06. Ordinance 1243 - Creating an Urban Renewal Plan - Downtown - 2nd ReadingCERTIFICATE AS TO ORDINANCE AND ADOPTING VOTE
I, the undersigned, being the duly qualified and acting
recording officer of the City of Kalispell, Montana (the "City"),
hereby certify that the attached ordinance is a true copy of a
Ordinance entitled: "ORDINANCE RELATING TO THE MODIFICATION OF THE
KALISPELL, MONTANA URBAN RENEWAL PLAN (THE URBAN RENEWAL PLAN) TO
APPROVE CERTAIN PROJECTS AS URBAN RENEWAL PROJECTS" (the
"Ordinance"), on file in the original records of the City in my
legal custody; that the Ordinance was duly adopted on first reading
by the City Council of the City at a regular meeting on July 1,
1996, and that the meeting was duly held by the City Council and
was attended throughout by a quorum, pursuant to call and notice of
such meeting given as required by law; and that the Ordinance has
not as of the date hereof been amended or repealed.
I further certify that, upon vote being taken on the Ordinance
at said meeting, the following Council members voted in favor
thereof:
; voted against the same:
; abstained from voting thereon:
or were absent:
WITNESS my hand and seal officially this day of
1996.
(SEAL)
City Clerk of Council
I further certify that the Ordinance was duly adopted on
second reading, as amended, by the City Council of the City at a
regular meeting on , 1996, and that the meeting
was duly held by the City Council and was attended throughout by a
quorum, pursuant to call and notice of such meeting given as
required by law; and that the Ordinance has not as of the date
hereof been amended or repealed.
I further certify that, upon vote being taken on the Ordinance
SE
at said meeting, the following Council members voted in favor
thereof:
; voted against the same:
; abstained from voting thereon:
; or were absent:
WITNESS my hand and seal officially this day of
, 1996.
(SEAL)
City Clerk of Council
ORDINANCE NO. 1243
ORDINANCE RELATING TO THE MODIFICATION OF THE KALISPELL,
MONTANA URBAN RENEWAL PLAN (THE URBAN RENEWAL PLAN) TO APPROVE
CERTAIN PROJECTS AS URBAN RENEWAL PROJECTS
BE IT ORDAINED by the City Council (the Council) of the City
of Kalispell,Montana (the City), as follows:
Section 1. Recitals. The City by
Ordinance No. 933, passed and approved on September 10, 1979,
adopted the Kalispell, Montana Downtown Redevelopment Plan (the
Plan) as an urban renewal plan for the project area known as the
Downtown Redevelopment Area which constitutes the City's Urban
Renewal District (the District) pursuant to Montana Code
Annotated, Title 7, Chapter 15, Parts 42 and 43, as amended (the
Act), which Plan contained a provision for tax increment
financing. Pursuant to the Act and the procedures contained in
the Plan, and Resolution No. 4269, adopted June 3, 1996, the City
has set forth its intention to issue and sell urban renewal tax
increment bonds in an amount sufficient, but not to exceed
$8,500,000 (the Bonds) to finance all or a portion of certain
-2-
urban renewal projects and has undertaken to designate and
approve the following urban renewal projects (the Projects), and
modify the Plan accordingly, has given notice and conducted
public hearings with respect thereto:
a. Kalispell Center Mall. This project consists of the
acquisition of real property, the clearance of improvements
thereon, construction of certain public utilities and related
relocation activities, all to make such property available for
expansion of the Kalispell Center Mall. The project is estimated
to cost $2,625,000, which will be financed from the proceeds of
the Series 1996 Bonds.
b. KDC Site Kalispell Downtown Center) Development. This
project consists of the acquisition of certain real property, and
related demolition and site work including public improvements to
make the property available for private development for uses
consistent with the Plan. The project is estimated to cost
$2 000,000, which will be financed from the proceeds of the
Series 1996 Bonds.
C. Central School Project. This project consists of the
renovation and rehabilitation of the old Central School building.
