Public hearing set for Nov. 5 on TIF funding for Buffalo Crossing
City Commissioners approved a resolution of intent for a tax increment financing project during the Oct. 15 meeting and set a public hearing for Nov. 5 on the requested TIF funding.
Buffalo Crossing is the name of the 2.2 acre property that was subdivided earlier this year into six lots. Lot 1 has the barrel building on the corner of Central Avenue West and Bay Drive, across from the federal courthouse.
The overall project is an estimated $18.9 million, according to the application and city staff.
The property is owned by Ken Holman and Paula Gundermann and they requested the TIF funds to begin infrastructure on Lot 1 to help spur development. The owners are in discussions with a “with a potential restaurant/bar owner who has multiple locations on the western side of the state. They are committed to repurposing and renovating the existing barrel-vault building to become ‘the place’ to drink and dine in Great Falls. We believe that they will become the anchor tenant and the driving force for the rest of the development,” according to the application.
The potential tenant has not yet been named.
The planning board voted unanimously on Sept. 24 to recommend that the City Commission approve a $350,600 tax increment financing request for public infrastructure improvements associated with development of the Buffalo Crossing subdivision in the West Bank Urban Renewal TIF District.
The overall Buffalo Crossing development, according to the application, will include the renovation of existing barrel-vault building on Lot 1 and multi-story buildings with commercial space on the lower levels and housing on the upper levels for the other five lots.
The TIF funds would be used for demolition of existing buildings, relocating overhead powerlines, sidewalks and landscaping on Bay Drive, trail access, a common parking lot area and engineering fees, according to the application.
During the Oct. 15 City Commission, Brad Talcott, one of the developers of West Bank One and West Bank Landing, said he was appreciative of the TIF district, but was frustrated by the different requirements for Buffalo Crossing’s potential reimbursement.
“The improvements to date would never have happened without the TIF district being approved,” he said.
Tax increment financing allows municipalities to use new tax dollars from increasing taxable values for reinvestment within the geographic area in which they were derived for a period of 15 years, or up to 40 years if the funds are pledged to the repayment of a bond, according to city documents.
Talcott said for West Bank One, they were required to borrow the money and were later reimbursed for the cost of specific improvements, including the interest.
He said they had to spend $10 million at their own risk to put the improvements in place so tax increment could be generated in the district for the reimbursement.
If the TIF district wasn’t in place, all of the new tax dollars generated by development like the West Bank projects would go into the general fund and would not be available to reimburse developers for public infrastructure.
Talcott said the agreement for West Bank Landing, which was approved in 2016, required the developers to borrow the money but did not reimburse for interest.
City staff said they had not heard Talcott’s concerns about the 2016 agreement until the Oct. 15 meeting.
For Buffalo Crossing, Talcott said those developers didn’t have skin in the game yet and were asking for reimbursement.
City staff said that as with other TIF reimbursements, the Buffalo Crossing developers would have to complete the proposed public improvements before being reimbursed.
“It’s very discouraging,” Talcott said.
Earlier during the Oct. 15 meeting, commissioners approved a second amendment to the West Bank Landing development agreement to make an early reimbursement payment of $350,000 to the developers. In October 2018, commissioners approved an early reimbursement payment of $700,000 to the West Bank developers.
The original 2016 agreement committed the city to issue bonds to pay or reimburse the West Bank developers up to $2.64 million of costs for infrastructure improvements associated with the development project. Under the agreement, bonds would not be issued until there is: “1) sufficient increment to cover the aggregate principal amount of the bonds, 2) fund a deposit to the reserve account required by the bond resolution, 3) pay the cost of bond issuance, and 4) provide coverage equal to at least 140 percent of the maximum annual debt service requirements required under the bond resolution,” according to the staff report.
During the Oct. 15 meeting, Talcott questioned why interest wasn’t reimbursed in the new agreement and why the TIF fund needed to be at 140 percent of the debt service payments.
City staff said their outside bond counsel makes those recommendations and they would ask her for additional information on those requirements, as well as those for the proposed Buffalo Crossing development agreement.
The TIF fund currently has just over $350,000, meaning there’s not enough money to simultaneously fund both requests, but the city receives two annual payments into the TIF, one in December 2019 and other mid-year 2020.
If the commission approves the TIF funding request during the Nov. 5 public hearing, staff proposes reimbursing $350,000 immediately to West Bank developers; about $242,000 of reimbursement for Buffalo Crossing after the phase one improvements are completed, which are the power line relocation and demolition work; and about $108,600 of reimbursement to Buffalo Crossing after phase two improvements are completed.
Greg Doyon, city manager, said the city has to follow state laws regarding TIF districts and the different types of districts have different requirements for bonding.
He said developers know the risk is on them for bonding, Doyon said.
“The commission has exercised an incredible amount of flexibility” to accommodate changes within the districts, Doyon said.
During the Oct. 15 meeting, Doyon said when the two TIF funding requests came into the city planning office, essentially competing for limited dollars, his charge to Planning Director Craig Raymond was to be as flexible as possible.
Doyon said staff is aware of the public perception of the buildings in the Buffalo Crossing development and those buildings have long been a frustration for many.
The barrel building has been vacant for years and had been the subject of nuisance abatement action by the city in 2016. The result was some effort to secure the building and remove public safety hazards, but the proposed development “will do more than secure it, this will activate the space,” Deputy Planning Director Tom Micuda said during the September planning board meeting.
The planning board voted unanimously to recommend that commissioners approve the TIF funding.
Doyon said having two developers working on projects in the West Bank district is a good problem to have and the city wants to try to accommodate both, but they would give Talcott an explanation from bond counsel regarding his concerns.
Raymond said the city appreciates Talcott’s commitment to West Bank and that the city has been fully supportive of the project throughout, “but I think it’s a good decision to support both projects.”
Mayor Bob Kelly asked staff to bring more information on what drives the rules on reimbursing interest but said it won’t change his mind on the project.
He said he’s concerned going forward in knowing where the changes come from and whether they’re communicated to developers.
Commissioner Bill Bronson said he wished the commission had known about Talcott’s sooner but reminded his fellow commissioners that from the beginning, TIF reimbursements for public infrastructure were subject to the availability of funds. For years, there’s only been one developer in the West Bank district and since there are now additional developers, they will be competing for the dollars.