5. Resolution 5506 - URA Recommendation for Old School Station TIF Distribution=F ... .... ...... ...
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MEMORANDUM
TO: Mayor Tammi Fisher
And Kalispell City Council
FROM: Jane Howington, City Manager
Wade Elder, Revolving Loan Fund Manager
City of Kalispell
Urban Renewal Agency
201 1 st Avenue East
Kalispell, MT 59901
h P one 405.758.7738
Fax: 406.758.7758
SUBJECT; Glacier Investment Properties request for Old School Station Technology
TIF distribution.
MEETING DATE: July 5, 2011 - Regular Council Meeting.
BACKGROUND: The Old School Station Technology (OOST) TIF was established on
11/21/05 through the passage of Ordinance 1558. It established the base year for calculating the
tax increment as January 1, 2005. The amount of funds in the OOST TIF account as of 06/29/ 11
was $15,495.67 and the projected ending balance (06/30/12) in the proposed FY 2012 is
$1,374.00. The projected revenues from the proposed FY 2012 budget are $33,700.00.
The City of Kalispell received a request from Glacier Investment Properties (GIP) requesting
$464,489-00 dated October 26, 2010. Funds are being requested for improvements at their
location of 125 School House Loop, Kalispell, MT (Lot 7, Old School Station).
The Urban Renewal Agency (LIRA) Committee met on November 17, 2010 and discussed a
request from GIP in the amount of $464,489.00 for Land Acquisition costs, SID Costs, Late
Comers Fees, Impact Fees and Special Wiring from the OSST TIF. Present representing GIP was
Brad Kastelitz and Jim Barrett. There were concerns from the Committee that there were no
funds available for the request in the OSST TIF. This comment lead into funds of future
payments being refunded back to the property owners such as what is being done at the Fed Ex
property in this same TIF District. There were concerns of why this project was done in 2007 and
now being brought forward. GIP representatives commented there had been a verbal application
to the City back in 2007 before they bought the property that were never acted on. The Commit-
tee presented a motion to recommend to City Council that in light of the purported verbal
application GIP had previously with the City of Kalispell the URA is recommending the City
Council approve a request of $21,376.00 for special wiring (if the wiring is for public infra-
structure and not specifically for the GIP building) be approved. This motion passed with a 3 to 2
vote.
In discussion with GIP they requested the motion passed by the URA Committee on November
17, 2010 not be sent to the City Council as they wanted to work with the City staff and the URA
to make adjustments to the request and what is an allowable item.
The URA Committee met on January 19, 2011 and discussed a memorandum dated January 3,
2011 from City Attorney Charlie Harball that covered the subject "Historical Outline of Old
School Station re: TIF' It was discussed that distributions of funds in the Old School Station
(OSST) TIF for payments of Special Improvement District (SID) bond obligations is an
approved use of funds. This was done with a motion by a 4 to 1 vote to present to Council a
recommendation to amend the guiding document to include an additional item # 15 for which
OSST TIF funds can be considered to pay up to 100°Io of the SID payments on each property
owner's parcel, with a sunset of 5 years.
City Council met on February 7, 2011 and approved Resolution 5480 in which it made it
allowable for 'TIF funds to be used for Special Improvement District assessments.
The City of Kalispell received a request from Glacier Investment Properties (GIP) requesting
$277,414.00 dated March 31, 2011. Funds are being requested for improvements at their location
of 125 School House Loop, Kalispell, MT (Lot 7, old School Station).
The URA Committee met on May 4, 2011 to consider the request of GIP. GIP was represented at
the meeting by John Peterson.. Mr. Peterson and all members of the committee as well as the City
Attorney Mr. Harball and City Revolving Loan Fund Manager Mr. Elder participated in the
discussion. The URA Committee looked at the request from GIP and voted on a motion to
recommend to City Council the request be approved or declined as follows
AMOUNT
PURPOSE
$1359915
SID Request
$ 55,095
Land
$ 579840
Late Comers Fees
$ 45500
Landscaping
$ 41047
Road Apron
$ <1,359>
Public Utilities
YES VOTES No VOTES
1 3
1 3
0 4
1 3
Not voted on as is a negative number.
$ 215376 Personal Property (wiring) 0 4
The recommendation does not include how the funds were to be paid only that they are
recommending to approve the $135,915 SID request and that the other items be declined.
There was a second motion that the funds paid are not to exceed 10 years in term. or 100% of the
SID payments paid by the property owner in the annual tax payments. This was approved in a
vote of 4 to 0.
RECOMENDATI0N: A motion for approving a refund back to Glacier Investment
Properties of the funds being paid into the Old School Station Technology TIF District up to the
maximum amount of the Special Improvement District payments (on Lot 7 of Old School
Station) on an annual basis for the next 10 years would be in order.
