02/05/90 Tax Increment Policy Manual004
TAX INCREMENT POLICY MANUAL
(Procedures Necessary to Implement Tax Increment
Provisions of ordinance #933)
Adopted Pursuant to Resolution No. 3922 , February 5, 1990
OR4
To assist the City Council, the Kalispell Development Department
Corporation (KDC) contemplates working as closely as possible with
developers seeking the use of tax increment funds. The KDC's primary
objective relative to assisting potential developers will be to assure
that all project proposals are complete in terms of -providing all the
necessary information to allow the City Council to make a decision
regarding the proposal. Successfully performing this function should
eliminate the possibility of the City Council delaying action due to
a lack of information.
The KDC's primary objective in assisting the City Council is to
prepare a sound recommendation pertaining to each project proposal's
potential for efficient use of the funds. The KDC has adopted the
following goals and priorities pertaining to the use of tax increment
funds. All project proposals will be evaluated according to how well
they meet the goals and priorities._ -
REDEVELOPMENT GOALS
To eliminate slums and blighting influences as well as inappropriate
land uses within the Redevelopment Area and specifically the Central
Business District, and to free land for development into more economic
uses. To establish a pattern of land use within the Redevelopment
Area which is functional, imaginative, and achievable, and which
provides for residential, commercial, and industrial development. To
provide a system of off-street parking facilities which recognizes
the needs of the shopper, the businessman, and the employee. To
develop a traffic circulation system within and around the Central
Business District and Redevelopment Area which provides for safe and
convenient automotive and pedestrian movement. To strengthen the
Central Business District's position as the retail, business, and
financial center of northwest Montana.
PROJECT PRIORITIES
The amount of economic activities to be generated by the project, the
total employment generated by the proposed activities, the increase
and expansion of the tax base with the planned development and the
project's impact on the fiscal deterioration within the Redevelopment
District and community. Other forms of financing that will be leveraged
with the project, the developer's past performance and the total
feasibility of the project.
Section 7-15-4288, MCA. Costs whict
financing. The tax increments may be
the following costs of or incurred in
project:
(1)
may be paid by tax increment
used by the municipality to pay
connection with an urban renewal
05*4 PSI
(1) land acquisition;
(2) demolition and removal of structures;
(3) relocation of occupants; and
(4) the acquisition, construction, and improvements of
streets, curbs, gutters, sidewalks, pedestrian malls, alleys,
parking lots and off-street parking facilities, sewers,
waterlines, waterways, public buildings, and other public
improvements authorized by parts 41 through 45 of chapter
12, Parts 42 and 43 of chapter 13, and part 47 of chapter
14 and items of personal propero be used in connection
with improvements for which the foregoing costs may be
incurred; and
(5) costs incurred in connection with the redevelopment
activities allowed under 7-15-4233;
(6) acquisition of inf rastructure-def icient areas or portions
thereof;
(7) administrative costs associated with the management of
the industrial districts-
(8) assemblage of land for development or redevelopment by
private enterprise or public agencies, including sale, initial
leasing, or retention by the municipality itself at its
fair value;
(9) the compilation and analysis of pertinent information
required to adequately determine the infrastructure needs
of secondary, value -adding industries in the industrial
district;
(10) the connection of the industrial district to existing
infrastructure outside the industrial district; and
(11) the provision of direct assistance to secondary,
value -adding industries to assist in meeting their infra-
structure and land needs within the industrial district.
Tax increment may be pledged to the payment of the principal of
premiums, if any, and interest on bonds which the Agency may issue
pursuant to state law for the purposes listed above for the purpose
of providing funds to pay such costs.
PROCEDURE FOR REVIEW OF PROPOSALS FOR TAX INCREMENT FUNDS
1. Initial contact to present a proposal for the use of
tax increment funds shall be made through the Community
Development Department. Application forms and development
criteria will be made available to developers.
Applications shall consist of a written project proposal
providing the following information:
-Name, address, etc. of the applicant.
-Location of the project.
-How much money is being requested?
-Will TIF funds be in the form of a loan?
-What is the proposed use of the funds?
M
-What are the requested terms of the agreement? (How long
for repayment? How will it be repaid?)
-What combination of funding will be used in the project?
-Some idea of what increase in taxes would be generated
from the project.
-A brief history or track record of the applicant.
-Do they plan to take advantage of the tax incentives such
as the remodeling tax credit?
-Any additional items as determined by City staff or the
KDC.
2. The Community Development staff shall submit the project
proposals to the City Council for informational purposes.
Staff will refer all proposals to the KDC for processing.
