Page 22 - Flathead Beacon // 3.18.15

22 | MARCH 18, 2015
NEWS
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that have piled up and reached six fig- ures — and then attempt to quickly sell the lots, City Manager Doug Russell said.
“I think we’re somewhat in a corner here,” he said. “It’s wiser to acquire the asset to be able to manage under the sce- nario laid out than to sit back.”
It’s a complex proposal for a conten- tious issue.
In the early 2000s, growth was de- fining the Flathead Valley, especially Kalispell. In 2004, there were a record 480 new housing units constructed in town. Commercial development sky- rocketed, including a new section of re- tail business sprouting up north.
A group of developers, Montana Venture Partners, approached the city with an ambitious plan to create a hub for technology and light manufacturing businesses on an empty section of land on the south end, near the intersection of Demersville and Rocky Cliff roads. The project was called Old School Sta- tion, named after the old Demersville School that sat near the site.
To get this project off the ground required a lot. First, the 55-acre prop- erty was annexed into city limits in the summer of 2005 and the growth policy boundaries were extended to include this former rural area into the urban sector. It was platted as 17 lots. The city created a special improvement district, which is a mechanism used by munici- palities to build infrastructure, includ- ing sewer, curbs, gutters and street- lights. The city received $4.5 million in bonds to initiate the SID, and then the plan was for businesses and other devel- opment at Old School Station to pay back the city in assessment fees over 20 years.
To attract high-end businesses, the developers wanted cutting-edge tech- nology infrastructure. So the city ap- proved a pair of tax increment finance districts, one for industrial and another for technology. The two TIFs would use surplus property tax revenues above a determined amount and use the funds for infrastructure and other develop- ment needs.
Old School Station was a grand en- deavor, in many ways embodying the rapid — and some would say reckless — growth of the time. There were crit- ics, including former City Councilor Bob Hafferman, who voted against each measure throughout the multi-year pro- cess, saying public funds should not be used to support private development.
But the project moved forward, pro- pelled by optimism and encouraged by rumors of interested tenants, including large production companies, a perform- ing arts center and various manufactur- ers. Two large tenants moved in almost immediately, including Fun Beverage, which developed its new facility there.
Then the Great Recession hit.
Growth screeched to a halt in late 2008 and early 2009. Meanwhile, atten- tion turned to the burgeoning commer- cial district on the north end of town, where new retail development thrived
in spite of the economic downturn.
Old School Station became an island on the south, ready and waiting for devel- opment. But it never arrived, except for
the three businesses that sit there today. “It just came on the market at the wrong time,” Paul Wachholz, who owned Fun Beverage and was a developer with
Montana Venture Partners, said. Reflecting on what went wrong at Old School Station, Wachholz said the SID payments that businesses needed to pay the city were probably a disincentive. But overall, the recession is to blame,
Wachholz said.
“It’s a good project,” he said. “Every-
thing is there. All the high-tech wiring is there.Thecitywater.Thecitysewer.The streets are paved. It’s really ready to go.”
In the years since the site was devel- oped, 11 of the 17 lots remain vacant and six lots are significantly behind in their payments to the city, some delinquent by up to six years.
Now the plan is to eliminate those delinquencies, thus removing a hurdle for prospective businesses.
Russell explained the complex sce- nario last week.
The city would pay roughly $1.16 mil- lion to acquire the six lots by covering the outstanding debt, including the spe- cial improvement district fees and for- estry and street assessment fees. Essen- tially the city would be paying itself back the SID fees, and the money would be re- imbursed by the county back to the city.
Now Kalispell would own these lots, encompassing nearly 25 acres of land.
The city would offer to sell the lots at “fair market value,” Russell said, and there would no longer be the delinquen- cies attached to the lots.
Kalispell would take the money from selling the lots and recoup the general fund account, where the initial $1.16 million would come from.
“We’re confident we will be reim- bursed over time,” Russell said. “Maybe it will take 10 years, but every develop- ment will get us one step closer to that.”
The other option is to default on the loans, which would result in the city pos- sibly losing other claims. It would also hurt the city’s ability to borrow in the future.
“We’d be looking at an ugly situa- tion,” Russell said.
Most councilors who reviewed the proposal expressed initial interest in the idea last week, while Kuntz remained vocally critical.
The council did not take any action at the work session and will review a possible resolution to move forward with the acquisition at an upcoming meeting. Russell said the city could acquire the lots by the end of May and begin seeking buyers. He also sought other ideas or private investors to offer a better solution.
Others remained optimistic that this could be the best scenario for a bad situ- ation.
“I think it definitely is light at the end of the tunnel,” City Councilor Wayne Saverud said, “And we’ve been looking for it for a long time.”
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