Loading...
I5. Res. 6027, Repealing Non-Profit Payment In lieuCITY OF City of Kalispell KTALISPELL post Office Box 1997 -Kalispell, Montana 59903-1997 elephone (406) 758-7700 Fax - (406) 758-7758 MEMORANDUM To: Honorable Mayor Johnson and City Council From: Doug Russell, City Manager Re: Repeal of Resolution No. 5374, Non -Profit Payment in Lieu of Taxes Meeting Date: May 17, 2021 BACKGROUND: In 2009, the City Council passed Resolution No. 5374, requiring a Payment in Lieu of City Taxes (PILT) for any non-profit entity that competes directly with local property tax paying entities. While there are arguments for having PILT agreements, as outlined in Resolution 5374, there are also reasons to consider repealing the resolution. These include the overall limited applicability, determining when the entity is actually directly competing against for -profit entities, and the addition of additional fiscal obstacles for non -profits with the provision of services. The City currently has three PILT agreements, with providers of housing in the community. As housing is currently one of the areas that has been identified as a community need, especially housing that could be provided by our non-profit community to address potential needs in the unhoused population or housing that meets potential Federal and State housing program requirements, it is worth considering the value of repealing this resolution to aid our non-profit sector with the provision of these services/programs, be it housing, or some other form of service. FISCAL IMPACT: The City of Kalispell budgets approximately $20,000 in the general fund based on previous PILT agreements. Repealing this resolution would remove that revenue from our annual budget. RECOMMENDATION: It is recommended that the City Council approve Resolution 6027, a resolution repealing Resolution No. 5374, which requires non-profit entities to enter into a PILT agreement when providing services that compete with for profit entities. ATTACHMENTS: Resolution 6027 Resolution 5374 RESOLUTION NO. 6027 A RESOLUTION RESCINDING RESOLUTION NO. 5374 THAT ESTABLISHED THE CITY OF KALISPELL POLICY THAT THE CITY WOULD REQUIRE IN CERTAIN CIRCUMSTANCES AN AGREEMENT OF PAYMENT IN LIEU OF CITY TAXES (PILT) BETWEEN THE CITY OF KALISPELL AND ANY NON-PROFIT ENTITY RECEIVING A TAX-EXEMPT STATUS FROM THE STATE OF MONTANA. WHEREAS, on July 6, 2009 the Kalispell City Council passed Resolution No. 5374 in which the policy was established requiring payments in lieu of city taxes from any non- profit entity receiving a tax-exempt status from the state of Montana, if that entity competes directly with local property taxpaying entities, and seeks services from the City of Kalispell requiring a building permit for new construction that creates additional enclosed space; and WHEREAS, Resolution No. 5374 was an expression of concern and response by the Kalispell City Council to the revenue constraints brought on by a severe economic recession and the fact its valuable municipal services could only be provided through the receipt of property tax revenues paid by City residents who paid those taxes; and WHEREAS, during the course of the economic recession and subsequent recovery there were only a small number of qualifying nonprofit real estate improvements constructed with the associated PILT agreements actually established; and WHEREAS, it is the desire of the Kalispell City Council to encourage nonprofit organizations to engage in community building ventures and to provide such specialized community services that the municipal government is unable to provide; and WHEREAS, the Kalispell City Council has concerns that, going forward, Resolution No. 5374 may have a chilling effect upon the vigorous activities of the nonprofit organizations that can provide such essential services; and WHEREAS, the Kalispell City Council finds that it is in the best interest of the City, its taxpayers, and citizens that Resolution No. 5374 be immediately rescinded and that all existing PILT agreements be terminated. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, AS FOLLOWS: SECTION L That it hereby immediately rescinds the policy of the City of Kalispell expressed in Resolution No. 5374 and terminates all existing Payment in Lieu of City Taxes (PILT) agreement. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL, THIS 17TH DAY OF MAY, 2021. Mark Johnson Mayor ATTEST: Aimee Brunckhorst, CMC City Clerk RESOLUTION NO.5374 A RESOLUTION ESTABLISHING THE POLICY OF THE CITY OF KALISPELL THAT THE CITY SHALL REQUIRE AN AGREEMENT OF PAYMENT IN LIEU OF CITY TAXES (PILT) BETWEEN THE CITY OF KALISPELL AND ANY NON-PROFIT ENTITY RECEIVING A TAX EXEMPT STATUS FROM THE STATE OF MONTANA WHEN THAT ENTITY COMPETES DIRECTLY WITH LOCAL PROPERTY TAXPAYING ENTITIES AND SEEKS SERVICES FROM THE CITY OF KALISPELL REQUIRING A BUILDING PERMIT FOR NEW CONSTRUCTION THAT CREATES ADDITIONAL ENCLOSED SPACE. WHEREAS, the City of Kalispell provides services to the public, which services include fire and police protection, amenities such as parks and recreation and other general public services; and WHEREAS, the City of Kalispell is only able to provide these valuable services through the receipt of property tax revenues paid by City residents whose property is taxed; and WHEREAS, certain entities (non -profits) that own property in the City of Kalispell and receive the valuable services of the City of Kalispell may apply for and receive a tax- exempt status from the State of Montana Department of Revenue, in which case all property taxes, including city taxes (not special assessments) are abated on the theory that the community receives benefits from the entity that are equal to or greater than the tax revenue otherwise generated by the entity; and WHEREAS, certain non-profit entities that own property in the City of Kalispell and have property taxes abated compete in the local market directly with for -profit entities that pay city property taxes and therefore pay for the services provided by the City and it is therefore the finding of the City Council of Kalispell that this presents an undue advantage to the non-profit entity; and WHEREAS, the City of Kalispell is currently significantly challenged to continue to provide an adequate level of services to its taxpayers, partly as a result of the number of entities that have applied for and received tax exempt status although the City continues to provide its valuable services to these entities; and WHEREAS, the City Council of the City of Kalispell finds that it is in the best interest of the City, its taxpayers and citizens that entities, otherwise exempt from paying city property taxes, and that compete in the local market with taxpaying entities and that receive and benefit from the valuable services provided by the City make reasonable payment to the City of Kalispell in the form of payment in lieu of City taxes; and WHEREAS, the City Council further finds that the necessary consideration triggering this requirement shall be upon the application of the non-profit entity for a building permit from the City for new construction that creates additional enclosed space. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF KALISPELL, AS FOLLOWS: SECTION L That it shall hereby be the policy of the City of Kalispell to require an agreement of Payment in Lieu of City Taxes (PILT) between the City of Kalispell and any entity receiving a tax exempt status from the State of Montana that competes in the local market with taxpaying entities when that entity receives substantial valuable services from the City of Kalispell. SECTION II. That at such time as a tax-exempt entity applies to the City of Kalispell Planning Department for a building permit for new construction that creates additional enclosed space, the Planning Department shall negotiate a PILT agreement with that entity for the City of Kalispell. The Planning Department shall also prepare a cost of services analysis which shall include an estimate of the City taxes the nongovernmental entity would otherwise pay if it were not tax exempt as well as a reasonable annual estimate of the cost of services the City provides to the property. SECTION III. Upon reaching a tentative PILT agreement with the entity the City of Kalispell Planning Department shall provide such agreement and cost of services analysis to the City Manager who shall present it at the next regularly scheduled City Council meeting for review and approval by the City Council. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL, THIS 6TH DAY OF JULY, 2009. ATTEST: Theresa White City Clerk