2012/06/25 Airport Ballot LanguageiX Pill 1111
Charles A. Harball Office of City Attorney
City Attorney 201 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
TO: Doug Russell, City Manager
E Charles Harball, City Attorney
Tel 406.758.7709
Fax 406.758.7771
charball@kalispell.com
SUBJECT: Discussion of Ballot Language for Funding the Kalispell City
Airport
MEETING ATE: June 25, 2012 — Council Workshop
BACKGROUND: The City Council determined a few weeks ago to send the matter of
future investment and maintenance on the City Airport to the voters on the November
2012 general election ballot. After scrutinizing the options set out on the 2012 Kalispell
City Airport Master flan the Council agreed that the city voters should decide the issue
between two options. The first option is lined out in the master plan as the option that
upgrades the City Airport to FAA approved B-2 standards utilizing FAA. grant funds,
funds already expended by the City that are eligible for FAA reimbursement and such
funds as permissible from the Airport/Athletic Complex Tax Increment District. The
second option is to fund any capital improvement program, maintenance and operations
of the City Airport solely from financial resources derived from airport operations, the
general fund account and such funds as permissible from the Airport/Athletic Complex
Tax Increment District.
ISCUSSI : There have been some questions raised regarding the extent to which
the tax increment district funds may be utilized in the city airport endeavor. For this
reason I asked our bond counsel to respond. His memorandum is attached. I have also
attached ballot language for discussion. Although, and because, this is a complex issue,
the ballot language must provide clarity and be as simple and easy to understand as
possible. The preface must be limited to 100 words or less. We probably all believe we
fully understand the issues; however, this workshop is an opportunity for the Council to
exchange views with a goal toward reaching a common understanding on the question to
be presented to the voters.
Respectfully submitted,
Charles Harball
• 1Eth"Llim [WIVIO OU DI'm WWI aml 1 MUM
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The Kalispell City Council has determined that the City of Kalispell electors shall decide by
ballot measure whether capital improvements, and continuing maintenance and operation costs
for the Kalispell City Airport shall be partially directed and funded by the Federal Aviation
Administration as outlined in the 2012 Kalispell City Airport Master Plan or be directed and
funded solely by the City of Kalispell for airport projects that may be approved by the City
Council and only with such funds from airport operations, general fund and Airport/Athletic
Complex tax increment funds as may be expended by the City.
aImacoaffm
The City of Kalispell shall continue
to pursue and utilize grant funding
provided by the Federal Aviation
Administration to contribute to
capital improvements, and
continuing maintenance and
operation costs of the Kalispell
City Airport as approved by the
City Council.
a
The City of Kalispell shall fund City
❑ Council approved capital improvements, and
continuing maintenance and operation costs
of the Kalispell City Airport only with such
financial resources derived from airport
operations, general fund and permissible
Airport/Athletic Complex tax increment
funds.
Kennedy
craven
CHARTERED,
P.C.
470 U.S. Bank Plaza
200 South Sixth Street
Minneapolis MN 55402
(612) 337-9259 telephone
(612) 337-9310 fax
www.kennedy-graven.com
TO: Charles A. Harball, City Attorney, City of Kalispell, Montana
FROM: Ben Johnson
Considerations with Respect to use of Tax Increments Derived from the City of Kalispell
Airport/Athletic Complex Urban Renewal District
DATE: June 21, 2011
The City of Kalispell, Montana (the "City") previously established the City of Kalispell
Airport/Athletic Complex Urban Renewal District (the "Airport TIF District") pursuant to the provisions
of Montana Code Annotated Title 7, Parts 42 and 43, as amended (the "TIF Act"). As required under the
TIF Act for the establishment of an urban renewal district, the City Council of the City adopted an Urban
Renewal Plan on July 1, 1996 and, pursuant to Ordinance No. 1541, adopted by the City Council on
July 18, 2005, amended the urban renewal plan to add an urban renewal project (collectively, the "Urban
Renewal Plan"). The provisions of the TIF Act and the Administrative Rules of Montana, Chapter
42.19.1401 et seq. (the "TIF Rules") govern the establishment, administration, and use of tax increments
derived from tax increment districts in Montana.
The boundaries of the Airport TIF District contain the City's municipal airport (the "Airport")
that is operated for general aeronautical purposes. Pursuant to the provisions of Montana Code
Annotated, Title 67, Chapter 11, Parts 1-3, as amended (the "Airport Authority Act"), and Resolution No.
4210 of the City Council of the City (the "City Council") adopted on June 5, 1995, the City Council
determined to exercise, with respect to the Airport, the powers granted to an airport authority under the
provisions of the Airport Authority Act. The City has established a seven (7) member advisory board
with respect to the Airport and the advisory board's primary responsibility is to review existing and
proposed City policies concerning the operation and maintenance of the Airport and future improvements
to the Airport and advise the City Manager (and the Airport Manager who is supervised by the City
Manager) with respect to such matters.
The City previously commissioned a revised master plan for the Airport and the City Council
received a new Master Plan, dated April 4, 2012 (the "Master Plan"), prepared by Stelling Engineers.
The City undertook the revised Master Plan to evaluate the Airport's capabilities and role, to forecast
future aviation demand, and to plan for the timely development of new or expanded facilities that may be
required to meet that demand. The stated goal of the Master Plan is to provide systematic guidelines for
the overall maintenance, development, and operation of the Airport.