3. KDC Action - the KDC working through the Tax Increment
Committee (TIC) will conduct meetings upon demand with proper
public notices. The KDC/TIC will provide the City Council
with copies of minutes of all meetings® City staff will
act as staff for the KDC/TIC and provide the members with
copies of project proposals prior to _meetings. Groups
making proposals will be asked to limit their presentations
to approximately 20 to 30 minutes with only one speaker
participating in the actual presentation. Under no circum-
stances will the KDC/TIC consider taking action on a proposal
unless all parties involved in the proposal are present or
represented by someone with the authority to make commitments
on their behalf. The KDC/TIC will prepare a written recommen-
dation for consideration to the City Council. Presentation
will be made by the KDC/TIC and the proposed developer at a
work study session of the City Council. The applicant will
receive a copy of the recommendation.
4. City Council Action - The City Council, as Urban Renewal
Agency, may act upon the proposal at the regularly scheduled
meeting or work session or, if it deems necessary, may
schedule a public hearing to consider the proposal. At the
time that the Council considers the proposal, it will permit
all interested parties to present information pertinent to
the proposal.
Any project proposal receiving approval by the City Council
should be documented and finalized through the use of a
legally binding "Development Agreement". Such an agreement
will specify, in detail, what all parties involved in the
proposal have committed to loan, pay, develop, etc.
'PON
APPLICATION PROCESS
TAX INCREMENT FINANCING
I. INTRODUCTION
The existence of blighted areas within the municipalities of Montana
has been identified by the state legislature as a problem which
requires government action. Enabling legislation has given local
governing bodies the authority to establish urban renewal districts,
utilize urban renewal powers, and implement urban renewal projects
through the use of tax increment financing. Tax increment financing
(TIF) is a significant element of the urban renewal law, allowing
urban renewal programs to be financed locally without reliance on
limited 'federal funds. The principal behind TIF is the ability of
the local governments to use the increase in taxes within a specified
district above an established base year for redevelopment projects.
In 1979 Kalispell adopted an urban renewal plan and designated the
central business district as a blighted area. Property taxes continue
to be paid to all taxing jurisdictions on the basis of the 1979
taxable valuation. Any subsequent tax increases due to new development,
inflation, or re -appraisals, however, are set aside for the City of
Kalispell which has been delegated the authority to undertake urban
renewal efforts. After the expiration of urban renewal authority on
1987 or after retiring of all bonded indebtedness incurred for renewal
activities, the base year restriction is eliminated and the local
taxing jurisdictions obtain the additional tax revenues generated
through redevelopment.
Tax increment financing is not an abatement program for new development.
Revenues obtained, however, may be utilized to encourage the implemen-
tation of public or private projects. As specified in state law, the
City of Kalispell may utilize TIF for the following activities:
1) land acquisitiion;
2) demolition and removal of structures;
3) relocation of occupants;
4) public improvements; and
5) costs incurred in the exercise of urban renewal powers,
including urban renewal projects as authorized by Kalispell
City Council, Ordinance #933. Loans and grants may be
eligible under this provision.
6) acquisition of infrastructure -deficient areas or portions
thereof;
7) administrative costs associated with the management of
the industrial district;
8) assemblage of land for development or redevelopment by
private enterprise or public agencies, including sale, initial
leasing, or retention by the municipality itself at its
fair value;
9) the compilation and analysis of pertinent information
required to adequately determine the infrastructure needs
of secondary, value -adding industries in the industrial
district;
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10) the connection of the industrial district to existi
infrastructure outside the in« R and
11) the provision of direct assistance to secondary,
.•• • • assist in meeting their infrastructur
• land needs within the industrialdistrict. I
II. APPLICATION PROCESS
The City Council of the City of Kalispell has the authority to assist
developers in the implementation of redevelopment projects. The
following procedure has been developed to process TIF funding requests.
Costs to be paid with TIF monies may not be incurred by the applicant
prior to the effective date of funding approval and the satisfaction
of any conditions of such approval.
Contact the City of Kalispell Community Development
Department, 12 Third Street East, Whipps Building, Suite 9,
to discuss the project and determine eligibility for TIF
assistance.
Prepare Application - The CD staff will assist the developer
in preparing a formal application.
Staff Review - upon submittal of all necessary information,
the staff reviews the merits of the project and the need
for funding.
Board Review & Decision - The Kalispell Development Corpor-
ation (KDC)/Tax Increment Committee (TIC) reviews the project
and staff recommendation, and either recommends approval/
disapproval for funding request or requires more applicant
information.
City Council Review and Approval - The City Council of the
City of Kalispell will review and make the final decision
on the KDC/TIF recommendation.
A developer must submit a written application for each proposed project.
The following information would generally be required in the application.