FISCAL IMPACTS. A reduction of the old School Station Technology TIF District
fund over the next 10 years up to the maximum of the amount of the Special Improvement total
payments. Assuming the maximum is being paid out of the full SID payments the total would be
$1101277.66.
Respectfully submitted,
Wade Elder, Revolving Doan Fund Manager
vl�
Aane Howington, City Manager"
P
SCHOOL is -:
A RESOLUTION TO AUTHORIZE A ► DISTRIBUTION TECHNOLOGY TAX INCREMENT DISTRICT FOR THE PURPOSES OF
HEREA.S, on the 21. st day of November, 2005 the City of Kalispell established the Old School.
Station Technology Tax Increment Financing (TIF) District with ordinance No. 1.558
pursuant to the authority granted the City under MCA Title 7, Chapter 1.5, Part 42; and
WHEREAS, the city received a request from Glacier Investment Properties (GIP), owner of Lot 7, old
School Station, for a distribution from the old School Technology TIF account in the
sure of $2771,41-3.00 for the purpose of land acquisition costs, SID costs, latecomers fees,
and special wiring for Lot 7, old School Station; and
WHEREAS, on February 7, 2011., the Kalispell City Council passed Resolution No. 5480 which
specifically allowed the use of TIF funds to pay Special Improvement District
assessments; and
WHEREAS, the Urban Renewal Agency met on May 4, 201.1 and fully considered the request of
Glacier Investment Properties and determined to recommend to the City Council that it
partially approve the distribution request by recommending that each year the tax
increment payments contributed by Lot 7, old School Station be applied to the SID bond
obligation share of Lot 7, old School Station for a period not to exceed 10 years and in
an amount not to exceed 1.00% of the SID obligation on Lot 7, Old School Station; and
WHEREAS, the Kalispell City Council finds in this case that the application of tax increment
generated by the parcel within the old School Station Technology TIF District against
the SID obligation assigned to that parcel meets the goals of the district by funding the
public infrastructure within the district and attracting investment to the district.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL of THE CITY of KALISPELL.
AS FOLLOWS:
SECTION I. The City Manager is authorized to instruct the Finance Director to apply the tax
increment payments contributed by Lot 7, old School Station to the SID bond
obligation share of Lot 7, old School Station for a period not to exceed 10 years
and in an amount not to exceed 100% of the SID obligation on Lot 7, old School
Station.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR of THE
CITY OF KALISPELL, THIS 5TH DAY OF JULY, 201 L
Tammi Fisher
Mayor
/�1�Itf�T.`
Theresa White
City Clerk
Tel 406.758.7709
Fax 406.758.7771
ch arbal I @ kal ispel 1. com
Mayor Tar nu* Fisher
and Kalispell City Council
Charles Harball, City Attorney
Jane Howington, City Manager
Resolution No.5480 — a Resolution Clarifying the Guidelines of t�v-t
City Regard*ng the Util* ation of Tax Increment Financing N-0 I ILZ
February 7, 2011 — Regular Council Meeting
Prior to the estabhshment of the URA the Council approved a developer's agreement with the
mvestor that constructed the FedEx facility in Old School Station. This agreement approved the
use of tax m"crement created by the FedEx facility property to be applied toward the annual SID
assessments against that property. The URA does not question the authority or discretion of the
Council to enter into that agreement. But for the reason that such use of increment is not
specifically stated within the existm*g glu'dehnes, the URA seeks this clarification M anticipation
of receiving future applications from M'Vestors. seeking this benefit.
RECOMMENDATION: That City Council give consideration to and pass Resolution No.
5480. The Resolution shall become effective immediately.
FISCAL HVIPACTS: There are no anticipated fiscal * acts to the City from this proposed
IMP
resolution.
Respectfully submitted,
Charles Harball, City Attorney ane Howington, City Ma�4ger
A RESOLUTION CLARIFYING THE GUIDELINES OF THE CITY OF KALISPELL
REGARDING THE UTILIZATION OF TAX INCREMENT FINANCING WITHIN TAX
INCREMENT DISTRICTS THAT HAVE PUBLIC IMPROVEMENTS FINANCED THROUGH
SPECIAL IMPROVEMENT DISTRICT DEBT.
