Memo/Harball/Resolution for Sale of Armory PropertyW, '1
Charles A. Harball Office of City Attorney
City Attorney 312 First Avenue East
P.O. Box 1997.
Kalispell, MT 59903-1997
TO: Mavor Pamela B. Kennedy
and Kalispell City Council
FROM: Charles Harball, City Attorney
James H. Patrick, City Manager
Tel 406.758,7708
Fax 406.758,7771
charball@kalispell.com
SUBJECT: Resolution No. 5114 — A Resolution to Sell the Armory
Property to Gateway Hospitality Group, Inc.
MEETING DATE: Monday, May 1, 2003 — Regular Council Meeting
BACKGROUND: Earlier this calendar year, the Montana National Guard moved
out of the Armory property at 1840 Highway 93 South and ownership of the
property reverted back to the City of Kalispell. The 3.4 acres that comprises this
property has been used as an armory since the 1950's and is located within the
Kalispell Airport Tax Increment District and previously found by City Council to be
blighted and in need of urban renewal.
The City obtained an appraisal of the property and determined that the fair market
value was approximately 1.2 million dollars. Based upon the urban renewal plan
approved by council, a Request for Proposals with specific criteria was then
generated and published to seek interest from the development community to inject
capital into this property.
Gateway Hospitality Group, Inc. [Gateway] was the sole respondent to the RFP, but
submitted a substantial proposal. The proposal meets the criteria of the RFP on
many points. The full -appraised market value is being offered although Gateway
has no need of the structures on the property. Gateway will invest approximately
15 to 18 million dollars in the property with in -ground improvements expected to be
in the range of 12 million dollars providing a much needed boost to the tax base
within this TIF district. The proposed 117,300 square foot facility is a MEMM Hotel
and conference center with a full service restaurant and casino. The conference
center meets the RFP criteria by bringing in and circulating out of area dollars into
our local economy. Other hotels in the area can expect to benefit from the
conference overflow. Although the facility is in the service industry, it will create a
substantial number of jobs, including some higher management positions. Gateway
desires to be located adjacent to the City Airport as it anticipates benefit from fly -in
Sale of Armory
April 27, 2006
Page - 2
consumers. The City Airport will also benefit from the additional business this may
generate.
RECOMMENDATION: The City Council should consider and pass Resolution No.
5114 authorizing the sale of the Armory property to Gateway Hospitality Group,
Inc. The property was marketed by the City as a TIF project for the purpose of
attracting investors such as this. As urban renewal is the impetus to this project,
the City should use the statutory tools available to it to make the project happen.
Gateway came to the City with the anticipation that up to 10% of its hard costs
investment could be contributed by the City through its TIF district. It was for this
reason that Gateway responded to the RFP. Staff is recommending that the
developer's agreement allow the City to contribute up to $890,000 on the project,
which is approximately 7Y2% of the anticipated hard costs that will be invested by
Gateway. Gateway is further offering to enter into a Net Proceeds Agreement of
10% with the City, which gives the City the additional opportunity for additional
payback of its investment upon the sale, refinancing or exchange of the property.
Staff further recommends that the Council direct that the proceeds of the sale be
held in an interest bearing account until such time as the Community Center
Committee has developed recommendations for a Community Center and a public
hearing can be held to elicit public comment regarding the use of the sale proceeds
toward the development of a Community Center and the City Council makes its
final determination. It seems appropriate that the matter of the sale of the property
be kept separate from the issue of how the City will best use the proceeds.
FISCAL EFFECTS: It can be anticipated that the fiscal effects to the City from
this sale and agreement will be substantially favorable. The increased tax base will
generate increased tax revenue. The facility will be an anchor to the south entrance
to the City which will likely spur additional much needed investment and urban
renewal to this part of our City. The additional jobs created by the facility will
circulate more dollars within the community as will the additional tourist dollars
generated by the conference center.
Respectfully submitted,
Charles `I-farball, City Attorney es H. Patrick, City Manager
Office of City Attorney
City of Kalispell