City takes look at TIF district
A tax-increment finance (TIF) district could raise $268,866 over 15 years for every $1 million of new development, Columbia Falls city manager Susan Nicosia told the city council on Dec. 17.
That money could be used to pay for needed infrastructure as a way to draw a big investor to the community, such as a big hotel, she said. Both Kalispell and Whitefish have used TIF districts to fund infrastructure improvements.
Taxes on an individual property do not change once a TIF district is established. What changes is how the city’s total tax revenue is used. As the tax value of a TIF district increases after the district is established, the additional tax revenue goes into a TIF fund instead of the general fund.
The tax value of a district could increase as empty lots fill up with new construction, large lots are subdivided into smaller lots, or blighted buildings are torn down and replaced with newer ones.
The money that goes into the TIF fund could be leveraged by using it to purchase 15-year bonds. Using local tax figures, $1 million of new investment valued at 2.63 percent and taxed at 679 mills would create $17,858 a year in new tax revenue. But that’s $268,866 over 15 years, Nicosia explained.
Establishing a TIF district can be a lengthy process. Columbia Falls looked at the idea in 2000-2001, but the city’s overall tax value declined at that time due to tax cuts by the 1999 Legislature, Nicosia said.
The city looked at the idea again in 2006 as a way to invest in an industrial park just north of the viaduct. But Montana West Economic Development and the Port Authority backed away from the project, Nicosia said.
TIF funds can be used for acquiring land, demolishing and removing buildings, improving or connecting infrastructure, planning or analysis, or general redevelopment. But it’s important to have a good plan for the money so it doesn’t turn into a “slush fund” and get diverted to other uses, Nicosia said.
She cited the example of the Kalispell city council voting to take $2.275 million from its Airport TIF District and using the money to buy a permanent easement on state school trust land north of Kalispell for the Kidsports complex.
Key steps in creating a TIF district are to identify “blight” and to create an “urban renewal district” with defined boundaries. Blight, a word that was deleted from the city’s growth policy during this year’s review process, includes problems like public safety and health issues, property value depreciation, substandard housing or traffic problems.
The city council must approve a resolution that specifically identifies blighted areas where rehabilitation is needed. Nicosia noted that some property owners may not like that designation. An urban renewal plan can then be adopted by ordinance.
The urban renewal plan must conform with the city’s growth policy, and the Columbia Falls City-County Planning Board must hold a hearing on the plan. Nicosia said management of the TIF district could be handled by her office without creating a new agency.
The city council agreed that Nicosia should continue to study the idea and bring it back to them for review.