BILLINGS CITY COUNCIL BULLETIN // aug.21.2023
THE SEINFELD OF ECO DEVO: TAX INCREMENT FINANCE
Before diving into the headline topic, we’d be remiss to “Yada yada” past the recently opened property tax rebate application. Starting last week and closing October 1st, Montana property owners can claim their rebate online.
- How Much: Up to $675
- When: Aug 15 – Oct 1
- Where: https://mtrevenue.gov/taxes/montana-tax-rebates/property-tax-rebate-house-bill-222/
- Who: Montanans whose primary residence is in Montana. Second homes, vacation rentals, seasonal cabins and non-residents are not eligible.
Plan: Make yourself a calendar reminder for next year to get your second rebate up to $675, a total property tax rebate of up to $1,350.
Tax Increment Finance (TIF)
Tax Increment Finance (TIF) is an economic development tool used to help spur redevelopment in cities. Districts are intended to target “blighted” areas where property values are declining, kickstarting redevelopment that causes values to rise again. When a district is created, a boundary is established and a baseline of tax revenues (A, see graphic below) from properties within the boundary is benchmarked. Over the years, a district continues to pay taxing jurisdictions at the benchmarked level, but any increase in tax revenue (B) goes toward an account used specifically to generate further development. Once the district sunsets, local government and school district coffers receive the entirety of the new taxable value (C).
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Billings has three TIF districts, the Downtown TIF, the Billings Industrial Revitalization District (BIRD), and the South Billings Urban Renewal Area (SBURA). There is also a TIF in the county, called a Targeted Economic Development District (TEDD), which works similar to other TIFs. Some examples of projects in the TIF districts include:
| Downtown Created 2005 Empire Parking Garage Aspinwall Sassy Biscuit Stacked The Pub Station | BIRD Created 2007 Lazy KT Fischer Flooring Belle Chemical Yellowstone Ice & Water First Interstate Bank | SBURA Created 2008 KSKC LLC (mobile-stor) Jackson Court Apts. Optimist Park Calhoun Lane Newman Ave |
Like the 90s sitcom, Seinfeld, people either love it or hate it. Proponents make the case that it’s necessary as one of only a few economic development tools available in Montana. Perhaps it’s that reliance that causes proponents to cling to it so tightly. Perhaps it’s because studies show that it works. A 2011 research paper from MSU Billings analyzing Yellowstone County TIFs concludes, “these districts in general produce a higher rate of economic growth than the rest of the area.” Notably, that study is due for an update now that Billings is approaching two decades of TIF implementation.
TIF can also be used to assist development addressing the big challenges our community faces such as housing. Last year, City Council approved four TIF applications slated to add 97 units of housing in Downtown Billings once complete. Not only do those TIF-assisted housing developments address our housing needs, adding residents to our downtown will assist with crime prevention as well. “Eyes on the street,” serve as a deterrent to would-be criminals and inappropriate activity. Allowing more people to live downtown and self-police the area after business hours will bring positive changes to safety in the core of our city.
Opponents: Crony Capitalism
While the Billings Chamber of Commerce is strongly supportive of TIF, there is opposition to its existence and usage. Opponents charge that it amounts to crony capitalism and corporate welfare. A CATO Institute paper makes the case against TIF, citing examples of major conflicts of interest, eminent domain concerns, and campaign quid pro quos. While worrying, the TIF abuses the author points to come from other states. More useful critiques of Montana TIF comes from…Montanans.
During the 2023 Legislative Session, TIF opponents voiced concerns about a number of issues. Some claimed the definition of blight is too broad, allowing for districts to be designated anywhere with the proper wordsmithing. Considering the definition of blight hasn’t been updated since…*insert shrug emoji*…it’s probably worth entertaining some revisions that address opponents’ concerns and more appropriately targets urban areas that truly require the assistance of TIF financing.
Opponents took issue with TIFs in other Montana cities that allowed unelected boards to approve TIF expenditure decisions, rather than making recommendations for approval by an elected body—city council for instance. While there is benefit in allowing additional flexibility and reducing approval times (more bureaucracy = increased project costs), this is a legitimate concern that should be given consideration in future edits to TIF statute.
Finally, TIF opponents expressed frustration over the types of projects that received increment funds. The Sleepy Inn Motel and a mall in Missoula came up frequently as examples of unnecessary investments of TIF. Much of the opposition seemed to stem from objection to TIF applications in other cities, Bozeman and Missoula primarily. However, Billings did not escape scrutiny as opponents took issue with TIF funds going toward the proposed Sports & Rec Center. While that critique is less deserving of corporate welfare scrutiny (the City will own it), the issue of allowable TIF uses deserves a closer look as well.
Many of the issues voiced by TIF opponents are already addressed in Billings’ TIF policy. And while it’s not an explicit policy, our City Council is likely more prudent with TIF approvals for non-profits than other local governments, citing the concern for increment funds generating a return on their investment, which is what TIFs are supposed to do in the first place.
Billings TIF Policy
Tonight, City Council is discussing the City’s TIF Policy, a resolution adopted in 2018 outlining specific processes, reporting, training, etc., to guide the application of TIF in Billings. A few of those provisions are below:
- For every dollar of TIF investment, a minimum $5 of private investment is required.
- TIF advisory boards make recommendations to City Council for expenditure approval
- Financial reporting from different TIF districts is consistent and coordinated.
- Each TIF advisory board is required to take biannual training on TIF laws, admin rules, ethics, conflict of interest, and records management.
The Billings model is a thoughtful one, addressing many of the concerns voiced by Montanans who object to TIF. Concepts adopted by the City of Billings may serve as examples to thoughtfully amend the state’s TIF statute in the 2025 Legislative Session. Proponents of TIF, including the Billings Chamber, dodged a bullet during the 2023 Legislative Session as a bill aimed at seriously reducing the usefulness of TIF districts narrowly failed. In response, the Montana Chamber is leading a statewide effort to find a workable compromise that address concerns from opponents while ensuring TIF exists as a valuable economic development tool. The Billings Chamber will remain engaged and working toward an appropriate solution.