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Empty department store on Harrison Avenue in Butte

The location of a former KMart department store stands empty on Harrison Avenue near the Butte Plaza Mall.

County officials say special taxing districts have spurred development and funneled needed tax dollars into key areas of Butte-Silver Bow, including Uptown and an industrial park that’s now home to several manufacturers and businesses.

Now some are eyeing a wide swath of the Flat, including the struggling Butte Plaza Mall, vacant K-Mart building and some residential areas, as a possible fifth tax-increment financing district.

Like the others, taxes generated by increased values on existing properties and new developments in the district would be captured and re-invested in economic development in the same area.

The money can be spent on such things as new or upgraded water and sewer lines, street improvements and sidewalks. It can be used to provide loans or subsidies to private investors for projects that create jobs and the paychecks and tax revenue they come with.

The districts do not by themselves increase property taxes. A base tax value continues to generate dollars that flow to all taxing units, including local government and schools. Only revenue from increased values, called “increments,” is captured solely for re-investment.

Karen Byrnes, Butte-Silver Bow’s community development director, says some major developers have looked at the retail corridor on the Flat in recent years but shied away because of poor street designs, inadequate water and stormwater capacity and other issues.

Streets in some nearby neighborhoods are in poor shape, some don’t have sidewalks or curbs and some aren’t safe for pedestrians.

“It all started to add up,” she said, prompting her, Chief Executive Dave Palmer and the county’s “economic development team” to start seriously considering a new urban renewal area and the tax-increment financing that could be employed.

Districts are sometimes created to attract or retain a specific project or venture. The business park west of town and its Tax Increment Financing Industrial District (TIFID) created in 1992 helped bring Advanced Silicon Materials, now called REC Silicon, to Butte.

A three-decade Urban Renewal Area and TIF covering parts of Uptown was redrawn and re-established in 2014. It and a new parking garage it financed were factors in NorthWestern Energy’s decision to build a new $25 million Montana headquarters building at Park and Main.

Byrnes said people have asked her if a major developer has promised to locate on the Flat if such a district was created there.

“I wish I could say yes but we don’t know now whether something major is coming,” she said. “But this would put that tool in place so we can catalyze on something when the time is right.”

There are some perceived downsides to TIFs.

Some tax values in an area might go up through appreciation and other natural factors, but if there’s a TIF, the extra revenue isn’t available for general purposes like schools or police, fire and other services that benefit everyone. And without that extra money, the county or schools might have to raise property tax rates for such things or cut services.

Dan Fisher, Butte-Silver Bow’s assessor, says he wants more discussion on the proposal. There are definite infrastructure needs, including storm-water issues, hindering development in the area, he said. But he’s concerned the proposed district is too big.

“We are going to look at the size of the district, for one thing, and try to shrink it down to an area that will take care of the needs without going overboard,” he said.

There is also debate on whether a smaller TIF district in East Butte should be allowed to sunset, or expire, as scheduled next year. It can be extended by at least 15 years if a bond is floated for the area.

Butte School District 1, the largest school district in the county, hasn’t publicly weighed in. Dennis Clague, the district’s business director, says school officials need more information about the proposal before doing so.

But county officials have made an initial pitch for the idea to the council, and commissioners have approved a resolution declaring that blight exists in the area — a prerequisite under state law for creating an urban renewal area and TIF.

Officials plan a public discussion at 6 p.m. Monday at the Butte Plaza Mall to talk about the proposal and get feedback from residents and businesses, including where boundary lines should be and goals to be set. Anyone is welcome to attend and weigh in.

The county has already hired Janet Cornish as a consultant for the proposal. She has provided technical assistance, planning and other services for numerous community development projects in Montana, including TIFs in Butte.

County officials have already identified areas of blight in the area, too, and they can point to some past success stories with tax-increment financing, especially for Uptown and the industrial park.

“It is probably the only real tool that local government has to do economic development,” said county Budget Director Danette Gleason. “We have tax abatement, but that is giving all the taxes away.”

The TIFID alone has brought new businesses and helped create hundred for jobs for Butte, she said.

The need on the Flat

The area being considered runs from Dewey Boulevard and Interstate 15-90 on the north all the way south to Waterline Road, where Lydia's Supper Club is. On the east, it runs along South Harrison Avenue, and on the west, it parallels South Arizona Street, Utah Avenue, Electric Street, Western Boulevard, Mabel Street, Holmes Avenue and Hansen Road.

