I recommend the Council approve, up to $75,000 in downtown tax increment financing to the Billings Depot to match their historic preservation grant.

Billings Depot – The most recent amended sublease between the city and Billings Depot, Inc. was signed in 2018 and expires December 31, 2034.  Page 3 paragraph 10 make it clear that the city is not responsible for utilities, maintenance or repairs of "any kind".  That being said, nothing in the lease precludes the Depot from asking for assistance.  The Depot is asking the city to reconsider it's TIF grant application under two premises.  First, it wasn't made clear during the past discussion that the Depot pays property taxes.  Therefore, there is a financial return on investment case that can be made to support TIF funding their projects.  Secondly, they have raised funds and have lowered their request to $75,000 from their original $95,000 request.

The following information has been provided by the Depot:

Contrary to some of the concerns expressed by some regarding private businesses seeking money from the City for deferred maintenance, the Depot has never requested TIF funds to address deferred maintenance.  Rather, the Depot has obtained a $414,000 grant but risk losing it if the matching funds cannot be raised.  For that reason, the Depot, a multi-use property, requested $75,000 to secure the grant slated to be used on projects that would significantly increase the property value, thereby generating additional property taxes.  As a property-tax-paying-entity, this investment would be recouped by the City in less than four years in the property taxes paid by the Depot.  Absent matching funds, these improvements will not occur. 

To be clear, the improvements to be undertaken are not deferred maintenance.  The Depot has always, and will continue, to manage its maintenance obligations, as well as taking efforts to better the space in a manner that honors the historical importance of this space and our partnership with the City. 

The following are examples of work done by the Depot that supports the statements above:

• Every year, the Depot takes on at least 1 significant capital improvement project to maintain the campus. We understand the City has no obligation to support these improvements and have never asked for city assistance. In 2023, we spent $40k to upgrade our fire suppression system. In 2022, we repainted exteriors. In 2021, we upgraded all our internet and technology. 2020 saw an upgrade to gutters and new signage.
• In 2019, a new grant opportunity, valued at up to $500k, was released by DOC to assist with capital improvements and historic preservation. The Depot identified projects which met grant requirements for improving public safety, energy efficiency, restoration of historic assets, and economic development. The projects we included in our application are:

• • Floor refinishing
  • Cement walkway repairs
  • Roof updates on all four buildings
  • Restoration of the historic mail building
  • Refinishing & weather stripping all doors in main building and mail building

• The Depot was awarded the grant in 2023 in the amount of $414,000 with a 20% match requirement.
• Since the time the application was submitted to the time it was awarded, inflation caused a significant increase in project costs and the total project cost increased to $528,100. 
• The Depot has been fundraising to reach our required match amount AND the remaining costs of the project. To date, we’ve secured the following:

• • Billings Community Foundation grant: $5,000
  • A&E in kind design: $7,500
  • Misc. Private Business Donors: $14,000
  • Board donations:  $11,000

• In 2024, the Depot campus was struck by a series of unforeseen but significant repairs, totaling over $80k and depleting our savings. These included:

• Security alarm panel replacement
• HVAC control system replacement
• AC Chiller repair
• Fire sprinkler air compressor replacement
• Gas leak repair and pipe replacement
• Roof leak (office building)
• Boiler replacement x2 (office building
• Water heater replacement (office building)
• Water damage repair (office building)
• HVAC water testing (office building)

• While the Depot is a 501(c)3 nonprofit, we do pay property taxes on the improvements which generate business (2 tenant buildings, 2 parking lots) contributing back to the tax base.
• Our initial ask to TIF was $95k. Due to fundraising efforts, this ask would now be reduced to $75k. These dollars would allow us to secure contracts with vendors to complete the capital improvement projects identified within the historic grant application. Delays in contracting with vendors and starting improvements would incur additional project costs or losing the grant in its entirety.
• The Depot has only utilized TIF funding on three other occasions in our 27 year history. Outside of these instances, the Depot has been maintained entirely using Depot-generated funds:

• 1997: $200k for restoration of the Depot campus
• 2020: $3,000 matching funds for signage grant & $3,000 for CPTED grant

The downtown tax increment finance district recently revoked a grant reimbursement for the Stone Building project for failure to perform after two grant extensions.  This opens up over $600,000 in previously allocated funding for consideration.   

During the October 2024 council work session, Council asked and our staff discussed the option of using the revolving loan fund to pay for some or all of the grant request.  Under the circumstances, neither the Depot nor staff believe it is a good option.  I don't advise lowering the interest rate for city-owned properties.  If we do, I suspect all future applicants will request the same treatment.  Also, under the circumstances of our weak commercial lease market downtown, the Depot wants to protect its ability to borrow funds in the future.

The final attachment is a letter from the Downtown Partnership Board recommending against using TIF dollars to fund capital projects for these city assets.  
 

City Council may:

• Approve; or,
• Not Approve

Billings Depot - $75,000 requested and recommended through the downtown TIF budget.   See enclosed cash flow spreadsheet showing that this grant can be paid within the current and anticipated cash balances.


*  A TIF reimbursement agreement totaling over $600,000 for the Stone building project is no longer a liability for the TIF budget.  This grant has been revoked because the project did not meet its timelines in spite of two extensions.