Josh and Shelby Farnham discovered they hit a sensitive nerve in Kalispell when they applied for annexation into city limits to run a drive-thru coffee stand.
The Farnhams want to open a small business on their 3.4-acre property. Problem is they live just outside city limits on Three Mile Drive and West Spring Creek Road. The county designates the land as agricultural zoning, barring commercial development. So the Farnhams applied to be brought into the city’s neighborhood business zone, at which point a deluge of growth policy apprehension and taxation concerns surfaced.
The property is within the city’s recommended annexation boundary but according to a cost-of-services analysis could cost the city an estimated $2,600 annually. In other words, the coffee shop could cost Kalispell more than what it pays in city taxes.
This hitch led the planning board to vote 4-3 recommending against annexation. But Planning Director Tom Jentz noted at a city council work session last week that cost-of-services analyses are by and large flawed. They make general, far-reaching assumptions, like newfound costs for road maintenance, policing and fire department coverage, but these estimated losses may or may not end up real, he said. For example, cost analyses estimate that a house annexed into Kalispell would need to be worth $375,000 to break even, Jentz said.
The flawed cost-of-services analysis only appeared to muddy waters even further among councilors and the mayor, who are treading lightly with new growth in the wake of the recession and years of urban sprawl. Councilor Jeff Zauner brought up a decade ago when several commercial businesses “were driven” to Evergreen because the tax burden weighed too heavily on commercial. This led Kalispell to lose “about $1 million of tax revenues that should have been the city’s.” This was at a time when large subdivisions of residential property were annexed.
“I personally have a huge issue with a lot of the methodology for how we generate tax revenue,” he said, adding, “Bottom line is what is the true cost to city? That’s the real question here?”
Mayor Tammi Fisher raised similar skepticism.
“I can’t justify annexing this property if it’s not cost-neutral,” she said. She suggested a system that made new annexations pay for themselves. City attorney and interim City Manager Charles Harball said it would be looked at but is something no other city in Montana has ever done. A draft could be brought before city council later this month.
“All we want to do is open a coffee shop,” Josh Farnham later told councilors. “But I’m sure this will arise again as the city of Kalispell continues to grow … We’re laying the groundwork for future annexations.”
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