By Evelyn Pyburn, – This article was first published in the Jan 16th edition of the Yellowstone County News.
Click here for Janet Cornish’s Power Point Presentation
A series of meetings created an intense schedule for a lot of county officials, this week, as Big Sky Economic Development (BSED) pursues a process to gather and disseminate information regarding a proposed industrial park in Lockwood. The meetings are part of the first phase of an exploratory process for a “targeted economic development district,” or TEDD, which has been proposed by BSED to help finance infrastructure for the proposed industrial park.
The next phase will only follow if the information gathered convinces Yellowstone County Commissioners to establish the TEDD and conduct a comprehensive plan for it. That is far from a certainty.
At the Lockwood School Board meeting on Tuesday evening, County Commissioner Jim Reno said that if he were to vote on the proposal now, he would vote against it.
Commissioner Bill Kennedy, in conversation earlier in the week, said that he will support the proposal.
No comment, has yet been made, by Commissioner John Ostlund that would reveal his position. But all of the commissioners, as well as many other public officials, posed hard questions during the meetings to the BSED information team, headed by BSED Director Steve Arveschoug and their hired consultant, Janet Cornish, of Community Development Services of Montana, who has assisted in establishing other TEDD’s in Montana.
Of considerable concern is how a TEDD, which will incorporate a Tax Increment Finance (TIF) district, could impact taxing jurisdictions for a period of at least 15 years and as much as 30 years. Reno expressed considerable concern about its impact on the Lockwood School District, which would be the hardest hit. “I don’t’ know what you say to local taxpayers or legislators when you request new funding or a levy, when you have walked away from educational dollars,” said Reno, “Businesses come for quality of life, and good education for their families, they don’t come to save tax dollars.”
Arveschoug and Cornish conceded that in the short term there would be negative impacts, but they urged a long-term view. In the long-term there will be economic growth within the relatively small geographical area of the TEDD, and outside of it, which would generate more taxable property values than if there were no TEDD, they said.
The proposed area of the industrial park lies east of Johnson Lane on either side of Interstate 94, and incorporates a proposed private development of Trailhead Commerce Park, as well as other business sites, already established. The Lockwood “concept area” – an area of some 600 to 700 acres — emerged as the preferred alternative of three concept areas identified in a feasibility study conducted by BSED, which was released early last fall.
To develop an industrial park is critical for Yellowstone County, according to Arveschoug, in order to entice value-added industry. Arveschoug said that the community needs sites that are “ready to go” – equipped with needed infrastructure – when industry is “ready to go”. Yellowstone County is short on those kind of sites and without them industry will locate in communities that have them.
TEDDs are not a new concept to the state. They are a revamped legal structure created by the 2013 Montana Legislature to improve upon the law that created Tax Increment Finance districts. As explained by Cornish, there were several kinds of TIFs previously. Now there are only two – one for urban renewal projects in municipalities and TEDDs which are aimed at removing barriers which block development of value-added business – such as manufacturing. Since the legislative change, four TEDDs have been established in the state but there are dozens of older-version TIFs. A comprehensive plan must be developed for a TEDD, which conforms to the county’s Growth Policy, and all property within a TEDD must be zoned in keeping with the Growth Policy.
A TIF is a geographical area within which, once it has been established, retains all new property taxes generated as a result of new development, which are then applied to building infrastructure within that district. Property taxes which were generated in the TIF, up to the year of its creation, continue to be distributed to the various state and local tax jurisdictions, but most of the jurisdictions forego any new taxes generated for the duration of the TIF. All of the taxes are once again distributed to all taxing jurisdictions once the TEDD sunsets (15 years, unless there is indebtedness which must be paid off).
There are opportunities to spend TEDD revenues outside its boundaries if a case can be made that the need for that infrastructure is a direct result of economic activity within the TEDD, said Cornish. For example, increased traffic generated by TEDD activity could justify its expenditure on road development outside its boundaries.
That potential seems to have encouraged much support in Lockwood, which has struggled with meeting its infrastructure needs without a revenue stream. “It would be better to spend Lockwood tax dollars in Lockwood rather than on 72nd Street West,” quipped Lockwood School Board member, Peter Freivalds.
