Missoula City Council approves $1.8M reimbursement for downtown hotel developer

The AC Hotel is expected to be completed in the fall of 2020.

City Councilwoman Gwen Jones led an impassioned defense Monday of the Missoula Redevelopment Agency and the tax increment financing it provides major developers as the “one and only tool we have for any long-term investment in our community.”

It is, in fact, the reason why Missoula has “the best downtown in Montana,” Jones said during debate over designation of the AC Hotel as an urban renewal project.

That designation, in turn, allowed council members to approve the allocation of $1.8 million in tax increment bonds to reimburse the developer for public improvements associated with the $22 million hotel.

Missoula Investors LLC purchased the old Firestone Building at the corner of Main and Pattee streets for use as an office and staging area during construction of the new Mercantile Residence Inn next door.

With that project complete, Missoula Investors is moving forward with redevelopment of the long-abandoned Firestone property as AC by Marriott Missoula – a six-story hotel with a basement restaurant and rooftop bar.

As approved on a 10-1 council vote Monday night, the tax increment bonds will eventually reimburse the developer for these costs:

  • Remediation of the property and deconstruction of the building: $1.262 million
  • Public right-of-way improvements: $245,482
  • Placement of all utilities underground: $377,643

The reimbursement will come over after the hotel is completed and the developer submits a detailed accounting of the expenditures.

Councilman Jesse Ramos, the lone dissenting vote, attacked the reimbursement as “worse than a tax break” and grilled Ellen Buchanan, director of the Missoula Redevelopment Agency, on the justification for use of TIF dollars.

“What if there is a recession?” he asked. “What if they go out of business, and we don’t get any tax revenue from the project?”

Ramos said the use of tax increment financing has depleted the tax base in more than 400 urban renewal districts in California, taking away needed funds from public safety and schools, insinuating that it could or will do the same in Missoula. He didn’t explain the rationale for comparing California’s experience with that of Missoula.

Where is the proof, he asked, that the AC Hotel will deliver its promised benefits?

Andy Holloran of Missoula Investors LLC defended his company and its latest downtown project, saying he disagreed with everything Ramos said.

“TIF creates jobs,” Holloran said. “It creates projects that will dramatically increase tax revenues. Communities that did not create programs like this are dying.”

Without tax increment financing, there would have been no Mercantile Residence Inn, he said. Without TIF, the Firestone Building would remain in its current decrepit, uninhabitable condition “for a very long time.”

“We believe the city of Missoula has tremendous momentum,” Holloran said. The AC Hotel will continue and contribute to that momentum, he said.

“This project adds increment,” said Buchanan. “It enables us to do other projects.”

The Firestone building, which has been abandoned for more than 20 years, currently pays property taxes of $15,081. When it’s finished in 18 months, the AC Hotel will pay more than $186,000 in property taxes each year.

The hotel will need an estimated 33 full-time equivalent employees, with an initial payroll of $1.6 million a year, by Holloran’s estimate.

The construction plan involves the reuse of 95 percent of the materials from the Firestone building – including the concrete walls, which will be crushed and used as fill, and the rebar, which will be used for the basement restaurant.

The right-of-way improvements will include better pedestrian access, trees, bushes, specialized light poles, benches, bike racks, and planters.

The utilities will be buried because there is no alternative if you intend to construct a multi-story building in downtown Missoula. There is no other place for the lines to go, Buchanan explained. Without the utility work, there can be no multi-story building.

But that taller building creates a larger tax base, right? Jones said.

Yes, came Buchanan’s reply.

“These funds will make the project better,” Buchanan said. “Without TIF funds, does he not build the restaurant? Does he lower the quality of the project? Yes, he probably does.”