City approves tax abatement for hotel, hospital projects

Commissioners approved two tax abatements during their April 19 meeting.

The first to the developers of The Gibson who are remodeling the former Greystone Inn and the second to the Great Falls Clinic for their hospital addition.

Both abatements are for remodeling, reconstruction or expansion of existing buildings or structures, and tax relief is governed by state law. Projects that include work that will increase their taxable value by at least 2.5 percent, as determined by the state, are eligible for tax benefits during the construction period and for the following five years.

The tax relief approved by the city is only for the mills levied by the city.

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The state amended this law in 1985 to require that both the county and city pay approve the tax benefit on a project basis. If one approves the abatement and the other does not, the benefit only applies to those levied by the approving government body.

In December 2015, the City Commission adopted criteria by which tax abatement requests would be evaluated.

Starry Night Hospitality is remodeling the former Greystone Inn at the corner of Central Avenue and 7th Street and rebranding it as The Gibson, a boutique hotel that will be part of the Ascend Collection by Choice Hotels.

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The developers announced their plans in January 2020, but the pandemic slowed their progress.

Construction is currently underway.

Under the abatement, the Montana Department of Revenue will gradually add the new taxes to the owner’s existing property taxes over a five-year period in increments of 20 percent each year beginning in the 2022 tax year, according to city staff.

At the current tax rate and estimated post-construction appraisal values, the city estimates its lost tax revenue to be about $109,620 during the first year. The city estimates its lost tax revenue over the five year abatement to be about $328,860, according to the city staff report.

Staff recommended approval of the abatement for The Gibson project since it will eventually have a positive impact on the city’s tax base.

The property has been “underutilized” for years and the remodel will increase tax revenue,according to staff. The construction project is estimated at $5.8 million.

Commissioners also approved a remodel for the Great Falls Clinic’s $55 million expansion to include a new three-story tower that will add 75 beds and other services and resources. The expansion is expected to create another 150 new full-time jobs, according to the staff report.

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According to the staff report, “the applicant has stated that the rise in construction costs have caused the original budget estimates for construction to increase by a minimum of 20 percent. Great Falls Clinic states these cost increases have created an unforeseen gap in financing, which the tax abatement will help offset. Additionally, Great Falls Clinic states that the hospital maintains a for-profit status which puts them in a unique position with other hospitals. As Great Falls Clinic competes with other non-profit based hospitals, they feel the financial considerations related to investment and future tax burden should be considered. They see this tax abatement request as a way to level the financial playing field and asks the city to consider this request to support their expansion to meet the growing healthcare needs of the Great Falls community.”

The city estimates that it will lose about $397,168 over five years for this abatement. That loss will be in the city’s general fund, which staff said is recovering from COVID, and that the Clinic has said the project will generate additional taxes once complete.

Staff recommended approval of the abatement but also told commissioners to “carefully weigh the total cost of the abatement against the growing pressure on the city general fund and the ability to deliver critical services.”