The building could be used for multipurpose community and
educational facilities, along with offices and museum space. The
total cost of this project is estimated to be $2,500,000, which
will be financed from the proceeds of the Series 1996 Bonds.
d. Affordable Housing• Elimination of Blight. This project is
a Private Multi -Family Housing Density Development Incentive
Program designed to enable the City to: (1) offer incentives to
both existing property owners and private developers desiring to
purchase substandard dwellings occupying large lots with the
Urban Renewal Project Area and replace the substandard single
family units with higher density affordable multi -family housing;
(2) purchase substandard dwellings when they become available and
vacant, particularly if the site would accommodate multiple
dwelling units, clear the property and resell it to developers
willing to build multi -family housing; and (3) to provide the
necessary incentives to encourage high density affordable housing
redevelopment of sites that may become developable and/or
affordable because of fire or other circumstances. The cost of
this project is estimated to be $300,000, which will be financed
from proceeds of the Series 1996 Bonds.
e. Downtown Parking. This project will consist of the
acquisition of additional land for the construction ofoarkin
lots or a parking facility on parcels within the District to
provide or facilitate the provision of adequate parking for
projects -or -to encourage other private development within the
District. The cost of this project is estimated to be $8Q0 OQQy,
t
which will be financed from proceeds of the Series 1996 Bonds
f. Redevlopment Incentive Proieet. This proiectwill enable the
City to provide assistance to the owners of commercial properties
in the District to encourage the redevelopment of underutilized
or obsolete properties to increase the taxable value and create
jobs The assistance may take the form of acquisition and
demolition of improvements provision of infrastructure or other
appropriate incentives. The cost of this project is estimated to
be S275 000, which will be financed from proceeds of the Series
1996 Bonds.
Section 2. Findings. The Council hereby finds, with respect
to each of the Projects described in Section 1 hereof, as
follows:
a. a workable and feasible plan exists for making available
adequate housing for any persons who may be displaced by the
Projects;
b. the Plan, as modified to include the Projects, conforms to
the comprehensive plan or parts thereof of the City;
C. the Plan, as modified to include the Projects, will afford
maximum opportunity, consistent with the needs of the City as a
whole, for the rehabilitation or redevelopment of the District by
private enterprise;
d. a sound and adequate financial program exists for the
financing of each of the Projects, which program includes the
sale and issuance by the City of its urban renewal tax increment
bonds in an amount not to exceed the costs of the Projects and
other Projects heretofore or hereafter approved by this Council,
including administration costs and costs of issuance of the
bonds, and for the application of available funds in the
Development Account in the Tax Increment Fund of the City, in
proportions yet to be determined, for the purpose of financing
all or a portion of the costs of the Projects as set forth above;
and
e. each of the Projects constitutes an urban renewal project
within the meaning of the Act and the Plan.
Section 3. The Urban Renewal Projects herein designated and
approved may be modified by the City Council of the City of
Kalispell if the Council determines by Resolution that an
adjustment to a Project or Projects is required in the best
interest of the City of Kalispell.
-4-
Section 4. All actions of the City Council heretofore taken
with respect to the Projects herein designated, to the extent not
inconsistent herewith, are ratified and confirmed.
Section 5. This Ordinance shall take effect from and after
30 days of its passage by the City Council and approval by the
Mayor.
Section 6. Approval of Projects. This Council hereby
approves, ratifies and confirms modification of the Plan to
designate the Projects as urban renewal projects within and under
and to be undertaken pursuant to the Plan, and the Projects are
hereby approved. All actions of this Council heretofore taken
with respect to the Projects, to the extent not inconsistent
herewith, are hereby ratified and confirmed.
PASSED, ADOPTED and APPROVED on first reading this 1st day
of July 1996.
PASSED, ADOPTED and APPROVED on second reading this
day of
1996.
Attest:
By:
City Clerk of Council
-5-
CITY OF KALISPELL
By
Mayor
(�IV I
Incorporated 1892
elephone (406) 758-7700 Douglas Rauthe
FAX (406) 758-7758 Mayor
Post Office Box 1997
Kalispell, Montana Al Thelen
Zip 59903-1997 Interim City Manager
To: Kalispell City Council City Council
Members:
From: Al Thelen - Interim City Manager
Subject: Urban Renewal - Tax Increment Financing
Gary W. Nystul
Ward I
Date: July 8, 1996
Cliff Collins
Ward i
Norbert F. Donahue
Ward II
A careful weighing of the testimony at last week's public hearing leads me to the following
Dale Haarr
conclusions:
Ward 11
Jim Atkinson
1. there is general support in the community for the concept of tax increment Ward III
financing and a consensus that it has been well utilized by the City of Kalispell; Ward IlIuren Granmo
2. there is a concern about extending the life of the district for an additional 15 Pamela B. Kennedy
Ward IV
years, particularly given that the base would remain at the base established in 1979
M. Ouane Larson
thereby continuing to deprive the other taxing jurisdictions of the benefit of any Ward IV
growth that has accrued since that time; and
3. that if the other taxing jurisdictions could share some of the benefit of the increased
value of the tax increment district as soon as possible, there would be a resulting
reduction in property taxes for Flathead County residents.
