regardless of whether there’s a TIF, but the tax increment on those mills stays within a TIF for the duration of the district. Once a district expires, the funds are taxed and distributed normally.

Great Falls City Commissioner Bill Bronson has been involved in the TIF working group and said the city supports the first draft.

That bill requires that local government bodies have the ultimate say on TIFs and “we’re already doing that in the City of Great Falls,” he said.

The bill that would restrict funds after 15 years wouldn’t likely impact the city today, he said, but could have negative impacts in the future.

Wyeth Friday, director of planning and community services in Billings, said the draft that the League supported was timely since the Billings City Council just approved on Monday a policy that clarifies the council’s role in TIFs, permitted uses, funding mechanisms and more.

The Great Falls City Commission adopted TIF guidelines and criteria several years ago that are used to consider applications for funding.

Some of the concerns at the legislature have involved what TIF funds can be used for.

Rep. Adam Hertz of Missoula said there are widespread issues of abuse in TIF districts statewide and are “at this point, a disaster.”

Specific examples of abuse by local governments were not mentioned during the hearing, nor were any mentioned in the committee study or a legislative audit of the TIF program, both completed this year. The study and audit did find inconsistencies and lack of TIF procedures from the Montana Department of Revenue and have recommended improvements in clarifying statutes and developing policies and procedures for administering TIFs.

The legislative audit found that DOR did create rules in 2008, but “the department’s role can be better defined and it can further develop department policy and organizational duties for the administration of TIF.”

The audit found that the majority of TIF district statewide are used to pay for public infrastructure and 34 percent of all expenditures relate to infrastructure, such as roads and utilities. About 19 percent was used to pay debt service issued for major infrastructure projects and 22 percent of funds were remitted to taxing jurisdiction.

Some expenditures didn’t fall into other categories, they were for public betterment like $25,000 from a downtown TIF to pay a portion of the salary of a police officer that patrols specifically the downtown area; or a park maintenance program, maintenance for a public parking garage and others.

Sen. Margie MacDonald said she has seen the impact in Billings in addressing blight.
“I have been impressed with the good faith and integrity of the process,” she said. “I would not say our TIF districts are an abject failure.”