Kalispell Diverts Tax Increment Funds to Flathead High

By Beacon Staff

Kalispell City Council voted this week to distribute funds from a tax increment district to Flathead High School to repair a potential fire hazard.

Darlene Schottle, superintendent of Kalispell schools, initially requested the funds in March, following the rejection by voters one week earlier of a building reserve levy. The school district will receive $153,399 to correct potential problems with Flathead High’s “half-floors” – the flat areas breaking up staircases between floors, which former Fire Chief Dan Diehl said could pose a potential problem.

“We’re just trying to take care of this one area that’s of particular concern to us,” Schottle told the council. “If we don’t address this we may have this area closed down.”

The vote by council, of which Tim Kluesner was the only member opposing, releases $465,000 from the West Side Tax Increment Finance (TIF) District to the entities that pay into it. The decision marks the first time the council has shown a willingness to use those funds for anything other than its stated purpose.

“This is nine months away from sunset,” Councilman Wayne Saverud said. “If viable projects do come forward I don’t think we’re backing way from the ability to respond to a potential good development.”

Tax increment financing is an economic development tool aimed at promoting growth by setting aside a portion of tax revenue from a district into a fund aimed at making specific improvements there. In theory, those improvements will encourage more business to move into the area, further improving it and generating more revenues.

But in the case of the Westside TIF, encompassing the general area around the Gateway West Community Center, west of the intersection of Meridian Road and U.S. Highway 2, the stalled economy has not recently enticed any new businesses to set up shop there. The Westside TIF account, meanwhile, has a balance of $2.2 million as of June 29, with a sunset date of March 17, 2012.

For more than a year, City Manager Jane Howington and Finance Director Amy Robertson have suggested releasing a portion of those TIF funds to other areas of government also stretched thin due to the economy, like the schools or city health levy. In November, the council denied a request for funds by the Gateway West Community Center to make structural improvements to the former mall, which houses social service agencies and nonprofits. Business groups have pushed to keep the funds available, as an incentive to draw potential employers.

Though Councilwoman Kari Gabriel acknowledged at the most recent meeting a letter from the Kalispell Chamber of Commerce urging the TIF funds remain available in case the opportunity to create jobs presents itself, she also supported the measure.

“There’s nothing that we know of in the docket waiting to use those funds,” Gabriel said. “With what the school district wants to do with those funds I think it’s a very legitimate use.”

But the issue of how TIF funds should be used presented itself repeatedly that night. The next agenda item was a request by TeleTech for $43,964 in West Side TIF funds to repair a fiber optic cable TeleTech recently discovered had been severed during prior roadwork on U.S. 2. TeleTech needs the line as a backup, which it is contractually obligated by its client to have in place.

Kalispell’s Urban Renewal Agency recommended the city provide TeleTech $20,982 in West Side TIF funds as its share of the cost to repair the line, noting the call center is one of the area’s biggest employers.

But some council members questioned why a private company should receive public dollars to repair its internal infrastructure.

“We are giving money to a company that can afford this far more than almost any business in the city of Kalispell,” Kluesner said. “If it passes I hope every business in this TIF district starts to line up and look for the money because I guess the city is starting to give it out.”

Councilman Bob Hafferman questioned why CenturyLink, TeleTech’s service provider, or the Montana Department of Transportation, which performed the roadwork, weren’t also involved in paying to repair the line. Councilman Jeff Zauner introduced a motion to table the issue for further study, but it failed.

Supporters of the measure argued that future businesses at that location would have access to the fiber optic cable, and Kalispell needs to do everything in its power to ensure TeleTech remains at its current location.

“We do need to support TeleTech,” Councilman Randy Kenyon said. “We really don’t want to start down the road of showing our lack of support.”

The motion passed 5-3, with Zauner, Hafferman and Kluesner opposed.

The council also voted to direct revenues generated by a lot in the Old School Station TIF, on the south end of town, to that lot’s Special Improvement District bond obligation.

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