Commissioners approve TIF request for Buffalo Crossing development in 3-2 vote
In a 3-2 vote, City Commissioners approved a tax increment financing request for Buffalo Crossing, a 2.2 acre property on the Missouri River, during their Nov. 5 meeting.
The developers requested, and commissioners approved, a $350,600 TIF request for public infrastructure improvements associated with development of the Buffalo Crossing subdivision in the West Bank Urban Renewal TIF District.
The property 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.
Commissioners Tracy Houck and Mary Moe voted against the TIF request.
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 West Bank developers expressed concern over the fairness of the process since they had to carry what they said was more risk in their projects in order to get TIF funding. Some of the rules that were imposed on them that they found to be unfair are requirements under TIF laws and regulations, according to city staff and the city’s outside bond counsel.
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.
Brad Talcott and Linda Caricaburu, husband and wife partners in the West Bank Landing and West Bank One developments, said a major concern of theirs was that they were approaching the 140 percent threshold in the TIF account that would allow the city to issue bonds in their project. That’s a requirement in their TIF agreements with the city that the TIF account has to have 140 percent of the debt service payments of any bonds through the fund, according to the city’s outside bond counsel.
Talcott said that by approving the Buffalo Crossing TIF request, it would push back the issuance of bonds for the West Bank project, causing them to pay more in interest and delay their ability to repay their loans to the Great Falls Development Authority.
Erin McCrady, an attorney with the Montana office of Dorsey Whitney, said that the 140 percent threshold has to be met for the last fiscal year and as of June 30, 2018, that level wasn’t achieved, so it would be at least until next July before the city could issue bonds for the project if the threshold was met at the end of the current fiscal year.
TIF districts have been in the sights of some at the state legislature based on some concerns of misuse of the funds in other cities. So far, there have been so such issues in Great Falls.
“I would hate like heck…for buffalo crossing to be the poster child for all those naysayers” on TIFs, Talcott said during the Nov. 5 public hearing.
Commissioner Bill Bronson has worked on those TIF issues at the legislature and said he recognized the differing opinions but worried if the city denied the Buffalo Crossing request in favor of another developer, it could also cause perception problems for the city.
It could be the case that the Holman development concept doesn’t come to fruition, but the TIF funding as requested would go toward public improvements on the property that would make it more attractive for development either way.
The planning board voted unanimously on Sept. 24 to recommend that the City Commission approve the TIF request for Buffalo Crossing.
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.
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.
The development agreement for West Bank Landing was approved in 2016 and in October, 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.
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.
With commission approval for the TIF funding request, staff plans to reimburse $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.
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.