WHEREAS, the City of Kalispell has established a number of tax increment districts Pursuant to its
authority and the terms of state law; and
WHEREAS, the City of Kalispell has also established, pursuant to its authority and the terms of state
law, a number of special improvement districts for the purpose of funding certain public
improvements; and
WHEREAS, a special improvement district on which public improvements were constructed and
financed through city debt, secured by and assessed to the properties directly benefitted
by such public improvements may also be within a tax increment district; and
WHEREAS, the existing tax increment distribution guidelines established by the Council at Resolution
No. 4609 and Resolution No. 5262 specifically enumerate the statutorily permissible uses
of tax increment that includes the use of such funds for public improvements and
establishes the eligibility of businesses that locate or expand within the city that are of a
manufacturing, technological, office, professional or technical service nature to receive
increment benefits in an industrial or technology tax increment district; and
WHEREAS, the Kalispell City Council hereby finds that in instances in which the City establishes a
special improvement district and issues bonds for public improvements and also
establishes a tax increment district over the same area, it is appropriate that tax increment
benefits be considered for otherwise eligible businesses electing to locate and make
private investment within the districts for the purposes of paying the special improvement
district assessments of that district.
NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF T-HE CITY OF KALISPELL
AS FOLLOWS:
SECTION 1. That the tax increment distribution guidelines for the City of Kalispell shall
include the allowable use of tax increment to be the payment of special
improvement district assessments on property owned within such special
improvement district and within such tax increment district for the benefit of a
property owner of an eligible business electing to locate and make private
investment within the districts.
PASSED AND APPROVED BY TAUS CITY COUNCH-, AND SIGNED BY THE MAYOR OF THE -
CITY OF KALISPELL, THIS 7TH DAY OF FEBRUARY, 2011. P
ATTEST:
. . . ... . ..........
Theresa White
City Clerk
Tammi Fisher
Mayor
Tel 406.758.7709
Fax 406.758.7979
charb al I @ kal ispel I . com
0
To-, KalispJ
0
CCIP Wade Elder, Jane Howingtoll
omo Charles A. Harball, Kalispell City Attorney
Subject: Historical Outline of Old School Station re: TIF
in
At the time when the previous city manager, Jim Patrick, was searching for ways tf
bring business investment into the city, he discovered that an investor had
purchased property south of the city with plans to construct a business park. He
made contact with them and discussed the possibilities that the property may be
annexed into the city so that the city might benefit from the increased tax base. I
The basic framework of the exchange was that the investor would pay the cost of
running the utility infrastructure to the property and deed the utilities to the city
when it was completed according to city specifications. The city would enter into a
latecomer agreement with the investor such that properties hooking into the utility
services would pay a fee to reimburse the investor for Isis outlay.
Further, the city would cooperate with the financing of needed ln&astructure within
the business park by creating a special improvement district. Such a district is
eligible for relatively attractive financing through the issuance of bonds for which
the individual parcels within the park would be primarily responsible.
Finally, the city would create an industrial tax 'increment district and a technology
tax increment district within the park as an overlay to the SID. The intent was
that the tax 'increment created by investment within the districts would create
revenue that would be used to pay on the SID bond obligations.
Memorandum Re: Old School Station — Historical Context
January 3, 2011
Page - 2
F�.articular to the plan and its execution are the following relevant incidents:
Glacier Investments constructed its facility sometime after the interior
infrastructure of the SID was completed but prior to execution of the latecomer
agreement. Once the latecomer fee was established, Glacier Investments paid that
obligation. Inquiry was made to the city prior to its purchase and construction as to
I ^
the statutory eligibility for tax increment financing. Consultation with Department
of Revenue detennined that its activities would be deemed legally eligible.
In the meantime the city was attempting, with the assistance of bond counsel, to
negotiate a master agreement with the owner of OSS regarding the utilization of
TIF. Such an agreement would set out terms that investors would be able to rely
upon to determine the value of investing in a parcel. The agreement would
deterimine the criteria that businesses would need to meet in order to be eligible for
TIF benefits. For a variety of reasons, this agreement has never been reached.
Office of City Attomey
City of Kalispell
Memorandum Re: Old School Station — Historical Context
January 3, 2011
Page - 3
Office of City Attorney
City of Kalispell
Glacier Invest ant Properties
125 School House Loop
Kalispell, MT 59901
[406] 752-2216
March 30, 2011
City of Kalispell
Urban Renewable Agency
201 1st. Ave. East
Kalispell, MT 59901
Attn: wade Elder — Program Manager
Re: Old School Station — TIF
Dear wade:
Glacier Investment Properties [GIP] is resubmitting with this letter our application for
Tax Increment Financing [TIC`] for our Morrison Majierle Office project located in Old
School Station [OSS]. Tong with the NEW application, form, we are attaching our
previous letter with a written narrative of the project's development.
Based on meetings with you, the City of K.alispell's attorney and our attorney, GIP now
dirks we understand what funds qualify for TIF. The attached spread sheet includes [61
items for which we are requesting finding. we Have broken each of these items down to
ghat extra cost there were to the project because we built in O S S .
Our revised request for funds is $277,414 or a 4O% reduction from our previous
request. Representatives of GIP will attend your next review session to answer any
questions you may have on our request.
