City planning to use downtown TIF funds for Civic Center repair to avoid asking public for additional tax revenue

The city is moving forward with plans to use funds from the Downtown Tax Increment Financing District to back a revenue bond and pay the debt service for the estimated $5.5 million Civic Center facade repair project instead of putting the bond on the ballot asking voters in increase their taxes.

The project would include replacing the roof, which has been an issue for the building for years, and replacing the facade panels that have been failing, creating a potential safety hazard as they continue to deteriorate.

If those panels start to fall off, “that’s a very bad day for the city,” Craig Raymond, city planning director, said during the City Commission’s June 16 work session.
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Using the TIF funds means there won’t be an additional tax for property owners.

If the $5.5 million general obligation bond went to the voters the costs be:

  • For a 20-year loan at 4 percent interest, it would be an additional $4.13 tax on a house with a taxable value of $100,000
  • For a 10-year loan at 4 percent interest, it would result in an additional $9.34 tax on a house with a $100,000 taxable value

Downtown groups have opposed the use of those funds, arguing that they should be available for other development projects downtown, including for fire suppression installation, sidewalk repair and other improvements in privately owned properties.
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Craig Raymond, city planning director, said there is interest in using TIF funds for redeveloping privately owned buildings in the downtown, which has not been done before in Great Falls. He said city staff is researching it now and if commissioners wanted to hear more about it to let staff know. Commissioners did not ask for more information about those requests during the work session, but Raymond told The Electric he intends to bring the subject to a future work session for discussion.

[READ: Montana law regarding what TIF funds can be used for]

Raymond told The Electric that at this point, he’s not prepared to say it can be done legally based on the state laws. The city’s TIF/bond counsel has indicated it can be done based on the actions of other communities, but she also said that it’s possible those actions have not yet been challenged in court and might still be deemed illegal, Raymond said.
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Some other Montana cities, such as Billings, have created programs to use TIF funds to help private developers, but one Montana community botched it, causing the Legislature to reexamine the TIF program and making Great Falls officials cautious in using TIF funds over the last several years. Funds have been used for substantial public infrastructure projects in the industrial park on the northern end of the city and in the West Bank Park development, as well as the current Buffalo Crossing project.
The city has approved the use of downtown TIF funds to support the Downtown Development Partnership’s operational costs and a website. That group voted to oppose the use of TIF funds for the Civic Center.

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The city has also used downtown TIF funds for stormwater improvements, obligated some to the wayfinding project and last year, approved the use of $450,000 of those funds for parking garage repairs.

Accounting for funds already obligated, the downtown TIF fund currently has about $924,000 available, according to city staff. Since the district was established in 2012, the City Commission has approved $531,931 worth of TIF funded improvements with $230,109 of approved projects not yet paid, according to city documents.

City finance staff is projecting that the district will generate $1.3 million in revenue annually.
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On a $5.5 million revenue bond, city staff estimates the annual debt service would be about $400,000 and said that leaves roughly $900,000 and flexibility for others in the downtown who want to request the use of those funds.

An application has been submitted for $84,065 in downtown TIF funds for fire suppression and sidewalk repair associated with the renovations at 311 Central Ave.

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Tax increment financing districts are designated areas of the city where the base taxes on properties go into the general fund, but the tax revenue generated by improvements to properties in the district go into a fund that is used to fund public improvements in the district with the idea of spurring development.
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When a district expires, those funds go back into the general fund. If the district wasn’t in place, those funds would be in the general fund.

Brett Doney of the Great Falls Development Authority, speaking on the behalf of the Downtown Development Partnership, said they support the Civic Center repair project, but don’t want the TIF funds to be used.
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The downtown TIF district was established in 2012 and he said it’s taken that time to generate development and start building up the TIF fund.

Doney said the downtown has momentum but will need the TIF money to support that momentum.
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Doney said GFDA and the DDP would support the city if it took the bond to the November ballot.

The city has also applied for a $500,000 grant through the Montana Department of Commerce for the Civic Center project, but that has to be decided by the Legislature so the city won’t know if its been awarded that grant until next year.
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County Commissioner Jane Weber has mentioned in multiple public meetings that the county used Intercap loans through the state for the courthouse roof replacement and the Expo Park grandstands project.

Mayor Bob Kelly asked during the June 16 meeting if the city could use that program.

Melissa Kinzler, city finance director, said the city looked at that but the city has different restrictions for nonvoted debt and the interest rates on those loans are variable, so it looks good right now, “but in the future it could be detrimental.”
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Commissioner Mary Moe said she understands the comments from the downtown groups, but sees the use of TIF for a public facility as a way to defray the cost to the community at large.

Commissioner Rick Tryon asked if staff would give a recommendation for how to proceed and Raymond and City Manager Greg Doyon said they recommend using the TIF though it wouldn’t be popular with some.

“In my mind that’s a win win that I don’t think we can afford to pass up,” Raymond said.

Doyon said if there’s not a will to ask the public, which is often hears is saturated with tax burden, then the city doesn’t have much other choice.
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Issuing debt against the district will also extend the district another 20 years beyond its current 2027 sunset, Kinzler said, giving it more time to grow and generate revenue that can be invested back into the downtown.

Commissioner Tracy Houck said she was worried about opening up the building for repairs and finding more problems or adding improvements to the Mansfield theater as part of the project.

Raymond said not including something with this particular project didn’t mean the city couldn’t address it, but this was an attempt to package as many related elements as possible and get them done before they cause further damage to the building.

Mayor Bob Kelly said using some of the TIF funds to pay the debt for Civic Center repairs would leave funds for other projects and wouldn’t cost the taxpayer more.

“In the current taxing environment that we are in, I don’t think we have a leg to stand on,” in asking the public to fund the project, Kelly said.

He said the Civic Center is home to many events that draw people downtown, benefiting downtown businesses.

Staff is working to get a resolution of intent to use TIF funds for a revenue bond for the next commission meeting and that will include scheduling a public hearing on the proposal.