The Downtown Billings Partnership (DBP) Board recommends the City Council approve up to a maximum reimbursement of $5,000,000, starting in the fiscal year following the year in which the project is completed, from Downtown Urban Renewal tax increment financing district funds to the Rockman Project (William D. Honaker Realty, LLC and Don Cape, Jr./JWT Capital, LLC) for its hotel project at the southwest corner of the intersection of North 27th Street and 2nd Avenue North. Actual reimbursement will be based upon 100% of the actual costs incurred for qualified expenses for renovation, subject to the following conditions:

1. The Applicant shall sign a development agreement for this project with the City of Billings and DBP within 180 days of City Council’s approval. (attached)
2. This TIFD reimbursement is the maximum that can be received pending satisfactory submission of all paid invoices showing the completion of expenditures related to this project.
3. This TIFD reimbursement is approved per the condition that it be broken down into five disbursements of $1,000,000 each within five continuous fiscal years following the year in which the project is completed. If the City accelerates the TIF reimbursement payments in four years or less than the final TIF payment shall be discounted by $400,000. (reducing the TIF grant to $4,600,000). 
4. If funds are not available, reimbursement can be carried over to the next fiscal year

The Rockman Project first submitted an application on October 15, 2023 to the DBP requesting TIF assistance to construct a new 6-7 story hotel with a 120-140 room capacity. The area of development is several properties along 27th Street, including the Rockman Building at the southwest corner of the intersection of North 27th Street and 2nd Avenue North, and two City-owned parking lots south of the Rockman Building. While not slated for immediate redevelopment, the development plans to purchase and use the Park 3 Garage for the hotel guests and acquire the City Hall building complex on the northwest corner of the intersection of North 27th Street and Avenue North. The application was vetted by staff, the Development Committee and the DBP Board before a recommendation to fund the project was approved by the DBP Board at its October 27, 2023 meeting (See attached DBP Board minutes). Since the project's success is contingent on the purchase of City property, and the negotiations for the City property purchase have been commencing since fall 2023, this TIF award request was not brought to City Council until the purchase and sale agreement (PSA) could be brought to Council.

The project will include demolition of the Rockman Building and acquisition of the Park 3 Parking Garage to accommodate parking for the hotel. The TIF award would support funding of demolition and utility relocation and site work, as well as private improvements with public benefits, including life safety systems, ADA accessibility, building foundation structural elements, and some plumbing, doors, windows and facade work. All the work that is subject of this TIF award is for the hotel and not changes to the parking garage. The project is estimated to be $33.3 million for the land cost, site work, and vertical construction, as outlined in the TIF application for the project attached to this memo. With land cost removed, the site work and vertical construction total about $31.6 million.  

The reasoning for support of this application by DBP is outlined below. The project is in alignment with the elements/goals of the DBA Strategic Plan, North 27th Street Urban Renewal Plan, City TIF Policy and MCA as outlined in detail below:

• The project addresses blight remediation (MCA 7-15-4282 through 7-15-4294 and Ordinance 12-5590) through the demolition of the existing old Rockman Building and re-purposing of surface parking lots and exceeds (@6:1) the 5:1 private to public matching fund requirements of the DBP Large Project Incentive Grant criteria and City of Billings TIF Policy (not including the property acquisition).
• The project further enhances the vibrancy of Downtown Billings through revitalization of an old building site and two surface parking lots, 24/7 activity in the area with hotel residence and staff, an estimated 60-70 new jobs to support the hotel, and improved public safety through modern construction of structural, fire, electrical, plumbing and HVAC systems. The project also will bring a public parking garage and City office building under private ownership and onto the tax rolls.
• The application supports other elements/goals of the DBA Strategic Plan (maybe viewed through this link https://downtownbillings.com/about/about-the-dba/), City TIF Policy, MCA, and the North 27th Street District Urban Renewal Plan (See Table 1 below and the DBP Board Recommendation document attachment).

  Table 1.

