05. Resolution 4446 - Amending Resolution 3922 - Tax Increment PolicyDATE: January 15, 1999
TO: Glen Neier, Interim City Manager
FROM: Susan Moyer, PECDD
SUBJECT Adoption of Application Process for Tax Increment Financing
Glen, attached is the final version of the revision to the Tax Increment Financing Policy
discussed at the council workshop on November 11, 1999. The changes made in this revision
are:
The establishment of set interest rates and fixed terms for city -made TIF mortgages for on -
site new development.
2. The addition of assistance provided for the rehabilitation, retention or development of
affordable housing for the low and very low income residents. Such assistance has been
provided out of TIF funds several times in previous years but was not specifically identified
as an activity in the old policy.
3. The review criteria for city -made mortgages will lie solely with the City Council. The
Architectural Review Committee, by city ordinance, remains responsible for signage, overall
site design approval, and the approval of the commercial loans generated through the local
lending institutions.
C:\myfiles\pecdd\TIF
APPLICATION PROCESS
TAX INCREMENT FINANCING
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 designed 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.
Kalispell subsequently approved Ordinance No. 1259 creating the West Side Urban Renewal
Plan, establishing January 1, 1997 as the base year for calculating the Tax Increment, and
Ordinance No. 1242 creating the City Airport/Athletic Complex Redevelopment Plan.
II. UTILIZATION OF FUNDS
Tax increment financing is not an abatement program for new development. Revenues obtained,
however, may be utilized to encourage the implementation of public or private projects. Priority
in funding assistance will be given to publicly owned utility improvements for a development
vs. a request for on -site utility improvements assistance in the form of a low interest loan. As
specified in state law, the City of Kalispell may utilize TIF for the following activities:
1) Land acquisition;
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;
January 19, 1999
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 infrastructure and land needs within the industrial district.
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. Additionally, TIF
assistance to a proposed project shall not exceed 10% of the entire project cost. The City
Council will evaluate the "but for statement" of each project in determining that private
investment is contingent on TIF, based on cash -on -cash return and internal rate of return.
The City Council has chosen to create a low interest loan fund available to qualifying developers
for on -site work covering:
■ Acquisition
■ Land assemblage
■ Landscaping
■ Site Lighting
■ On -site Utility Work and Utility Taps
■ Parking — Paving and Striping
■ Direct assistance in the rehabilitation, retention or development of affordable housing
for the low and very low income residents.
Development activities such as building, plan review, design or management fees are not
eligible activities to be funded with TIF. The eligible amount of on -site development
activities will be considered as part of the 10% limit based on the total project cost.
The interest and repayment terms for a low interest loan for on -site redevelopment
purposes are:
3% for loans not exceeding $75,000 for a maximum 15 year term
4% for loans ranging from $75,000 to $125,000 for a maximum 15 year term
5% for loans over $125,000 for a maximum 20 year term
III. 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.
January 19, 1999 2
The Community Development staff will assist the developer in preparing a formal application.
Upon submittal by the developer of all necessary information, the staff will arrange for a
presentation by the Developer to the City Council at a workshop session.
IV. APPLICATION REQUIREMENTS
1) Project Description — A description of the project, type of development and scope of work
including:
■ Plans/schematics
■ Project schedule — proposed timetable for completion of project
■ Project feasibility — substantiate the market and economic feasibility of the project
Q 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
➢ pro forma — projections of anticipated income, expenses, cash flow and
depreciation for the first five years of the project.
3) Development Entity — A public disclosure of the development entity and other involved
parties including information on qualifications and past experience.
4) Financial Disclosure — Full financial disclosure of development entity with evidence that the
developer as 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.
55) 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 to 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.
January 19, 1999 3
IV. CRITERIA FOR REVIEW
The submission of an application for tax increment assistance begins the review process by City
Council. 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 City Council to decide between competing projects or determine if a proposal has sufficient
benefits to warrant assistance.
The City Council will evaluate:
■ Economic Stimulus
■ Employment Generation
■ Tax Generation
■ Elimination of Blight
■ 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.
■ Developer Past Performance
■ Project Feasibility
■ Impact Analysis/Assessment — This is based on environmental impacts, design and
dislocation associated with the project.
■ 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.
■ Timely Completion
■ The Amount of TIF Assistance requested.
January 19, 1999 4
RESOLUTION NO. 4446
A RESOLUTION ADOPTING AN APPLICATION PROCESS AND PROCEDURE FOR
REVIEW FOR TAX INCREMENT ASSISTANCE AUTHORIZED BY ORDINANCE #933 ON
REDEVELOPMENT PROJECTS IN THE CITY OF KALISPELL.
WHEREAS, Title 7, Chapter 15, Parts 42 & 43, Montana Code
Annotated authorized the City of Kalispell to develop a workable
urban renewal plan to rehabilitate and eliminate blighted areas
utilizing "tax increment finances" in partnership with private
enterprise, and
WHEREAS, the City Council of the City of Kalispell created the
Kalispell Downtown Redevelopment Plan by Ordinance #933 on
September 10, 1979; the City Airport/Athletic Complex Redevelopment
Plan by Ordinance 1242, on July 1, 1996; and the West Side Urban
Renewal Plan by Ordinance No. 1259, on January 1, 1997, and
WHEREAS, the City Council of the City of Kalispell recognize
the benefits to be derived from working closely with private
developers seeking to use tax increment funds, and
WHEREAS, tax increment financing has been a successful
financial vehicle in enhancing economic development opportunities
both within and without the respective Redevelopment Plan areas,
and
WHEREAS, the City of Kalispell anticipates new projects from
developers wanting to participate in the tax increment program, and
WHEREAS, the City Council of the City of Kalispell previously
adopted a Tax Increment Policy Manual which established a Procedure
for Review of Proposals for Tax Increment Funds, described an
Application Process, and contained the forms necessary to submit a
Tax Increment Financing Application, and
WHEREAS, the revised Tax Increment Policy Manual, as amended,
shall provide the City with a means of implementing policy for a
wider variety of potential recipients within the respective
Redevelopment Plan areas.
NOW THEREFORE IT IS HEREBY RESOLVED BY THE CITY COUNCIL OF THE CITY
OF KALISPELL AS FOLLOWS:
SECTION I. That pursuant to the authority granted to the City
of Kalispell by Title 7, Chapter 15, Part 42 & 43, Montana
Code Annotated and as a means of implementing the tax
increment assistance provisions applicable to all
F:\wp\res\4446 tax increment policy.wpd
Redevelopment Plan areas, the City Council adopts the Tax
Increment Policy Manual, as amended, said Tax Increment
Policy Manual attached hereto as Exhibit "A" and for purposes
of this Resolution made a part hereof.
SECTION II. This Resolution shall become effective
immediately upon passage by the City Council and approval by
the Mayor.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR
THIS DAY OF JANUARY, 1999.
Wm. E. Boharski, Mayor
Theresa White, Clerk of Council
F:\wp\res\4446 tax increment policy.wpd