Resolution 4609 - Process and Procedure for Reviewing TIF Assistance for Redevelopment Projects•
RESOLUTION NO. 4609
A RESOLUTION ADOPTING AN APPLICATION PROCESS AND PROCEDURE FOR
REVIEWING 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 4933 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 recognizes
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 out of 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, said Procedure was amended by Resolution No. 4446
creating a low interest fund for the benefit of developers subject
to the application process and review criteria set forth in the
original policy, and
WHEREAS, a recent review of the application process and review
criteria set forth in said Procedure has indicated a need to
further amend said Policy Manual primarily to specify a policy for
utilization of the Commercial Rehabilitation Loan Program.
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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 Redevelop-
ment 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 16TH DAY OF APRIL, 2001.
ATTEST:
Theresa White
City Clerk
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Wm. E. Boharski
Mayor
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POLICY & 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
that 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 that
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.
CITY MADE LOAN
I. UTILIZATION OF FUNDS
A. 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
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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 TIP 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;
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, TIP assistance to a proposed new
addition to tax base 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 TIP, based on cash -
on -cash return and internal rate of return.
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B. The City Council has chosen to create City -made a low
interest loan fund available to qualifying developers for
on -site work covering:
1) Acquisition
2) Land assemblage
3) Landscaping
4) Site Lighting
5) On -site Utility Work and Utility Taps
6) Parking - Paving and Striping
7) 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
10t limit based on the total project cost.
The interest and repayment terms for a low interest loan
for on -site redevelopment purposes are:
3t for loans not $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
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.
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.
III. APPLICATION REQUIREMENTS
Project Description - A description of the project, type of
development and scope of work including:
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Plans/schematics
Project schedule - proposed timetable for completion of
project
Project feasibility - substantiate the market and economic
feasibility of the project
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.
Development Entity - A public disclosure of the development entity
and other involved parties including information on qualifications
and past experience.
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.
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.
Leverage Ratio - Ratio of public to private investment
Employment Generated - Best estimate of construction and permanent
jobs to be generated by the project and a wage/salary scale for
employment created.
Letters of Intent from tenants for lease project.
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.
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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:
1) Economic Stimulus
2) Employment Generation
3) Tax Generation
4) Elimination of Blight
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.
6) Developer Past Performance
7) Project Feasibility
S) Impact Analysis/Assessment - This is 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
11) The Amount of TIF Assistance requested.
COMMERCIAL REHABILITATION LOAN PROGRAM
I. UTILIZATION OF FUNDS
The low interest loan subsidy program is provided to assist
downtown businesses and property owners in making physical
improvements to their property. Working with participating
banks, the City of Kalispell subsidizes the interest rate down
to 3k with the bank funding and securing the principal on the
loan.
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The interest subsidy is funded through the use of Tax
Increment Funds (TIF) from the Kalispell Downtown Urban
Renewal District. The use of these public funds is to improve
the tax base and stimulate the revitalization of the downtown
area. Properties within the district are eligible to make a
preliminary application to the City to determine the
eligibility of work items to be funded by the program.
Eligible Items include:
1)
Eliminate code deficiencies
2)
Energy conservation/weatherization
3)
Removal of physical barriers to the
handicapped
4)
Replacement of permanent fixtures to
existing structures
5)
Renovation through alteration,
additions to or
enhancement of existing structures
6)
Capital improvements to the real
estate (permanent
fixtures)
7)
Exterior storefront improvements
8)
Replacement of exterior signs
9)
On site improvements (paving and landscaping)
Note: Items not eligible include acquisition of property,
personal inventory, equipment and cash flow.
Costs to be paid with TIF commercial 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.
II. LOAN AMOUNTS AND TERM
The property owner and/or a long-term tenant located within
the Urban Renewal District (see map on back) are eligible for
a low -interest loan with a five-year payback.
The minimum amount of a commercial loan to be subsidized will
be $5,000 and the maximum amount will be $50,000. Only one
loan per building per owner will be approved.
A requirement of a 50/50 dollar match between the TIF
subsidized loan and the property owner/tenant will be required
for all approvals.
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Leveraging the monies with the private sector, the City of
Kalispell subsidizes the interest rate down to 3% at
participating Kalispell banks.
An applicant has a time frame of ninety days to complete the
application process and close on a loan. This 90-day time
frame will begin when the Community Development Department
receives the application. All necessary supporting
documentation and attachments must be attached to the
application prior to presentation to the Architectural Review
Committee.
The Architectural Review Committee reserves the right to
review a request for extension of time on the actual
implementation of the loan. This request will only be approved
if there is a valid reason why the project has not begun. The
extension period will be evaluated on a case -by -case basis.
III. PROCEDURE
A. Fill out a Preliminary Application and submit it along
with drawings and cost estimates for the proposed work to
be done to the City of Kalispell's Community Development
Department.
B. Once the completed application and all supporting
documents are received, the Community Development
Department will schedule ' an Architectural Review
Committee meeting and you will be invited to attend.
C. The Architectural Review Committee will review your
application for eligibility and conformance to the
Redevelopment Plan. The ARC is charged to not only
review for conformance to the Redevelopment Plan but also
to mate suggestions if needed to improve the aesthetical
appearance of the project as well as ADA requirements.
D. After Committee approval, apply to one of the
participating banks for the approved loan amount. Notify
the Community Development Department as to your loan
office and respective bank, and the CDD will send a
lettei to them affirming your eligibility amount.
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