With those considerations in mind, and keeping in mind that it is in the City's and its
residents best interest to try to retain the option of tax increment financing to induce
economic development, I am proposing a sixth alternative for your consideration.
► Reducing the scope of the projects thereby reducing the size of the bond issue.
Reducing the term of the bond to a 10 year bond which has the effect of extending
the life of the Urban Renewal Project by only 4 years beyond the remaining term of the
existing debt. An enhanced Mall, a new development on the KDC site, and Market
Place III will actually generate significantly more tax increment for
Al Thelen - Interim City Manager
Page 2
July 8, 1996
increment for distribution while at the same time insuring against a possible
reduction in taxable valuation.
As early as 1998, the City may enter into a letter of intent to distribute
unneeded or surplus tax increment collected by the City, with all other taxing
jurisdictions. This is 4-years sooner than would otherwise be required.
In my memo prepared for the July 1, 1996, Public Hearing and First Reading of
Ordinance No. 1243, I offered five alternative courses of action to deal with the
Downtown Urban Renewal Project. I indicated further that there are a number of
variations and combinations of these alternatives. Every individual has his or her own
opinions on the basic issue and individual projects. If we are to have a "win" situation
for all of the interests, it will take some compromise on everyone's part. In the spirit of
this compromise we need to acknowledge the objections to the continuation of the
program. Some were acknowledged in the introduction of this alternative but I would
like to review some of them again because the comments presented at the public hearing
appeared to stress a number of issues that your action on this issue can impact. I have
attempted to address them with this alternative.
1. The desire to use the valuation in the increment district to benefit other taxing
jurisdictions, particularly School District #5, as soon as possible.
2. The need for the City to provide economic assistance to all areas of the City.
3. The desire to continue the strong effort that has been used in the past to
strengthen the downtown area.
4. Opposition to extending the current district for another 15 years.
5. Proponents and opponents of specific proposals.
6. Finance proposed projects, or some of them, with annual cash flow only until the
existing bond is paid vs. issuance of a new bond.
The following is a brief outline of a sixth alternative for your consideration. Staff can
work on any details you may request after the meeting tonight and before the required
action on July 15, 1996.
Al Thelen - Interim City Manager
Page 3
July 8, 1996
The Urban Renewal Bond Projects reduced in scope are:
Downtown Kalispell Mall
$2,625,000
Former College Property
$2,000,000
Central School
$2,500,000
Downtown Parking
$ 800,000
Affordable Housing
$ 300,000
Marketplace Project III
$ 275,000
Project Costs
$8,500.000
(Less Land Sales
$1,602,000)
**Net Project Cost
$6,898,000**
Sources of Funds:'
Series 1996 Bonds $7,510,000
Anticipated Sale of Property (1) $1,602,000
Other Available (existing) TIF Funds $1,575,000
Total Sources $10,687,000
Uses:
Project Costs $8,500,000
Cost of Issuance (2) $ 225,000
Defeasance of Series 1995 Bonds (3) 1,210,098
Debt Service Reserve 751,000
Contingency 902
Total Uses $100687,000
' D. A. Davidson & Co. - CITY OF KALISPELL, MONTANA PROPOSED TAX
INCREMENT URBAN RENEWAL BONDS SIZING ANALYSIS
Al Thelen - Interim City Manager
Page 4
July 8, 1996
The Advantages of this sixth alternative proposal are:
A. This package of programs will permit the Council to continue to encourage an
additional private investment in the central business area conservatively
estimated to exceed $15.25 million which will generate approximately $400,000
in total new tax revenues, added new employment and most importantly,
stabilize or "right size" the Mall, KDC Site, Market Place III and other parts of
the Central Business District so that it may continue to be the largest contributor
to the City's tax base and remain viable long into the future. Without the added
investment, the city's tax base is in jeopardy, and may not be stable into the
future, quite possibly returning even less than it does today to the city and other
taxing jurisdictions. There is a real attempt to lure CBD retail/financial
g
investment to outlying areas where land is cheaper, there are no city taxes, or
both, and unlimited parking is possible and highway access is paid for by the
taxpayer rather than the private developer(s). This is a real and continuing threat
to the City's tax base. The estimates of added Central Business District
investment are based on a detailed Urban Renewal Bond Project Summary
attached to this memorandum as APPENDIX A:
B. The investment of additional Tax Increment Dollars for the projects as outlined in
APPENDIX A could stimulate private investment generating approximately
$398,993 in new advalorem taxes. All of this amount could be distributed by the
City Council as part of an agreement with other jurisdictions.
