The Downtown Billings Partnership (DBP) Board of Directors recommends that the City Council approve a development agreement with Zootist Hotel, LLC. The development agreement outlines terms of a tax increment grant to Zootist to reimburse the Northern Hotel developer for eligible improvement costs. Those improvements include curb, gutter, sidewalk, utility connections, facade improvements, windows, etc. Approval of the development agreement is one of the conditions for Zootist to sell the Northern Hotel parking garage to the City. The garage would be demolished and a new 500 space parking structure would be built on the property and adjacent property. This development agreement and grant are similar to previous ones, among the most recent being for the First Interstate Bank building in the East Billings Urban Renewal District.   

The City Council may:

• Approve the development agreement;
• Disapprove the development agreement and therefore not purchase the Northern parking garage; or
• Amend the agreement

Exhibit C of the development agreement outlines how the developer will be reimbursed. The total estimated cost of eligible improvements exceeds $2 million (Exhibit B). The grant amount is proposed to be the lesser of 1/3 of the difference in taxable market value of the pre-development and the post redevelopment hotel or the amount of the eligible improvements. Annual payments would be spread over several years, perhaps as many as 20 years.  The payments start after the hotel, including qualified improvements, is substantially complete and operating. 
The annual payments would be 45% of the district increment, after deducting previously committed expenses such as bond debt service for a new parking garage and the DBP administration/operating contract.  Starting with an estimated annual increment of $1.9 million and deducting bond costs of $1.1 million, $300,000 for the DBP agreement and $100,000 for other projects, about $400,000 per year of increment should be available for projects. If Zootist receives 45% of the $400,000, it will be paid $180,000, leaving $220,000, or 11% of the total annual increment, for all other district projects.  An unusual element of this agreement is that it allows Zootist to apply for tax abatements under the City and County programs, but any abated taxes would be deducted from the tax increment grant amount and grant funds would not be paid until the abatement period, usually 5 years, expires.

The Downtown Billings Partnership Board of Directors recommends that the City Council approve a development agreement with Zootist Hotel, LLC for a tax increment grant.