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