The area includes most of Butte’s hotels, motels and car dealerships, the South Harrison retail corridor, the mall, Bert Mooney Airport, Stodden Park, some largely rural areas and some residential areas, including some trailer homes that are decades old.

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Officials say development of the Harrison Avenue South area mirrored national trends following World War II, including shopping centers with plenty of parking. But because of internet shopping, changing demographics and other factors, strip retail is hurting.

County officials, in a report on the blight conditions, cite the Urban Land Institute in saying “the future belongs to town centers, main streets and mixed-use development.”

The shift in commercial development is evident along South Harrison.

“The Butte Plaza Mall, an anchor of the area, is experiencing high vacancy rates, while the adjacent building, previously occupied by a K-Mart store, is entirely empty,” the report says. “Large parking lots constructed to serve these businesses are generally unused.

“In the surrounding neighborhoods, some of which date back to the first part of the twentieth century, infrastructure is substandard and/or deteriorating,” the report says. “Much of the area is built to rural, low-density standards. Where they exist, curbs, gutters, sidewalks, streets and lighting are found to be in poor repair.”

The report cites other examples of blight, including poorly designed streets and some that were never completed, neighborhoods that aren’t connected and parking lots with no controlled access or egress.

Existing TIFs in Butte

There are some differences in how TIFs for urban renewal areas, industrial parks and newer Targeted Economic Development Districts, such as the new one that includes the old MSE complex south of town, are established and set up. But they all utilize tax-increment financing.

County officials say there was hardly anything, including roads or water or sewer services, in a large area west of town before the TIFID was established in the early 1990s.

The area, called Montana Connections, helped land REC and is now home to several manufacturers and businesses, including Montana Precision Products, Seacast, FedEx, Scouler Grain and Old Dominion Freight Line Inc.

Its base tax value has stayed at $1.7 million but in just the last 10 years, it has generated nearly $49 million in property tax revenue from its increment taxable value, according to figures from the Budget and Finance Department that Gleason oversees.

In at least three recent years, when much of the TIF revenue wasn’t being reinvested and the surplus exceeded $15 million, county officials and commissioners were allowed to tap into it to supplement local government spending. Schools got equal shares.

But much of the increment revenue has been reinvested in infrastructure, including more recent spending on drinking water, a bridge realignment, a new building and upgrades to gas service. New rail spurs for existing and future businesses will start going in next year.

TIFID Administrator Kristen Rosa said remaining tasks and goals should be attainable before the district sunsets in 2022. A new one can be established, but no decision on that has been made, she said.

An Uptown district established in 1980 expired in 2013, but its tax money helped save, renovate and repurpose several buildings, including the Metals Bank Building, Hirbour Tower, the old Sears Building and the Miner’s Hotel, Byrnes said. Numerous houses were saved too.

When it expired and a new one was created, the increment became part of the new base. Its taxable value went from $1.6 million to nearly $3.6 million, more than doubling the annual property tax revenue flowing to all taxing units, including the county and schools.

In 2016, when the new one kicked in anchored by the new NorthWestern Energy Building, revenue from the increment was $718,912, according to budget officials. It is estimated to be $1.5 million this fiscal year.

The smaller East Butte district has helped spur some development along East Park Street, including a dentist’s office and office building for Water & Environmental Technologies, but its tax totals haven’t been as impressive. Its increment tax revenue was $187,000 last year.

The new TEDD, anchored now by the CryptoWatt bitcoin mining operation, only began last year.

Going forward

There are several steps to go before a new district is created on the Flat, starting with the public meeting at the Butte Plaza Mall on Monday night.

“We really want to talk to anyone who has an interest in the district … and we really want the public to tell us what they would like to see in the area and what their ideas are for boundaries,” Byrnes said.

Cornish told commissioners the proposed area won’t get any larger but it could get smaller before any final plan is ready.

“Some areas will require more immediate attention than others,” she said. “I do anticipate that we will make it smaller as we talk to the public and work on the plan.”

If the district is too big, she said, you are misleading people into believing that something can be done for everyone.

After the public meeting is held, officials will start drawing up a plan that will first go to the county’s Planning Department. It would then make a recommendation to commissioners, who would have to hold a public hearing before adopting any plan through and ordinance.

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