Although admittedly confusing, new market tax credits are worth looking into as a source of funding for development projects, speakers said during the 2014 State of Missoula Commerce Report on Tuesday.
Some 345 people listened to the presentation, which was part of the annual Missoula Area Chamber of Commerce-sponsored event focused on redeveloping Missoula.
This year’s event boasted the highest attendance in several years, most likely because of interest in redevelopment, said Kim Latrielle, president and CEO of the chamber.
“Right now, that’s on everybody’s minds,” she said.
The event allows people to hear about local resources and success stories while meeting new developers and others in the business community, she sad.
Part of the reason to have the event is to educate people about resources, including new market tax credits and tax increment financing, she said.
“Some of it’s kind of a celebration because things are starting to move,” she added.
The Garlington, Lohn and Robinson law firm used new market tax credits to build a six-story office building downtown. When officials there began looking at either building a new office or renovating their existing space, they had difficulty coming up with a cost-effective solution.
Their building at 199 W. Pine St. didn’t fit their needs anymore, but retrofitting it would have been expensive and they were on the verge of looking outside of downtown for less-expensive property, said Chuck Hansberry, a partner at the firm.
It also was during the financial downtown, when property values were nose-diving and interest rates were still high.
“We were having trouble making our project pencil out,” said partner Gary Chumrau.
By using new market tax credits, the firm was able to build a new, LEED gold-certified building at 350 Ryman St. – and create or maintain 87 permanent jobs and 38 construction jobs, Chumrau said.
The credits work when investors and financing entities join community development corporations in funding projects in low-income census tracts. Chumrau said he was surprised to learn that much of downtown Missoula is considered low income.
Investors receive tax credits, while developers see a low-interest payment for seven years before having to pay any principal and communities get an increased tax base.
Several banks with locations in Missoula serve as financers and/or investors for projects, including Wells Fargo, American Federal Savings Bank, Mountain West Bank, Glacier Bancorp Inc. and U.S. Bank, Chumrau said.
In the law firm’s case, it was First Security Bank that acted as the financer and investor, while the Montana Community Development Corp. was the community development agency.
While the law firm received low-cost financing and a more usable space, Missoula also benefited from the building, with the incorporation of retail and commercial space on the first floor and conference space for nonprofits, as well as a 20 percent increase in property taxes for the site.
By working closely with the city and county, the firm was able to sell its old location to Missoula County and retain those jobs and services in the downtown area instead of having them move to the outskirts of the city.
The project also kept commercial construction strong at a time when it was down elsewhere in the country, Chumrau said.
“Everything else declined in Missoula during that period,” he added.
The building also benefited the environment with its LEED gold certification.
Many of the expectations for the voluntary designation, such as using local businesses and encouraging alternative commuting methods, were already part of the building plan, Hansberry said.
If people took a moment to look at the requirements, they might be surprised to find the same is probably true for them, he said.
“And sometimes by doing the LEED certification, it makes you think of additional things that you can do,” he added.
Despite their complications, the LEED certification and new market tax credits are worth exploring when working on a development project, Hansberry said, adding that in the firm’s case, the tax credits made the project possible.
Larry Leasure, chairman of Boise, Idaho-based White-Leasure Development Group, said he was encouraged to hear about a local success using new market tax credits.
His development group is looking at several potential projects in Missoula and the state, Leasure said, and the tax credits could help make them pencil out.
“The new market credit option is really critical today when it’s so difficult to make projects make sense,” he said.
To view presenter slideshows and a Missoula Community Access Television recording of the event, visit missoulachamberadvocacycenter.com.