Tax rebate for building proposed

Matt Hagengruber

Apr. 21, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- Under a plan floated to the City Council on Monday night, First Interstate Bank could receive a $1.2 million tax refund over 20 years for building its operations center in the East End Tax Increment Finance District.

The plan hasn't been approved by the council, but city development officials said at the work session meeting that the plan could be copied to spur more development in the area between downtown and MetraPark. The council will vote on the plan at its regular meeting next Monday night.

Developer Aaron Sparboe is building the 65,000-square-foot First Interstate building across from North Park along Sixth Avenue North. Greg Krueger, who is working on the project for the city, said the building will bring significant new tax revenue to the TIF district.

With a TIF district, the state establishes a base taxable value in the district's first year. Taxes on later increases in that value stay in the district to fund improvements. With the East End TIF district, that value has dropped for the past three years.

The First Interstate operations center is expected to pay up to $150,000 in property taxes each year, all of which will stay in the district to be used for redevelopment projects, such as sewer and water lines.

The new tax money is called "increment" money and can be used only in the district. With the refund plan, 45 percent of First Interstate's tax bill, or about $62,000, would be refunded to First Interstate every year for 20 years as a reward for locating in the TIF district.

Krueger said First Interstate would receive the refund only when the entire TIF district has a positive increment amount. So if the taxable value of the district continues to stay in the red, First Interstate wouldn't receive its refund, Krueger said. If the increment value of the entire district increased by only one dollar, Krueger said First Interstate could receive only a 45-cent refund.

But Sparboe and his attorney presented language to the council that would have the city pay First Interstate "catch-up" money for years in which increment fell. For example, if the district's value dropped into the red one year, First Interstate still wouldn't receive a refund. But if the district's value surged the next year, the city would pay First Interstate its usual refund plus the refund from the previous, negative year using money from other development projects in the district. Essentially, First Interstate would be first in line to receive a tax refund when times are good.

That language caused some concern among city officials, and it's unclear if it will be included in the final agreement.

In other business, the council heard differing views on the fees charged to use Dehler Park. Under the city's agreement with the Billings Mustangs, the Mustangs can set user fees for the Montana State University Billings and American Legion baseball teams.

But those fees must be approved by the council and the advisory board that oversees the city's parks department. The Mustangs want to charge MSU Billings and the Legion program $450 for a double-header and $300 for a single game. The parks board wants the fee to stay the same as it was two years ago for MSU Billings: $350 for a double-header and $250 for a single game.

Mustangs General Manager Gary Roller said it costs more than $600 in labor, utilities and other expenses to play a double-header game at Dehler Park, yet his team only wants to charge $450. Roller said Legion officials would actually save $7,000 a year with the new fees, as their rate would decrease. He said MSU Billings is seeing a fee increase from two years ago at Cobb Field mostly because the Mustangs will now clean Dehler Park.

"We'll clean the park now, whereas in the old facility, the MSU Billings players cleaned the facility," he said. "And to be honest, they didn't do a really good job."

MSU Billings Athletic Director Gary Gray is on the city's park board, but parks director Mike Whitaker said Gray recused himself from the vote on the user fees.

The council also heard that the methane capture project at the city's landfill has been hampered by low gas prices and shallow wells.

Montana-Dakota Utilities regional head Rick Reid told the council that earlier revenue estimates were based on a cost for natural gas of $6 per 1,000 cubic feet, while the price has dropped to $2.31. MDU also expected to drill wells to 120 feet, but are mostly drilling to 90 feet, which means it will have to drill more wells. Those factors combined mean that MDU will need more time to get the operation up and running.

"Costs went up 10 percent, gas prices went down 60 percent," Reid said. "It's still a good project, but we're going to do it a little slower."

Newstex ID: KRTB-0032-34357978