On September 15, 2005, the City issued its (i) Tax Increment Urban Renewal Revenue Bonds,
Series 2005A (Non-AMT), in the original aggregate principal amount of $1,445,000 (the "Series 2005A
Bonds"), and (ii) Tax Increment Urban Renewal Revenue Bonds, Series 2005B (AMT), in the original
aggregate principal amount of $555,000 (the "Series 2005B Bonds," and collectively with the Series
2005A Bonds, the "Series 2005 Bonds"). The proceeds of the Series 2005 Bonds were used by the City
to finance an urban renewal project within the boundaries of the Airport TIF District as more fully
described below. The Series 2005B Bonds have been repaid by the City and the Series 2005A Bonds
have a final maturity date of July 1, 2020. The Series 2005A Bonds are subject to optional redemption by
the City on January 1, 2013 and on any date thereafter at a price of par (the outstanding principal amount
of the Series 2005 Bonds) plus accrued interest to the date of redemption, without a premium. The Series
2005 Bonds were issued by the City under the provisions of Resolution No. 5051, adopted on
September 6, 2005 (the "2005 Bond Resolution"). It is my understanding that the 2005 Bond Resolution
has not been amended by the City. The 2005 Bond Resolution contains covenants with and security
provisions for the benefit of the holders of the Series 2005 Bonds and also provides the requirement that
the City must comply with for the issuance of Additional Parity Bonds (as defined in the 2005 Bond
Resolution) to pay for the cost of new urban renewal projects.
This memorandum will not discuss (i) the requirements to establish an urban renewal tax
increment district such as the Airport TIF District or (ii) the requirements to amend the boundaries of the
Airport TIF District. We've discussed the requirements to establish an urban renewal tax increment
district and to amend the boundaries of an urban renewal tax increment district in prior memorandums or
letters to City staff and discussions with City staff. This memorandum is intended to discussion various
items for consideration by the City Council and City staff of the City while they consider various options
relating to the possible funding of capital improvements to the Airport as a result of the Master Plan.
Airport Authority Act vs. TIF Act. The provisions of the Airport Authority Act grant a municipal
or regional airport authority (or in this case the City) broad powers to operate a regional or municipal
airport. The powers granted to the City under the Airport Authority Act are supplementary to those
granted to the City under general Montana law. However, the powers granted to an airport authority
under the terms of the Airport Authority Act do not provide the City any authority to utilize tax increment
derived from the Airport TIF District in any way that is different than authorized under the TIF Act or the
TIF Rules. Therefore, the Act governs the City's use of the tax increment generated by the Airport TIF
District.
Termination of the Airport TIF District. Section 7-15-4292 of the TIF Act provides that the tax
increment provisions under the TIF Act terminate upon the earlier of: (1) the 151h year following creation
of ao urban renewal district, or (ii) the payment or provision for payment in full or discharge of all bonds
for which tax increment has been pledged. The Airport TIF District will terminate upon redemption and
prepayment of the Series 2005 Bonds (if such bonds are not redeemed and prepaid with proceeds of
refunding tax increment revenue bonds) since the Airport TIF District was formed as of July 31, 1996 and
the 151h anniversary of the formation of the Airport TIF District was July 31, 2011. Because the Series
2005 Bonds were issued prior to the 151h anniversary of the Airport TIF District and were outstanding on
the 151h anniversary, the final maturity date of the Series 2005 Bonds (July 1, 2020) is the final date upon
which any future refunding tax increment revenue bonds or new money tax increment revenue bonds
(issued to fund the cost of an eligible urban renewal project) may be outstanding. The practical effect of
the termination provisions of the TIF Act and the specific facts of the Airport TIF District mean that any
new tax increment bonds issued to finance improvements in the Airport TIF District must be fully repaid
within eight (8) years.
2
Future Use of Tax Increments Assuming Series 2005 Bonds (or refunding bonds remain
outstanding). Under the provisions of the TIF Act, the City is authorized to utilize the tax increments
derived from the Airport TIF District for costs that are generally considered capital improvements within
the Airport TIF District that are duly adopted urban renewal projects in the Urban Renewal Plan. The
specific listing of costs for which funds derived from tax increments is found in Section 7-15-4288 of the
TIF Act. Eligible costs under the TIF Act are the acquisition of land and the construction of infrastructure
in the urban renewal tax increment district. For example, the City utilized proceeds of the Series 2005
Bonds to fund (i) the construction of a vehicle access road, (ii) the installation of an automatic vehicle
security gate, and (iii) the acquisition of the facilities of Red Eagle Aviation. In addition, Section 7-15-
4288(7) of the TIF Act also provides that the City may pay for the administrative costs associated with
the management of the Airport TIF District. The administrative costs associated with the management of
the Airport TIF District include City staff time and outside professionals who provide advice with respect
to the Airport TIF District.
Examples of possible future urban renewal projects that may be paid from tax increments in the
future (assuming compliance with provisions of the TIF Act and the 2005 Bond Resolution) are (i) water,
sanitary sewer, water system, and street improvements, (ii) streets, roads, curb, and gutter, (iii) publicly
owned buildings, (iv) land acquisition, and (v) parking facilities. The City may also pay for planning
costs and other professional costs associated with such urban renewal projects.
Procedure to Fund Future Projects at the Airport with Tax Increments. If the City wishes to
finance future improvements to the Airport with tax increments, the City Council and City staff will need
to determine whether it is most advantageous to finance such improvements with the proceeds of tax
increment bonds. If tax increment bonds are proposed to be issued, the provisions of the 2005 Bond
Resolution must be complied with for the issuance of Additional Parity Bonds or the Series 2005 Bonds
must be redeemed and prepaid and a new bond resolution adopted by the City Council prior to the
issuance of new tax increment revenue bonds. As mentioned above, the City must also structure any new
tax increment revenue bonds issued to finance urban renewal projects so that they have a final maturity
date of no later than July 1, 2020.
Please provide me with any questions or comments that you, members of the City Council, and
City staff have with respect to this memorandum.
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