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Southgate Mall project

Southgate Mall's first expansion phase would include a multi-screen theater, a new outdoor plaza, a lifestyle retail building, and a new public street connecting Brooks and South Reserve streets.

Members of the Missoula City Council have authorized a study to see if Southgate Mall qualifies for inclusion in a district that would allow it to access public funding as it considers a major expansion and renovation. 

Ellen Buchanan, director of the Missoula Redevelopment Agency, brought the mall’s request to the City Council’s Administration and Finance Committee, which voted unanimously to authorize the study.

“We did receive a formal request from Southgate Mall Associates to look at amending the boundaries,” said Buchanan. “When the district was created, the mall was very specifically excluded from the district.”

The result has created a so-called doughnut hole that cut the mall from Urban Renewal District 3, placing it at a disadvantage when it comes to redevelopment.

Properties within the district can request tax increment financing for projects that increase the area’s taxable value. Such efforts have helped redevelop the former Kmart site on Brooks Street, as well as the Old Sawmill District, once an industrial site.

To bring the mall into the district, MRA must determine if blight exists, as defined under state law. If the study finds the existence of blight, the city can modify the district’s boundaries to include the mall and a small neighborhood to the west.

“Staff would do the study of blight and establish that boundary modifications are warranted under state statute or not,” Buchanan said. “If we find it’s warranted, we would begin the process of amending (the district) to include these two areas.”

Southgate Mall Associates have already invested $18 million in private funding to begin a long-term project that will, if realized, include a $70 million effort to revitalize the mall and its surrounding properties.

The project’s first phase would include a multi-screen theater, which is expected to break ground this year. An outdoor plaza is also planned, along with a lifestyle retail building and a new public street connecting Brooks and South Reserve.

That first phase would cost around $41.9 million, with roughly $7.4 million coming from tax increment financing. The mall has asked the city to purchase a $5 million right-of-way for a portion of the new public street, something that has given council members pause.

“The plans that have been shown are predicated on that level of equity, essentially, being in the project due to Southgate Mall Associates being paid for the right-of-way,” said Ward 1 council member Jason Wiener. “I have serious reservations on the amount of it, certainly, and whether in principle it’s the right thing to do at all.”

Buchanan said MRA’s board of directors is equally concerned about the cost of the mall’s right-of-way request. She said there may be other, more palatable ways to apply tax increment financing to the project, and that a $5 million request shouldn’t scuttle a $70 million project.

“I don’t think what we’ve heard from developers is that we don’t have a project without (the right-of-way), but we don’t have this project without it,” Buchanan said. “We don’t know what the impacts would be. It’s an evaluation we need to go through with the developers.”

While the right-of-way remains an outstanding issue, other council members said the study should move forward as a separate cause.

“I’m not against doing this study to see if blight can be determined in that area,” said Ward 6 council member Ed Childers. “We might as well try to capture the tax increment and put it back into the area.”

Phase 2 of the mall’s project includes additional road infrastructure and more retail and office buildings. Phase 3 would improve Mary Avenue from the edge of the mall’s property to Reserve Street, and the final phase would include 300 housing units in six modern buildings.

Buchanan said the study to amend the district’s boundaries will take several months to complete. MRA will continue to work with Southgate Mall Associates to hone the project.

MRA staff and residents have said the development would greatly enhance that region of the city.

“They need to know where they stand with the city and that piece of financing,” Buchanan said of the developers. “It will influence what this project looks like.”

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