Kalispell Council Reluctantly Approves Acquisition of Old School Station Lots

Expressing reluctance and regret, the Kalispell City Council unanimously agreed to acquire six empty lots at Old School Station, hoping to spur development at the business park south of downtown that remains mostly vacant a decade after its creation.

The council voted 9-0 on Monday to transfer $1.25 million to the county for the initial taxes, assessments and fees connected to roughly 20 acres of land.

By covering the fees associated with the bonds, the city becomes the property owner and will now try to sell the lots on the open market, a situation that continues to draw scrutiny from councilors and members of the public.

“This is a mess,” City Councilor Phil Guiffrida said, adding, “This is everything I’m against and goes against what our role should be, in my opinion. But there is no other choice.”

Kurt Hafferman, the son of former city councilor Bob Hafferman, who was a staunch critic of the city’s original support of Old School Station, criticized the council and its decision to acquire the lots.

“We’re going to take city resources to promote this and sell this. These haven’t sold up to this point,” Hafferman said. “You guys are going to be stuck holding the bag on all these lots. You need to figure out what to do when these lots don’t sell.”

As City Manager Doug Russell explained during Monday night’s meeting, there will not be a direct cost for taxpayers for the acquisition.

The funds will be reimbursed to the city, which issued the initial bonds for a special improvement district for the infrastructure at the site in 2006.

The city of Kalispell is responsible for making payments on the bonds because most of the 55-acre park sits vacant and racked with growing debt.

By June 30, the city was faced with its latest payment of $285,000, but the debt service fund did not have enough to support the continuous payments, creating a troublesome scenario where the city could be forced to tap into its general fund for the next 10 years to cover the reoccurring fees.

City officials devised a plan to eliminate the growing debt and hopefully spur development at Old School Station by acquiring six lots that are floundering in delinquency and resell them on the open market.

The other option was to default on the loan. But as Russell stated, that would still lead to the city being forced to pay out of its reserve fund while also taking a significant hit to its credit rating.

Instead, city staff will now try to sell the lots without undercutting the market price for the surrounding real estate.

“This is not riskless. Let’s make that perfectly clear,” Mayor Mark Johnson said.

If the properties do not sell, the total cost to the city would be estimated at $1.9 million, Russell said. If the city did not acquire the lots and cover the shortfalls in the debt service payments, the city would pay an estimated $1.85 million over the remaining life of the bonds. Russell noted that this would be a smaller payment but the parcels would have substantial delinquencies associated with them, creating a greater impediment for prospective buyers.

The city would need to sell the properties for an estimated $62,500 per acre to recoup its costs, Russell said.

NOTES: At its meeting on Monday, the city council also approved the final plat of Bloomstone Phase 1-A, which allows the development of 25 single family homes and 1 multi-family facility on a 16-are site west of Kidsports Complex. The council also set a public hearing regarding the Spring Prairie Development near Kidsports Complex. Developers are seeking approval for 14 commercial building pads on a 28-acre site. The public hearing is set for April 20.