Based on the nature and amount of the request, the CD director may
exercise discretion in the application information requirements. In
particular, the director may waive the requirement of personal financial
statements when not deemed necessary for the evaluation of a project.
At any point in the review process, the staff or board may request
more information of the applicant. The CD staff will assist the
developer, when necessary, in developing the information.
1. Project Description - a description of the project,
type of development and scope of work including:
(5)
W
- plans/schematics
- project schedule
completion of project
- project feasibility
and economic feasibility
proposed timetable for
substantiate the market
of the -project.
2. Project Financing - a description of the financial
arrangements of the project to include:
- source of funds - detailing terms and conditions.
-lender commitments - evidence of commitments of
funds necessary for completing the project
-cost breakdown - estimated cost of project
-proforma - projections of anticipated income,
expenses, cash flow and depreciation for the first
five years of the project.
3. Development Ent ily - a public disclosure of the development
entity and other involved parties including information on
qualifications and •. experience.
4. Financial Disclosure - full financial disclosure of
development entity with evidence that the developer has
both the financial and legal ability to complete the proposed
project. As per adopted policy, this information will be
kept confidential, subject to a challenge of this policy in
a court of law. Provide a letter from financial source.
5. Necessity of TIF - a "but for statement." that private
investment is contingent on TIF® based on cash -on -cash return
and internal rate of return.
6. Leverage Ratio - ratio of public to private investment.
7. Employment Generated - best estimate of construction
and permanent jobs to be generated by the project and a
wage/salary scale for employment created®
8. Letters of intent from tenants for lease project.
9. Tax Generation - The existing tax base of the property
upon which TIF assistance is requested must be compared t*
the anticipated tax base resulting from the proposed project
and must demonstrate that the increase in taxes generated
by proposed project will cover TIF assistance over a period
of ten years.
The following hypothetical development would be a realistic
juide for development using a $2 million project:
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$2,000,000-00 Market
3.86
77,200.00 Assessed
.459425 Consolidated Hill
35,467.70 Taxes Generated by Proposed Project
-5,211.99 Existing Taxes
$ 30,255.61 TIF Tax Annual Increase
IV.' CRITERIA FOR REVIEW
The submission of an application for tax increment assistance begins
the review process which is undertaken by the Community Development
staff and the KDC/TIC. Materials contained in the application provide
information needed to assess the merits of the project in relation to
the goals and objectives of the Urban Renewal Plan. This will allow
the KDC/TIC to decide between competing projects or determine if a
proposal has sufficient benefits to warrant assistance. The KDC/TIC
evaluates a project based on the following criteria.
1. Economic Stimulus - The amount of economic activity to
be generated by the project. This includes an- earnings
statment and/or projections of annual gross sales which
result from the project.
2. Employment Generation - Total employment generated by
the project including short-term construction and long-term
permanent jobs. Included should be a wage/salary scale for
all employment created. Additional employment "spinoff" or
the multiplier effect is also considered.
3. Tax Generation - The estimated taxable value or a
breakdown of the project's total construction cost must he
submitted. This will allow the City to determine additional
tax payments and the amount of assistance to be provided.
4. Elimination of Blight -' The project's impact on the
physical and fiscal deterioration within the urban renewal
district and the community.
5. Financial Assistance- Other forms of financing associated
with the project including equity, lender participation,
industrial development revenue bonds, and state or federal
monies will be examined to assess the need for TIF assistance.
In addition, tax incentives under the Economic Tax Recovery
Act will be considered.
6. Developer Past Performance - The applicant's demonstrated
performance in implementing similar projects.
7. Project Feasibility - Based upon the proforma and financial
arrangements, a review of project feasibility will be
undertaken.
(7)
S. Impact _Analysis/Assessment - This review will be based
on environmental impacts, design, and dislocation associated
with the project.
9. Special or Unique Opportunities - The extent to which
the project represents a special or unique opportunity to
meet local priority needs that are consistent with economic
revitalization and urban redevelopment objectives.
10. Timely Completion - The feasibility of accomplishing
the project in a timely manner (one or two years) within
the total project budget.
11. TIF Assistance - TIF assistance to a proposed projIM14,13
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shall not exceed 10% of the entire project including, b
not limited to, land assemblage, acquisition, demolitio
construction, landscaping, utility connections, parking, et
Based upon this criteria, a decision will be made on the provision of
financial assistance. If approved, post approval requirements will
be undertaken.
1. Development Agreement - The City and the developer must
sign a legally binding development agreement which finalizes
the terms and conditions of the TIF assistance.
2. Reporting Requirements - Developer shall provide the
City with 90 day progress reports and other reports on
approved projects as specified in the development agreement.
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