While the City Council cannot guarantee, nor should it, a specific amount of tax
distribution each year, the Council can provide its intent to return some of the
excess as soon as 1998 or at least by the year 2001 and provide its intent to
distribute even more of the excess revenues between 2002 and 2006 when the
bonds would be paid off and the valuation returned to the taxing jurisdictions.
Al Thelen - Interim City Manager
Page 5
July 8, 1996
This would be an arrangement similar to the one in use in .Great Falls and in
Billings. D. A. Davidson's projection for Net Increment Available After Debt
Service for 1998 Re -distribution or other uses is: $784,627 and beginning in
2002 with the above projects added the projection is $1,183,620.
It would appear a worthwhile investment of tax increment to stabilize and
increase the income to all taxing jurisdictions.
C. The City would have the ability to react to economic opportunities in the area
through 2006, thereby extending this economic development tool in this area for
another six years. The number of economic development tools available to cities
is constantly being reduced by the federal and state governments. We should do
what we can to use and enhance the only tool we have available.
D. The parking proposal will assist in maintaining the viability of the downtown
business district and benefit all of the property owners and the public.
This ten year bond proposal is a compromise between the 20 year district and a
$12,500,000 program, and no issue at all.
This proposed program has the potential of stimulating $17.18 million in new
private investment for new private improvements and personal property, $3.3
million in public investment for Public Parking and Central School, over $1
million for Flathead Industries to build an new thrift store and warehouse and an
estimated 20 new housing units. These would all be positive new additions to the
City's tax base and retail/residential core.
APPENDIX A
URBAN RENEWAL BOND PROJECTS
July 8,1996
1. The Kalispell Mall Project:
Project investment by city: Acquisition - $1,166,268; Relocation/FIFTH - $1,054,200;
City infrastructure relocation - $404,225 =
Total Estimated Cost: $2.625 million
Benefit to City: Market Value Taxable Annual Tax
New construction investment $6,200,000 239,320
$119,200
Furniture Fixtures & Equipment 1,600,000 128,000
63,754
Mall/Cavanaugh's's current (1995) Contribution to the City is:
Annual Advalorem Taxes $385,000
UDAG Payment (annualized @ 9%APR) $333,672
Profit sharing (based on 2-yr. Average) 29,500
Total Existing annual contributions to City
$748,172
Mall/Cavanaugh's Total Financial Impact Current & Proposed
93� 1,126
2. KDC Site (Former College Property) as proposed by Abrams Venture:* Acquisition -
$1.2 million; Utilities - $300,000; Parking participation - $500,000
Total Estimated Cost: $2 million**
Market Value Taxable
Annual Tax
New Construction investment
$3,750,000
$ 144,750
$ 72,096
Private 4 Land purchase
900,000
34,740
17,303
Furniture, Fixtures & Equipment
1,250,000
100,000
49,808
TOTAL KDC SITE
$5,900,000
$ 279,490
13� 9,207
Page 1
APPENDIX A: TIF BOND PROJECTS
*Abrams Venture is willing to make a non-refundable deposit to cover the city's cost of a
one time call feature. Additionally, as Mr. Abrams stated, if the council approved the
project and tax increment participation he would pursue an additional 25,000 SF of
building plus an attempt to combine Mr. Goodman's Depot Square 40,000 SF
professional/office tenants by adding another floor to the building. **An additional
$145,000 in annual tax revenues could be generated from such additions, possible only if
the city participates with additional TIF to assemble land and aid in the provision of
public parking. One can easily see how the investment of TIF can stimulate significant
new tax revenues available for the city to redistribute or to reinvest in economic
development opportunity.
