G4. FCEDA MOUCity of Kalispell
Post Office Box 1997; Kalispell, Montana. 59903
Telephone: (406) 758-7701 Fax: (406) 758-7758
MONTANA
MEMORANDUM
To: Mayor Johnson and City Council
From: Doug Russell, City Manager
Re: MOU with FCEDA- Costs for Rail Park Development/Administration
Meeting Date: July 16, 2018
BACKGROUND: In January of 2015, The City of Kalispell and Flathead County Economic
Development Authority formalized a Memorandum of Understanding to identify the partnership
for engineering costs related to the rail park being constructed as part of the TIGER grant.
Similar to that MOU, FCEDA and the city have been finalizing an MOU to outline the use of the
Targeted Economic Development District (TEDD) funds to reimburse FCEDA for a portion of
the costs they will be incurring in their administrative responsibility related to relocation
agreements.
A recent project in the Westside Tax Increment Finance District (TIF) had been set up to
reimburse the development only after taxes had been paid for a respective year, thus identifying
the increment to the project itself. The MOU before Council is similar in that it provides
revenues to FCEDA from their development project of relocating CHS Inc. to the rail park in the
amount equal to the taxes paid by CHS that are above their existing tax burden. This has been
part of the initial funding package discussed amongst the parties and is now being formalized
since we are nearing completion of the rail park and the relocation of the tenants.
The term of the MOU is for 20 years from the first payment to FCEDA. However, the TEDD
will expire after 15 years unless an approved project in the development plan is bonded with
revenues pledged from the TEDD. As such, there is a prepayment clause included to aid in the
fulfillment of the obligation should the TEDD expire.
The Urban Renewal Agency reviewed this Memorandum of Understanding with FCEDA at its
most recent meeting and is in concurrence with it moving forward.
FISCAL IMPACT: The funds that will be paid to FCEDA will be based on the new taxes
generated by their respective portion of the project, the CHS relocation. It does not include the
taxes that are being paid into the TEDD from CHS (base amount) that are equal to the amount
they currently pay ($104,000). This base amount that is not subject to payment to FCEDA will
also increase 2% per year.
ALTERNATIVES: Council may reject the MOU with FCEDA or request different parameters
than those that have been previously discussed and incorporated into the MOU as desired.
RECOMMENDATION: It is recommended that the City Council move to approve the
attached Memorandum of Understanding between the City of Kalispell and the Flathead County
Economic Development Authority.
ATTACHMENTS: Memorandum of Understanding with FCEDA
Memorandum of Understanding
between
CITY OF KALISPELL
A Montana Municipal Corporation
and
FLATHEAD COUNTY ECONOMIC DEVELOPMENT AUTHORITY
A Montana State Authorized Corporate Public Body
1. Purpose and Scope
The purpose of this Memorandum of Understanding [MOU] is to establish and
memorialize the understanding between the City of Kalispell [hereinafter the "City"] and
the Flathead County Economic Development Authority [hereinafter "FCEDA"] regarding
the reimbursement of expenses for the administration of services for the Glacier Rail Park
Targeted Economic Development District.
2. Recital of Facts
A. Annexation and Zoning of the Glacier Rail Park
a. On April 21, 2014, the Kalispell City Council by Resolution No. 5669 and
upon petition of FCEDA, a statutory entity of Flathead County, Montana and
owner in fee of that certain parcel of property referred to herein and the
Glacier Rail Park, annexed said parcel of property into the incorporated limits
of the City of Kalispell.
b. On May 5, 2014, the Kalispell City Council by Ordinance No. 1737,
following the proper review and recommendation of the Kalispell City
Planning and Zoning Board and duly noticed public hearing, applied a zoning
designation to the subject property of City I-2, Heavy Industrial.
c. Further, on May 5, 2014, the Kalispell City Council by Resolution No. 5673
and upon petition of the property owner, FCEDA, conditionally approved the
preliminary plat of said subject property with the designated plat name of
"FCEDA Rail Park Subdivision."
B. Establishment of the Glacier Rail Park Targeted Economic Development District
a. Subsequent to the annexation of the Glacier Rail Park into the City, the City
evaluated the fiscal and economic aspects, as well as the infrastructure and
other physical aspects of the subject property and its contiguous areas in
conjunction with the general economic aspects of the City and Flathead
County and generated a report entitled "Glacier Rail Park Development Plan
for Targeted Economic Development District (TEDD)" [the Plan], that
identified the lack of necessary infrastructure to and within the subject parcel
as well as identifying the need in the City for a district that can host a
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diversified tenant base of multiple independent tenants that will encourage the
location and retention of value -adding projects.
b. On April 4, 2016, the Kalispell City Council considered and passed
Resolution No. 5757, a resolution of necessity finding that that the Glacier
Rail Park Development Plan area is deficient in necessary infrastructure
improvements, that the City lacks sufficient capital to rectify the infrastructure
deficiency of the subject property, thus impeding its ability to achieve
economic growth through the development of value -adding industries, and
that infrastructure improvement of the subject area is necessary for the welfare
of the residents of the City of Kalispell.
c. On May 2, 2016, the Kalispell City Council passed Ordinance No. 1770 to
establish the Glacier Rail Park Targeted Economic Development District
which act was formally approved by the Montana State Department of
Revenue as a tax increment district in March 2017 with base values
established as of January 1, 2017.
d. The above -recited legislative history provides the basis for funds derived from
the Glacier Rail Park Targeted Economic Development District to be utilized
for all purposes authorized by MCA Title 7, Parts 42 and 43.
