The East Billings Urban Renewal District (EBURD) Board requested at a September 8, 2015, work session that the City Council waive landfill fees for two building seasons for disposal of non-asbestos demolition materials from blighted areas in the EBURD tax increment financing district as an incentive to development there.

Income from the Montana-Dakota Utilities (MDU) methane gas collection system at the landfill had been suggested as a substitute for the disposal fees.  However, the Landfill Fund is a self-sustaining enterprise fund, and the MDU fees go to the General Fund, not the Landfill Fund.  Employees from the Planning Department should determine whether projects in the EBURD meet the Federal definitions for blight to be included in the experiment, but those employees are paid for from fees for service or from a Yellowstone County levy.  Because the support for those funds comes from other sources, it is recommended that transfers from the General Fund be made to offset the costs of the program to the two departments.

The EBURD is only one of three tax increment financing districts operating in the City. When a tax increment financing district (TIFD) is created, the amount of taxes that local jurisdictions such as the City may collect are limited to the same amount they were receiving at the time of creation.  Any new taxes received for a specific period of time, usually 15 years, are returned to the TIFD, which may use them to reimburse property owners for the cost of demolition of blighted properties and other public aspects of their projects.  Taxing jurisdictions, including the City, will receive additional tax revenues only when the TIFD sunsets.

Other private and public projects, including those for the Library and Public Works, also are being charged demolition disposal fees. Demolition disposal fees are assessed in all cases to a particular project, not to the area from which they come, so there is no easy way to determine the impact of the proposed experiment on the General Fund. Current fees are $16.67 per ton for non-asbestos materials, one of the lowest rates in the nation, according to the Public Works staff.

Attached is a resolution that waives the fees as proposed and outlines a cost-benefit analysis method for determining the effectiveness of the experiment.  The resolution is limited to the EBURD, but it can be expected that at least the Downtown and South Billings Urban Renewal District, as well as other public or quasi-public entities will request similar exemptions for a 2-year period
 

The City Council must hold a public hearing on the resolution and then may:

• Approve the resolution as presented;
• Amend the resolution to include other TIFDs, public or private projects;
• Amend the resolution to identify other sources of funding for the experiment; or
• Not approve a resolution, which would still allow the EBURD and other TIFDs to continue to reimburse property owners of blighted buildings from the taxes received by those districts.

The exact impact of the proposed experiment cannot be determined until the recommended cost-benefit analysis is completed.  The City Council would see the amounts being transferred to the Landfill and Planning funds on a quarterly basis if the resolution is approved.

The MDU methane gas project has not raised as much revenue as originally expected, because the product cannot be easily blended with gas from other sources, and has value primarily in its energy credits.  MDU, which has been storing most of the gas until now, will report to the City Council at an Oct. 5, 2015, work session on its recent creation of an agreement for a California firm to purchase future gas.  Revenues to MDU and the City are expected to increase if gas prices remain stable.

The landfill disposal (tipping) fees are necessary for the City of Billings to operate the landfill and as important, the fees are required to fund the construction of new disposal cells as the existing cells are filled.  Providing free disposal may fill the construction disposal cell faster, requiring the City to accelerate the construction of a new disposal cell.  The construction costs of a new cell are estimated over $1.0 million.  

As proposed, the resolution would benefit only EBURD projects, not any other public or private demolition projects.   Most of the General Fund is transferred to the Public Safety Fund to pay for Police and Fire services.  Any un-budgeted revenues are being held to ensure funding of those programs in future years, or will be recommended for 1-time capital projects.  Despite all these demands, the General Fund often is identified as a potential source for additional, on-going operating expenses.  At some point in the future, this source may not be sustainable.  TIFDs already have the capability to reimburse property owners through their accounts for public improvements such as demolition.

For these reasons, The City Administrator recommends that the City Council disapprove the resolution.