�,r*nsarrai���
"'LACIER INVESTMENT PROPERTIES
P. O. BOX 8057
KALISPELL, MT
October 26, 2010
City of Kalispell
Revolving Loan Fund Program
201 1 "Ave. East
Kalispell, Montana 59901
Attn.- Wade Elder — Program Manager
Re: TIF — Old School Station
Dear Mr. Elder:
Glacier Investment Properties [GIP] is submitting with this letter our application for Tax
Increment Financing [TIF] for our Morrison Maierle Office project located in Old School
Station [OSS j. Along with the application form, GIP would like to give you a narrative
of the project's development.
In 2006 GIP started working with Morrison Maierle Inc [M-Mj on the possibility of
providing them with a new facility in order for M-M to have room to expand their
practice. Their existing facility had 4,700 sq. ft and was at capacity with their 20
employees. The economy was very strong at that time. The need to expand locally or
shift some of their employees to another town that already had extra capacity was
considered in order to meet their projected work load. Engineering is very different from
retail sales or manufacturing, it can be done anywhere with the finished product emailed
to the local office. M-M preferred to keep everything local.
M-M was the engineer of record for the OSS subdivision and utilities. They were very
interested in relocating to OSS. As GIP started to put together construction budgets and
land cost in early 2007 it became apparent that OSS was not the most economically
feasible location for the project. The asking price for lot No. 7 was $244,093. We had
looked at other locations both north and south of Kalispell [outside the City limits] where
lots were approximately $150,000 or 40% less than OSS. The final decision to relocate
in OSS was made based on the quality of the subdivision.
Other costs that came with the lot were the $135,915 SID and $26,641 Impact Fees. This
was disclosed to us by the seller prior to the purchase of the property. On or about April
111 2007 there was a meeting between the City of Kalispell and Old School Station to
hammer out issues with the TIF funds, Two of the partners of GIP attended this meeting
where GIP was assured that the M-M project would qualify for TIF funds. [note that no
TIF application forms had been developed at that date]
In May of 2007 GIP purchased Lot No. 7 of OSS. The total land cost impact on the lease
rate was $406,649. Construction started around June of 2007. Then on October 2, 2007
GIP received an email stating that we may owe $1,781,209 in Late Comers Agreement
Fees [LCA]. It is important to understand that until that date it had never been disclosed
to GIP that there was a LCA. In fact, we had the building framed, roofed and utilities
were installed to the building prior to the "writing" of the LCA, It was later determined
that the proposed LCA fee would be $57,840 and GIP reluctantly agreed to pay it on
March 18, 2009 well after the project was completed.
This brought the total land cost impact on the lease rate to $464,489. Our decisions to
buy the land, pay the SID, pay the LCA, pay the Impact Fees were all made knowing that
we were assured in 2007 that the M-M project qualified for the TIF funds.
This should bring the Committee up to date on the history. As GIP started working on
the TIF application, we asked the City for a copy of FedEx's application so we could try
to follow their procedure. What we found out was that they were not required to fill out
the application. Resolution No. 5396 was approved by the City of Kalispell in October of
2009 without an application.
We have in fact filled out the TIF Application which is attached to this letter. We believe
that GIP's Morrison Mal' erle Office meets all of the requirements for TIF funding.
* M-M needed to expand or relocate to another City where they have existing space
0 GIP built a 12,934 sq. ft. office building to assure that M-M maintained a fall
work force in Kalispell with room for additional work force
0 Our project costs are $2,312,937
0 The building and site are laid out for an 11,060 sq. ft. addition
e M-M's staffing went from 20 to 25 when they moved into the building [25%
increase]
e The improvements to the site have substantially increased the taxable value of the
lot and the remaining subdivision
a The M-M project acts as a stimulus to attracting more High Technology business
to oss
We are asking for funds to cover the following cost as outlined in MCA 7-15-4288
Section 4:
Land cost $244,093
SID cost equaling $135,915
LCA cost equaling $ 573840
Impact Fees $ 26,641
Special Computer Wiring L21 P7 -`
Total $464A9
Our Morrison Maierle office pro,0ect has completed exactly what Tax Increment
Financing was intended to do. Low taxable value land was turned into a high taxable
land for technology use. By developing this project, we were able to assure that
Morrison Maierle who has a majority of its employees located outside of Kalispell will
have a presence in Kalispell for a long time. And lastly, the quality of our tenant,
Morrison Maierle will help to encourage others to invest m* old School Station and
Kalispell, MT.
As requested or suggested., we are processing this application to complete the process to
cone to a successful. conclusion. Whereupon those who follow us will learn to
appreciate the cooperation extended by the City of Kalispell to keep a viable economy in
tact.
Thanks you,
hn W. Peterson