C. Costs to FCEDA in Administeringthe a Requirements of Businesses Located in the
Glacier Rail Park TEDD
a. Cenex Harvest States, Inc (CHS) elected to locate its businesses into the
Glacier Rail Park TEDD on the condition that FCEDA agree to reimburse
CHS for property taxes (including beneficial use tax) in excess of Base Taxes
with respect to these businesses.
b. The City's approved plan of economic development within the Glacier Rail
Park TEDD will be partially fulfilled from the location of the CHS businesses
to the TEDD and the City will further receive tax increment revenues from
those investments.
c. The City, therefore, may expend funds from those tax increment revenues it
receives to repay costs expended by FCEDA in the administration of the rail
park that are statutorily permitted and meet the goals established for the
TEDD by the City.
3. MOU Term
The term of this MOU Agreement shall begin upon execution of the MOU and extend for
a period of 20 years following the date of the first reimbursement payment, subject to
availability of increment revenue generated by the Glacier Rail Park TEDD. The City
may elect, at any time, to prepay to FCEDA any portion or all of its obligation under this
Agreement.
4. FCEDA Responsibilities
FCEDA has the responsibility of administering the requirements of the businesses within
the Glacier Rail Park TEDD.
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a. CHS elected to relocate to the TEDD pursuant to the City approved
development plan of the TEDD on the condition that FCEDA, for a period of
twenty years, shall reimburse CHS for property taxes (including beneficial use
tax) in excess of Base Taxes with respect to the Leased Premises and the CHS
Replacement Facilities and the Fuel Station.
b. The "Base Taxes" are calculated as follows: Base Taxes shall equal $104,000
for the first tax year CHS is assessed property taxes on the Leased Premise,
CHS Replacement Facilities or Fueling Station and in each tax year thereafter
Base Taxes shall be increased by 2.0% from the immediately preceding tax
year.
5. City Responsibilities
In furtherance of and in consideration for the benefits to be received as recited above, the
City shall make payments to FCEDA as the obligations are incurred by FCEDA pursuant
to the terms set forth in Paragraph 4 above as full payment for the administrative
functions provided by FCEDA for the Glacier Rail Park; to the extent tax increment
funds are then available to the Glacier Rail Park TEDD and subject to the restrictions of
Paragraph 7 below.
6. No Third -Party Beneficiary
This Agreement is for the exclusive benefit of the parties, does not constitute a third -
party beneficiary agreement and may not be relied upon or enforced by a third party.
7. No Assignment
This Memorandum of Understanding and any rights, agreements or obligations hereunder
may not be assigned, by operation of law, merger or otherwise, without the prior written
consent of the other party hereto, and any purported assignment by a party without prior
written consent of the other party will be null and void and not binding on such other
party.
8. Subordination
Nothing in this Memorandum of Understanding shall mandate the subordination of the
obligations agreed upon herein to any future financing obligations. Any such
subordination of this obligation must be by mutual consent of the parties.
9. Modification and Termination
Any and all amendments must be made in writing and must be agreed to and executed by
the parties before becoming effective.
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10. Effective Date and Signature
This MOU shall be effective upon the signature of the City and FCEDA authorized
officials. The City and FCEDA indicate agreement with this MOU by their signatures.
CITY OF KALISPELL
Doug Russell, City Manager
Date
FLA
AUI
Jerry
Date
CONOMIC
ve Officer
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STATE OF MONTANA )
):ss
County of Flathead )
On this LYA day of MCW 2018, before me, the undersigned, a Notary Public in and
for the State of Montana, personally appeared JERRY MEERKATZ, Executive Director of the
Flathead County Economic Development Authority, a governmental unit of Flathead County,
Montana, that executed the foregoing instrument, and the person who executed said instrument
on behalf of said Authority, and acknowledged to me that such Authority thereby executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal the
day and year in this certificate first above written.
,p WTI PUSLIG tUSS�or ft
VAN of Montane
STATE OF MONTANA )
):ss
County of Flathead )
111-� X(--//
otary Public, State of Montana
Printed Name: Lary, )CIISSf.0
Residing at ) aAi,,2
My Commission Expires D_/ZSO2l
On this _ day of , 2018, before me, a Notary Public in and for the State
of Montana, personally appeared DOUG RUSSELL, known to me to be the City Manager of the
City of Kalispell, a municipality, that executed the within instrument, and acknowledged to me
that such City Manager executed the foregoing instrument as the free and voluntary act of said
municipality, for the uses and purposes therein set forth, and that he was duly authorized to
execute the same on behalf of said municipality.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal,
the day and year first above written.
Notary Public, State of Montana
Printed Name:
Residing at
My Commission Expires
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