3. Market Place III - proposal pending - 24,000/SF Retail: Acquisition (Improvements
only) - $210,000;* Demolition and site clearance - $65,000 =
Total Estimated Project Cost: $275,000
Market Value Taxable Annual Tax
New construction investment* $1,800,000 $ 69,480 $34,606
Furniture, Fixtures &Equipment 480,000 38,400 19,126
Total Market Place III $2,280,000 $107,880 J53.732
*Currently the 24,000 square feet of existing improvements have a market value,
according to the assessors office, of $206,100. The proposed redevelopment would be a
new building valued at approximately $1.8 million or a 773 percent increase in
improvement value alone. Annual taxes for just the improvements would increase from
$3,962 to $34,606 annually. The city's TIF investment would be returned in the form a
new tax revenue in a period of 6-7 years. A good return on the investment. Also the new
improvements would enhance the area's appeal and add employment opportunity. If
additional public parking is available, density could be increased even more.
Page 2 APPENDIX A: TIF BOND PROJECTS
4. Central School: Project Investment for Rehabilitation/restoration of the building as an
Historical Museum/office use - $2,500,000
Total Project Cost - $2,500,000*
*The Central School Rehabilitation and restoration into an Historical Museum, while not
generating any direct advalorem tax revenue, will keep an important part of Kalispell's
landscape and history preserved for the future. The project is expected, however, to
yield significant indirect economic benefit by stabilizing the area and the public building
and adding a cultural attraction or "urban amenity" for residents and visitors alike. The
building can become an asset rather than a liability by keeping visitors in Kalispell longer
and attracting them to the Central Business District. It will provide some employment
too but its main attraction will be as an historic building/museum.
5. Downtown Parking: Acquisition - $800,000
Total Project Cost - 800,000
*The Downtown Parking project addresses the shortage of downtown parking that exist
today and will allow the City Council to determine if added investment in public parking
can stimulate added density, new private investment, redevelopment and additional tax
base. Already, the KDC site development, Market Place III, and Central School projects
would be enhanced by the addition of public parking in the area. If the projects do not
proceed as planned, parking could be provided in other areas.
Page 3
6. Affordable Housing: Total Project Cost - 300,000**
**The tax benefits of the affordable housing project estimate the addition of
approximately 20 units of privately owned new housing, valued @$60,000/unit or $1.2
million in market value or $23,100 in additional advalorem taxes paid.
APPENDIX A: TIF BOND PROJECTS
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Larry Gallagher
MDOW1
Director, Economic & Community Development
C"T14!*qN °""
City of Kalispell
'' f
P.O. Box 1997
arfarr,
Kalispell, Montana 59903
cst s ,Y E ua
1
Dear Mr. Gallagher: am""'H�4w
Please let the following serve as the current projection of the proposed additions to Kalispell Center:
rR`xran
Df:YbAp�kyr
�`
. ze
L
,,,"�
Estimated Value
f FsyTa
Addition to Cavanaugh's;
48 rooms
$ 1,524,000
NO)wx'v,Wa
New Restaurant on Main Street:
51000 SP
800,000
'W&*
Herbergera Addition:
61,000 SP
2,745,000
New Specialty Retail Stores:
21,000 SP
810,000
MD.
Estimated P'F&E increase for
TAW mom Edv
added space & new tenants:
450,000
Total
$ 6,329,000
i would like to clarify the Kalispell Center existing and expanded parking. Currmuly the Mall hag
a retail parking ratio of approximately 6.8 car parks per 1,000 square feet of leasable retail space.
The retail parking ratio does m)t count the car parks necessary by code and proximity for the existing
and expanded Cavanaugh's hotel. The necessary car parks for the expanded hotel already exist on
the east and of the project. With the expansion of the mall there is a requirement for approximately
126,000 square feet of land for new retail parking. The new retail parking ratio would be reduced
to approximately 51 car parks per 1,000 square feet of leasable retail space which we have been
advised is the lowest ratio that the major tenants will allow. The retail expansion takes away existing
parking west and north of Herbergers and create's it need for more parking because of increased retail
square footage. Additionally the project requires some utility relocation.
We are very excited about this important project and plan to get started this fall subject to final lease
negotiations. Please call me with any questions and I will see you on Monday July 15, 1996,
Sincerely,
GOODALB & BARBIERI COMPANIES
Thomas M. Barbieri.
Vice Fresideru
201 W. North RA-fr Davv, Salty 100 a Spokdrtr, Washatgion 99201 5 (509) 459-6l00 a FAX (509) 325-7324 w httprl/www.l.h.com