Qualified Improvements	DBA Strategic Plan	City TIF Policy	Urban Renewal Plan	Montana Code Annotated
Site work and safety - Demolition and Site Prep; Concrete work for foundation slab, sidewalk and exterior masonry Utility Relocation, Connections and Improvements - water and sewer; storm sewer system; gas and electrical main service connections from utility mains Building Exterior and Facade and work - ground floor doors and windows, street frontage/sidewalk areas Public access and area improvements - ADA compliance for ground floor, elevators and entrance areas. Building Safety and Utility work to code - Fire suppression systems and HVAC	Vibrant &Connected Downtown – P.13 Strong Downtown Identity –P.13	Permitted uses of TIF Funds: Demolition and structure removal - P.2 Private infrastructure with Public Benefit and Public infrastructure –P.2 Financial Assistance Through TIF – (grants may be for for-profit businesses) P.2	Infrastructure Improvements– includes improvements to support lodging development - V. b. iii. P.55 Crime Prevention and Public Safety -P.55	7-15-4202 (3) 7-15-4233 (i) 7-15-4288 (2) (4)

 
Some of the property is already owned by the developer and some of it (City portions) is in the process of being acquired. Sale of the city property by City Council will ultimately enable the project to move forward or not.

This project accomplishes many priorities of the Urban Renewal Plan, DBA Strategic Plan, Downtown Housing Study, and the City’s Growth Policy. The new build of the structure will increase the property value and generate more taxable value in the building itself. Transforming an old one-story building and to surface parking lots into a 6-7 story vertical structure is a much more efficient use of property in Dowtown Billings. Buildings around the project already contain retail, restaurant, financial and other uses in the City core that will both compliment and benefit from the construction of a hotel in this area of Downtown Billings. The DBP Board supports this application request, recognizing this project will make a significant commitment and investment in Downtown Billings and building where City services and infrastructure already exist.  
 

The DBP Board Meeting and the City Council Meeting are both public meetings that members of the public may attend and provide comment on agenda items. PCSD staff was not aware of any public comment at the DBP Board meeting per the attached minutes and had not received any comment from the public at the time this memo was prepared.

City Council may:

• Approve the recommendation from the DBP Board for the expenditure of these TIF funds consistent with some elements/goals of the DBA Strategic Plan, North 27th Street Urban Renewal Plan, City TIF Policy and MCA.
• Modify the recommendation from the DBP Board for the expenditure of these TIF funds before taking action, or;
• Disapprove the recommendation from the DBP Board for the expenditure of these TIF funds. If the Council chooses not to approve this TIF application, specific reasoning for the denial is necessary to provide further direction to the DBP Board and staff, and City staff for future applications.

The recommendation is for a maximum of up to $5 million to be reimbursed to Honaker realty, LLC and JWT Capital, LLC for the identified building demolition, site preparation and construction of portions of a new hotel on the subject properties. The new estimated total project cost included with this new request for TIF funds is about $33.3 million (property purchase included but not reimbursed). This maintains a private to public investment ratio for this total project of about 7:1.  IF funds are available, the city, at its sole discretion, may accelerate the payments over four years and reduce the total reimbursement by $400,000.

The funds are payable per the conditions of approval outlined above in the DBP recommendation, pending satisfactory submission of all paid invoices showing actual cost incurred for the project, and per the reimbursement being broken down into five disbursements within five continuous fiscal years following the year in which the project is completed. If approved, payments will be incorporated into future years' budgets, the earliest is expected to be FY27 assuming project completion prior to that time. The increased funding for this project will likely limit future projects, based upon the current estimates of the Downtown District revenues. Present cash flow projections show future year's cash position for the Downtown District remain positive. These projections are based upon conservative revenue estimates only showing growth tied to the two new construction projects (Old Town Flats and Rockman Hotel). However, the approval of any TIF award is contingent on the District having available cash to make annual reimbursements, so the developer assumes the risk that there may be delay in project reimbursements in future fiscal years.