4. Resolution 5374 - Payment in Lieu of Taxes PolicyCharles A. xarball Office of City Attorney
City Attorney 312 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
101 of�%
TO: Mayor Pamela B. Kennedy
and Kalispell City Council
FROM: Charles Harball, City Attorney
Myrt Webb, Interim City Manager
Tel 406.758.7708
Fax 406.758.7771
charball@kalispell.com
SUBJECT: Resolution Establishing the City Policy to Require an
Agreement for Payment in Lieu of Taxes for Tax Exempt
Entities Receiving Substantial Valuable Services From
the City of Kalispell.
MEETING DATE: Monday; July 6, 2009 — Regular City Council Meeting
BACKGROUND: 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. The City is only able to provide these valuable
services through the receipt of property tax revenues paid by city residents whose
property is taxed. Certain entities (non -profits) that own property in the city and
receive the valuable services of the city 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. To further
complicate the issue, 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. 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.
RECOM1V1ENDATION: That the City Council move upon and pass Resolution No.
5375 finding that it is in the best interest of the City, its taxpayers and citizens that
certain entities, otherwise exempt from paying City property taxes but that compete
in the local market with nonexempt taxpayers 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. The resolution should direct
that at such time as such a tax-exempt nongovernmental entity applies to the City
Payment in Lieu of Taxes Policy Memorandum
June 30, 2009
Page - 2
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 should also be directed to prepare a
cost of services analysis which shall include an estimate of the City taxes the 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. Upon reaching a
tentative PILT agreement with the entity the City of Kalispell Planning
Department should be directed to 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.
FISCAL I ACTS: The loss of revenue to the City from entities receiving tax
exempt status from the Montana State Department of Revenue is substantial. This
proposed policy would allow the City Council to evaluate such revenue loss at such
time that entity applies for services from the Kalispell Planning Department and to
require an agreement for payment in lieu of taxes.
Respectfully submitted,
Charle arball, City Attorney
Myrt Webb, Interim City Manager
Office of City Attorney
City of Kalispell
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 Citv of Kalispell and receive
1
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 I. 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.
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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.
Pamela B. Kennedy
Mayor
ATTEST:
Theresa White
City Clerk