Downtown gets help through tax district


The City of Miles City will be forming a Tax Increment Finance District in the downtown area to revitalize the area. It has been successfully used in many other city and towns in Montana.

There are a number of confusing things about a Tax Increment Finance District but the first is that the tax increment part doesn’t come into play until after the district has been in place for at least a year.  The initial years of a TIF district are dedicating to promoting the district.

The State of Montana website defines a TIF as  “a technique that allows a local government or redevelopment authority to generate revenues for a group of blighted properties targeted for improvement, known as a TIF district. As improvements are made within the district, and as property values increase, the incremental increases in property tax revenue are earmarked for a fund that is used for improvements within the district.”

In simpler words, it is one of the only methods available to a local government entity to raise funds for improvements without increasing taxes.  Which sounds impossible but, with a TIF, it’s not.

As Steve Zeier of Zeier Consulting of Billings, who has been hired to assist with the Miles City TIF district explained, TIF creates “more buckets of funding to revitalize downtown Miles City and remove barriers to redevelopment.”

An area is chosen to become a TIF district.  The base property tax of that area is determined.  As improvements are made in the area, property values will increase, followed by an increase in taxes.  The difference between the taxes collected prior to the implementation of the TIF and after the property values increase is kept and used only in the district.

For example: a property owners pays $1,000 in annual property taxes before the district is created based on the value of the property.  Improvements are made in the district, such as to sidewalks, lighting, cleaning up blighted areas.  The value of that owner’s property increases because of the improvements so the owner’s taxes increase to $1,100 a year.  That extra $100 can only be spent in the district.

A TIF district does not create an increase in the general tax base but only a separation of the taxes raised in that district apart from the general fund.

However, before those increases can happen, the district must be made desirable for developers.  City Historic Preservation Officer Connie Muggli said her goal is to remove barriers to redevelopment then market the TIF district to developers.

Barriers include permitting issues, such as parking requirements, and streamlining the permitting process.  In Miles City, building and zoning codes require a certain number of parking spaces.  However, in downtown areas, it is not always possible to provide the required spaces, which makes development impossible.  Muggli said the city is amenable to reviewing some of the permitting issues to make development easier.

Then a marketing plan must be prepared and distributed to interested parties.  Muggli said “To get it going, you’ve got to do some work” and active recruitment is part of that plan.

Zeier has already completed the feasibility plan for the city.  The district boundaries will be generally the same as the Downtown Historic District.  The downtown core area meets a number of criteria to make the project feasible, as well as the city itself.  The plan notes the upswing in the regional economy, the increased demand for housing, the area is eligible for different forms of tax credits, and the town’s core economy is stable.

As the area improves, more development is attracted, and property taxes are generated by new businesses.  In addition, when a property undergoes a major redevelopment, the state will reappraise the property without waiting for the automatic every six year review.  This will, again, create more funding within the district to put improvements such as improved sidewalks or lighting, again increasing property values.

Communities have been using the TIF district successfully in Montana over the past 20 years including larger cities such as Billings, Helena, Missoula, Kalispell, Great Falls and Butte.  Smaller communities with successful TIF districts are Laurel, Hamilton, Lewistown and Polson.

The districts generally last for 15 years, after which, increased funding goes into the general fund.

The growth often starts very slowly but increases every year until what was once a fading business district is again a vital part of the city again.