One of the most significant projects ever planned for downtown Missoula promises to develop a prime piece of riverfront real estate into a thriving new center of commerce. If these promises are fulfilled, the completed project will pack an economic punch felt throughout the entire city.
Without losing sight of those broad benefits, now is the time for Missoulians to look closely at the details of the Riverfront Triangle deal now before the City Council, paying particular attention to the city's role in what would become the largest conference center in the region.
In November, members of the City Council approved an agreement concerning the conference center, as well as a proposed hotel and underground parking garage on the property. Within the next few weeks, they will be considering additional aspects of the conference center deal.
Under the terms of the current agreement, the city of Missoula would buy the conference center for an estimated $16.5 million while the developers, Missoula-based Hotel Fox Partners, would still own the land beneath it. The city would also buy most of the parking garage, which would provide more than 400 spaces in an underground facility, for $8.3 million at most, with the owners of the hotel leasing some of the spaces.
Parking Facility Bonds, which would be paid with revenue from parking fees, would help pay for the parking garage. But the city would primarily cover its portion of the costs with the help of tax increment financing, or TIF.
This is the method by which additional property taxes generated by rising property values is re-invested back into the community in such a way as to further increase values. Using TIF money means these purchases will not have any effect on the general fund — or on city taxpayers.
However, dedicating TIF money to this project does mean those funds can’t be used for other projects. And it does not address the city’s costs once the conference center is completed. It’s entirely fair to ask whether the city of Missoula wants to be on the hook for a conference center, and if so, how much it will cost to operate and maintain.
According to a comprehensive U.S. Government Accountability Office report published nearly 20 years ago, “convention centers are generally not expected to make a profit on their operations or cover their construction costs,” and in fact, often operate at a loss. However, they also almost always bring measurable economic benefits to the wider community. The report’s findings have been confirmed by dozens of studies since, and the city of Missoula and Hotel Fox Partners have market studies pegging the local demand for a center.
The expectations are that it will get a great deal of use. The center will be the largest venue of its kind between Billings and Spokane, with the capacity to seat 1,000 visitors at a time, and also will have the flexibility to host multiple events at one time. Yet less than a year ago, the city was presented with a plan to build a center nearly half the size of the current project. That concept would have resulted in a 29,000-square-foot center estimated at about $6.25 million. Just what changed since January for developers to essentially double the size of the center?
The deal calls for Missoula to buy furniture, fixtures and equipment for the center, while the developers cover any non-routine repairs and maintenance. Hotel Fox Partners would lease the center for 25 years, with the option to renew for two additional 10-year periods.
The city would sell the land to the developers for $2.3 million, but the developers would receive a credit of up to 40 percent for the land occupied by the conference center and parking lot. Additionally, if the developers choose to exchange another portion of the property for additional parking in the future, it may receive credit of up to $1.25 million.
Hotel Fox Partners been working with the city on this project, with close involvement from the Missoula Redevelopment Agency, since 2011. Its vision for the Riverfront Triangle property includes three stories of condominiums atop the seven-story hotel, as well as a mix of affordable housing, offices, restaurants, retail space, a park and a public plaza. The high-density development will ultimately represent a $150 million investment on a site that has seen decades of inaction.
The first phase of the project calls for an $80 million building to house the hotel and condos, next to the 60,000-square-foot conference center, to be built on what is now a vacant parking lot covering less than 2 acres of the 7-acre Riverfront Triangle property. The site roughly follows the lines formed by the Clark Fork River, West Front Street and Orange Street.
On their end of the deal, the developers are assuming a great deal of the financial risk traditionally borne by the property owners. While that’s worth noting, it’s also worth pointing out that the city’s portion of the risk is still murky. In a worst-case scenario, what kind of financial burden would the city bear? In any case, what are the direct benefits to city taxpayers? These questions should be answered in detail before city councilors sign off on any more agreements.
The developers have a little less than 18 months to secure the necessary building permits and are hoping to break ground within the next two years.
In the meantime, another agreement regarding the conference center is expected to be finalized within the next couple of months. There’s no need for undue delay in considering this agreement. There is plenty of reason, however, to spend the next few weeks holding a very public discussion delving into the particulars of this very important development project.
Despite high interest, the Riverfront Triangle property has sat empty for so long, many Missoulians may be doubtful a final moment of decision has actually arrived. Make no mistake: this is a critical time to pay close attention and demand the best possible deal for the city.