RECOMMENDATION
No formal action is expected at this Work Session, but staff is seeking direction from City Council on whether to proceed with the Founders Park Area Urban Renewal District efforts through: Expansion of the Downtown District; Creation of a new District; No further action on this item.

If Council chooses to proceed with this effort, staff recommends pursuing expansion of the Downtown District for the following reasons:

• Founders Park Area is small – 128 properties and 77 owners - so inclusion in the existing Downtown District does not significantly add to the District or create an unmanageable total area (there are about 560 properties in the Downtown District).
• The Founders Park area is part of Downtown Billings and has many of the same redevelopment needs and opportunities.
• Total current valuation of the Founders Park Area is about $1.2 million. Per Figure 24 on Page 25 of the report, it would take about a $10 million increase in appraised market value in the area to generate about $131,000 in added property tax, or increment. This means it could take many years for the area if it were its own District to secure enough increment to fund a project or program, or bond for a larger project.
• Public Infrastructure is not in bad condition in the area now. It is predominantly private property and structures that are not up to date and private facilities that are not improved.
• If the Founders Park area was added to the Downtown District, it would share the same sunset date as the Downtown District in 25 years - 2044 - tying any bonding or long term development agreements to a 24-year maximum life span.
• The cost to the City to expand the Downtown District could be funded in whole or in part from Downtown Urban Renewal funds. Creation of a new District would require another funding source for the process.

The City of Billings, in response to a property owner petition for consideration of a new or expanded urban renewal district (URD) on the east side of Downtown Billings, and to better inform the City Council before making any decision, hired Community Development Services of Montana (CDS) to evaluate the appropriateness of creating a new URD or expanding the existing URD.  The study was funded in cooperation with the Downtown Billings Partnership, Founders’ District petitioners (Russ Fagg and Jeff Kanning) and the City of Billings.

Whether expanding the existing Downtown URD or forming a new URD, the designation would enable the use of the Tax Increment Financing (TIF) provision to finance projects in the public interest. The Founders Park area is directly west of the downtown URD and generally extends north from Montana Avenue to 6^th Avenue North, and west from North 31^st Street to Division Street. It includes 128 properties held by 77 property owners. 

Founders Park Area Urban Renewal Analysis
The CDS analysis concluded:

• The study area meets the state requirements to justify downtown district expansion or a new district.
• The conditions of blight in the study area mainly revolve around functionally obsolete buildings, underutilized land (surface parking and vacant lots), and some infrastructure improvement potential, including two-way street conversions.
• Expansion of the Downtown District could be controversial for existing property owners in the District that would see resources spread thinner across a larger area.

  Questions and some answers that have been brought up during the Founders Park Area Analysis process:

• With major land owners with major resources in this area now, why has development and redevelopment not already occurred? The answer to this question has continued to elude staff for the most part, but discussion with commercial Real Estate professionals that work in the area indicates a variety of issues, including:
  • Some property tax values do not reflect what they are currently worth and so sellers and buyers are not starting close to each other. Their recommendation was to have DOR complete a tax review of the area to better match property value with tax values.
  • As the Founders Park Analysis found, properties are in need of upgrades and in some cases demolition and redevelopment. Some prices for property in the area do not make a demolition and redevelopment feasible for a developer without some other tools to close the gap.
• Will an urban renewal district and TIF tool be transformative for redevelopment? Staff has not found evidence that creating a new District in this area or even expanding the Downtown District will suddenly spur development or redevelopment of the Founders Park area. While petitioners Russ Fagg and Jeff Kanning have indicated that there are development projects they would launch or be involved in, it appears that generally property owners in the area are not making investments in their properties or taking on significant redevelopment efforts.
• Do the 77 property owners need to be engaged somehow to measure commitment or reinvestment potential? Staff has reached out to some property owners in the area as well as some commercial real estate experts. But, to date, the response has been limited. Council has heard from some property owners, like the petitioners, that are very excited to move forward, form a District, and redevelop property. Some owners wish to remain neutral and not take a position for or against a District, and others are opposed to any kind of urban renewal district for the area.

Community Input
Since the study was completed in early July, Founders’ District petitioners Russ Fagg and Jeff Kanning have presented and sought support for the URD concept from the Billings Chamber of Commerce, Downtown Billings Partnership Board, and the Billings School District #2 Board. The Billings School District #2 Board at its July 20 meeting voted to support creation of a new district if it had a 10-year sunset provision. Urban renewal districts are allowed by State Law to have a life of up to 15 years unless project bonding extends the life beyond that period. The Downtown Billings Partnership Board voted at its July 24 meeting to support creation of a new district. At the time this memo was prepared, the Chamber Board had not taken action on this topic at one of its meetings. The City Council on July 29 also received a letter from eight property owners in the Founders Park study area that expressed opposition to the expansion or formation of a new URD in the area.

Founders’ District petitioners Russ Fagg and Jeff Kanning are in attendance tonight and are available to present on this topic and answer questions.

The full study was provided to the Council in the City Administrator's Weekly Report on July 17. It is attached to this memo for reference.

This is a work session, so no formal action may be taken at this time. However, staff is asking for the City Council to provide direction on whether staff should move to: Expand the Downtown District; Create a new District; Take no further action on this item.

The initial Founders Park Area Urban Renewal Analysis provided with this memo had a total contract cost of $11,000. The City General Fund paid for $5,000 of the total, while the Downtown Urban Renewal District paid $3,000 and Russ Fagg and Jeff Kanning paid $3,000. To move forward with expansion of the Downtown District or creation of a new Urban Renewal District, the City expects to incur an additional cost of up to $25,000. Expansion of the Downtown District would mean access to urban renewal funds to help with or cover the cost. Creation of a new district would mean the City General Fund would cover the total cost.