Freivalds was also concerned about who would be in charge of making the decisions in managing the TEDD. County Commissioners hold the ultimate authority, although in many cases other commissioners in other counties have appointed an advisory board which gathers local public input, according to Cornish.
“In the past Lockwood has not been well received by the County,” said Freivalds, who went on to lament that “now the County wants us to tie up” part of Lockwood’s property tax base for the benefit of the rest of the county.
Arveschoug, in talking with county commissioners, said that he envisioned that BSED would manage the TEDD, making changes to the inner local agreement that his agency has with the County, which compensates BSED for the services they perform on behalf of county government.
Freivalds also stated that the proposed industrial park area will most likely be developed, without a TEDD, when the Northend Bypass is built, and Lockwood taxing jurisdictions will not have to forego any tax revenues. A TEDD could mean giving up a lot of future revenues.
Reno very much agrees that development will most likely happen given the pending transportation improvements, without a TEDD. “I don’t know how you would stop development,” said Reno. He pointed to the development at South Billings Boulevard as an example. On one side of the street, a TIF helped a company “that didn’t need it,” said Reno – Cabela’s – while across the street, outside the TIF, all kinds of smaller companies provided for their own infrastructure costs without public assistance. “Historically, the private sector has done those things because they see gains to be made,” said Reno.
“What do you say to someone like Pacific Steel which has already paid for their own infrastructure?” he asked.
Cornish replied that she would tell them that in the future growth of their business they will benefit from the improved infrastructure and resources provided through the TEDD. That is part of the justification for a TEDD, explained Arveschoug, “so one guy isn’t holding the bag for everyone else. It is tough for them to have to swallow having to make that investment.”
When Commissioner Ostlund pondered the high risk nature of development, Reno concurred that it is a high-risk venture, and voiced concern about the government going into the development business. It’s an arena better left to the private sector, he contends.
Not all TEDDs (TIFs) have been successful, and sometimes they have required “dipping into the base” to meet obligations. Cornish said, however, that she did not believe that a failing TEDD would impact a county’s bond rating, a contention with which County Director of Finance Scott Turner strongly disagreed.
Turner went on, however, to state, “I have always felt that the purpose of increment districts is to spur development that is not going to occur, otherwise. The study is showing a need for heavier industrial sites with bigger infrastructure needs” than what other kinds of development would require. “You have to have a footprint available for that kind of development. You might get some other type of development but you wouldn’t get those kinds of businesses” —businesses that add value to Montana products, creating some wealth in the state, which is different from retail and tourism. He suggested that BSED identify areas outside the TEDD that might grow and develop as a result of the activity in the TEDD.
Another citizen also disagreed with Cornish’s contention that a TIF would have no effect on taxpayers outside the TEDD. Kevin Nelson said that taxpayers outside a TIF have to pay higher levies to compensate to the taxing jurisdictions that aren’t getting all the revenue they would otherwise get.
Cornish said that it has been her experience that development outside the TEDD resulting from the economic activity within it (such as new homes for workers) more than compensates for any revenues lost because of the TEDD. So the School would benefit from an increasing tax base outside the TEDD, as well as from the state funding it would get for additional students.
Questions regarding the environmental impacts and quality of life impacts were consistently addressed by Cornish pointing out that the TEDD actually gives the community a tool to control and mitigate those impacts which would not otherwise be available as development occurs.
“This gives people of Yellowstone County a chance to say how development occurs. That’s why I like it rather than let it happen as it will,” said Cornish.
Lockwood Water and Sewer District officials said that for the most part the water and sewer systems could be expanded to accommodate growth in the proposed area. Expanding the systems would mostly be a matter of paying for it, although either the sewer district or the property owners of the TEDD would have to enter renegotiations with the City of Billings to increase treatment capacity, since the district’s current agreement does not include that area.
The primary concern for the Lockwood Fire District was a matter of adequate roads and access, which always add to development costs, said Chief John Staley.
Access to power, which would include planning with both utilities, Yellowstone Valley Electric and Northwestern Energy, is feasible, reported company representatives, but would depend upon any given company’s needs, and could involve substantial lead times – by as much as two years.
It was pointed out several times that the extension of all such services would have spin-off benefits for the community outside the TEDD.