Martin Kidston

(Missoula Current) Over the lamentations of a city council member, the Missoula Redevelopment Agency's board of directors on Thursday approved a funding request to remove two blighted houses in the downtown district and replace them with a 26-unit apartment building.

The board, which includes several lawyers, said Montana law is clear in the use of tax increment financing and what projects MRA can invest. They also said City Council sets policy, and it's up to the agency's board to follow it when approving or denying a funding request.

Matt Sullivan and his wife, Caroline, owners of MC Real Estate Development, purchased their Front Street property in 2018 with plans to remove two dilapidated structures and replace them with 26 apartments – a project valued at $6.5 million. They said the tenants are short-term renters and were told last year that the property was poised for redevelopment.

As of Thursday, Sullivan said five tenants remain on site and will be aided in their relocation efforts. That includes two months of free rent, 100% return of their security deposit and first dibs on any apartment owned by MC Real Estate.

“The plans to redevelop this property were in place or being developed as these spaces were being rented on a short-term basis,” said MRA Director Ellen Buchanan. “There's never been any misunderstanding as to what was planned for that property, as far as I've been told.”

Insults and Controversy

Plans for the project began turning last year when the Sullivans sought a small easement to the site for fire access. At the time, council member Daniel Carlino attempted to block the easement, saying that doing so would give the city “power over (the Sullivans') financial incentive” by preventing them from redeveloping their property.

Carlino on Thursday continued to attack both the project and the Sullivans and urged the board to deny the funding request. He insisted that MRA demand affordability in exchange for tax increment, even though MRA said it's not the city's current policy.

“We already have five affordable rental units here. We don't need to give $250,000 in taxpayer money to capitalists to cause this gentrification,” Carlino said. “We don't need to give millions of dollars to capitalists who are going to do market rate, unaffordable housing.”

Sullivan was prompted to address the City Council last year regarding Carlino's misleading and disparaging remarks. Members of City Council also suggested that Carlino, in opposing the project, was being “disingenuous” and creating an “us versus them” scenario while ignoring state law and offering false promises.

Members of MRA's board also questioned Carlino's remarks on Thursday.

“I think we're being asked to say no to this request based on policies that don't exist, or create policies on the fly, or in the case of councilman Carlino's request, that we deny this project because of Mr. Sullivan's political beliefs – all policies that are blatantly illegal in Montana,” said board chair Karl Englund.

Englund said the City Council sets the policies for the board to follow, and the city doesn't currently mandate that affordability be attached to a project in order for it to receive tax increment. He called it a significant policy decision that's not up for one council member to decide unilaterally but rather, one the entire City Council must make.

“We have to administer this program in accordance to the law,” said Englund. “It's entirely within the council's authority to change the plans. But to have a council person come to us and tell us to operate differently than what the plans say is, to me, inconceivable and is something I'd never do as someone sworn to administer this program.”

Two dilapidated buildings currently occupy the site.
Two dilapidated buildings currently occupy the site.

Front Street Apartments

In its review of the project, MRA said the 26 units will offer far more housing than what's currently on the site, and also in a safer building. The two dilapidated homes were erected in the early 1900s and have fallen into disrepair given plans to deconstruct them.

Roughly 60% of the old homes will be salvaged for other uses. The property currently generates around $9,440 a year, though it's expected the new apartment building will generate around $45,000 a year.

The increase in tax increment enables MRA to invest in other public projects like affordable housing, sidewalks and trail lighting. Without the increase in tax increment, the agency has said it would be unable to invest in housing or other public projects.

State law dictates how the program operates.

“When folks want to add requirements, that's the regulation of private property rights,” said board member Tasha Jones. “My fear is that a husband-and-wife team like the Sullivans that have established a commitment to this community will be priced out of these programs due to demands for more regulation over these types of projects.”

Sullivan said he and his wife have worked hard to create their business and don't have the backing of “institutional investors, a hedge fund or a private equity shop.” Renters in the past and on Thursday have stepped forward to defend the family from personal attacks, including those leveled by Carlino.

Sullivan said such insults and the spreading of false information hurts. He became emotional when defending his project and his intent to help his tenants on Thursday.

“I get a little emotional when I hear people say things that are untrue about my wife and I. We work very hard for what we do and it makes me a little upset. It makes me even more upset when it's an elected representative who's mischaracterizing our character,” Sullivan said.

The board approved the request and Sullivan said construction would likely begin later this year. The one-bedroom apartments will rent for roughly $1,400 a month.