Billings Mayor Bill Cole and new council member Frank Ewalt went to school Thursday, taking a 90-minute crash course in "tax increment financing" from the people who make it work in blighted districts in Billings.
TIF refresher meetings were held Friday at the Billings Industrial Revitalization District office, 1413 Fourth Ave. N., to help new council members learn the basics about what East Billings Urban Renewal District coordinator Tim Goodridge called simple in concept but complex in operation.
In essence, here’s how it works: A city determines the neighborhoods it considers blighted — “messed-up streets, underutilized properties and unsafe conditions,” Goodridge said. “It was pretty easy for the EBURD to make it.”
TIF districts collect taxes that are then granted to private urban renewal projects in those districts. The renewal projects should lift property values in the district, thus generating more growth and more taxes to renew the TIF fund.
The districts begin with a “base” year setting the taxable value for all properties within the district. That’s about 300 properties on 224 acres in the EBURD, said Marty Connell, the district's former board chair.
The EBURD's base taxable value in 2006 was $1.8 million. The “increment,” or increase in property taxes, is used by the district in what Goodridge called a “virtuous feedback cycle.”
Private development leads to the increase, which gives the district enough revenue to bond for public infrastructure like parking and lighting or curbs and gutters, which help attract more development.
By law, TIF districts sunset, but a bond issue extends their life an additional 15 years.
For the EBURD, two large projects — the First Interstate Bank Operations Center, completed in 2009, and the GSA Building for the Department of the Interior, completed in 2013 — helped the district begin bonding for infrastructure projects, like the upcoming project to add 193 streetlamps and curbs and gutters to many streets within the district.
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“Lighting the district,” said EBURD board member Lenette Kosovich, “is one of the best things we could have done.”
Goodridge told Cole and Ewalt that there is one test they’ll be faced with every time they consider whether to approve a TIF project — what is the project’s public purpose and public benefit?
“It’s up to us to present you with projects with public purpose and public benefit — and to validate our reasoning,” Goodridge said.
State law, he said, clearly says that public money may be used for private development.
“The law is about incentivizing private enterprise so the tax base can go up,” Goodridge said. “That’s the biggest judgment you will have to make.”
He noted that the Montana Legislature considered — and turned down — 15 bills during the 2017 session that Goodridge labeled “anti-TIF.”
“People don’t understand what the money is spent for,” he said. “You need to understand that what you are allocating TIF funds for isn’t controversial, so you won’t get attention from the legislature.”
Connell put it this way: “You have three great TIF districts. Listen to them, and make them accountable.”