The Missoula City Council on Monday took its foot off the pedal in pushing for changes to the Missoula Redevelopment Agency and the tax increment held within the city’s urban renewal districts.
With caution raised by the local business lobby and Mayor John Engen, among others, the council sent its proposed resolution back to the drawing board, where it will linger in committee while its sponsors work to make improvements.
“We’re sending it back. It will be several week before we see it in committee. Frankly, it needs some work,” said council member Gwen Jones, one of the resolution’s sponsors.
Earlier this month, the council introduced a resolution that would limit the amount of tax increment available within the city’s urban renewal districts. The City Council created each district to spark economic development and eliminating blight and over the past few decades, the tool has worked with significant outcomes.
But as property values have risen, the amount of revenue held within the city’s urban renewal districts has grown when compared to the city’s overall tax base. It currently stands at around 8.7%, up from 5.9% in 2018, which marks the year the state shifted to a two-year appraisal cycle.
“We don’t get the value of new construction that we used to,” said city CAO Dale Bickell. “That continues to compound the constraints on our general fund.”
In theory, the proposed resolution would strike a balance between the resources available in the city’s urban renewal districts when compared to the revenues available to the taxing jurisdictions.
To do so, sponsors of the resolution have proposed a 9% cap on the combined revenues held in the urban renewable districts. Anything over that cap would be remitted back to the taxing jurisdictions and their general fund.
But of the city’s six urban renewal districts, only one would fund the remittance under the proposed resolution, that being District III, which represents the Brooks Street Corridor. The Missoula Midtown Association is working toward a master plan for district improvements while the city, for nearly 20 years, has worked to position itself to make changes to Brooks Street.
Members of the Midtown Association voiced opposition to the resolution in its current form, saying it would unfairly cripple the district.
“Midtown has been waiting for two decades for the right moment to redevelop. We have patiently built the increment and laid the groundwork to build so we can have the quality of life that other Missoula neighborhoods have,” said association board member Mark Bellon. “This resolution in its current form will have lasting effects on the future of Midtown, and now is not the time to deprive this district of the one economic development tool we have.”
While members of the City Council didn’t disagree with the resolution’s intended outcomes, they are expressing caution in moving forward until the consequences are fully explored. They also defended state law that for years has given municipalities the right to create urban renewal districts to spark economic development.
Nearly all major Montana cities use the tool.
“We are dealing with structural problems with financing municipal operations given the dirt of revenue options provided to us by our Legislature,” said council member Jordan Hess. “The Missoula Redevelopment Agency and the urban renewal districts provide the single greatest opportunity to shape development in our community.”
Mayor John Engen has long defended urban renewal districts as a tool to effect redevelopment for the public good. Tax increment available in the downtown district alone has leveraged hundreds of millions of dollars in private investment, including housing and new businesses.
Other districts are seeing positive outcomes as well.
“A lot of what we appreciate very much in the city would go missing but for the tool,” Engen said. “As we move forward, if we were to ever be in a position, which I think we are, of really making meaningful progress in affordable and workforce housing, then tax increment and urban renewal districts and MRA will play a critical role in that.”
Engen suggested the tool as designed is working well. He suggested the resolution may not be necessary at all.
“I believe the balance exists today,” he said. “In the moment, the flexibility we have today allows us to take advantage of the remittance tool when we need to. We often don’t know we need that tool until the time is upon us. That’s really the flexibility that’s inherent in the way we’re operating today, and we exercise that flexibility with prudence.”