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TIF Gets Taken to Task: How Does That Work?

There have been a lot of changes at the Southgate Mall in Missoula over the past few years. A dine-in movie theater and a newly connected street were recent additions to the area. But this project got pushback shortly after these completion because of a TIF-related public opposition.

In the final part of our series on TIF funds, we’re looking at a project that caught some heat. What happened around the Southgate Mall, and why were people upset about the involvement of TIF funds?

Now, before we get started, it’s important to note that here at Sterling CRE, we work on commercial sales and developments that involve TIF funds. From our experience, we know TIF projects aren’t all good and they aren’t all bad. We also know that TIF is a misunderstood tool. This series is meant to help clear up some of the confusion about TIF, first by simplifying some of the concepts and then by looking at some local case studies.

The upgrades to the Southgate Mall area met a lot of the city’s goals for a TIF project.

Hundreds of jobs would be created, it would ultimately generate over $300,000 in tax revenue, and the surrounding neighborhood would have improved amenities.

The city had also planned for an east-west street between Brooks and Reserve since the 1990s, which would be accomplished with The Mall’s expansion plan.

In 2015, Southgate Mall owners applied for and received about $7 million in TIF funding. This money went to build a public street and things like buying right-of-way, moving utilities, demolition, and facade improvements.

All seemed well and good, with most of the construction dust around the Mall settling by late 2017. But, just a few months later, in the spring of 2018, the Southgate Mall was sold to Washington Prime Group, a large publicly traded company, for a reported $58 million.

Now, that quick turn from completing the improvements to selling the newly updated Southgate Mall caused a stir. A city councilor criticized the deal by saying, “The government shouldn’t be giving money to rich people.”

This alderman was joined by others who spoke against the deal, including a former state legislator. He noted that the TIF district boundaries were adjusted to include the mall after plans to expand its facilities had already been announced. So why, he asked, would we allocate TIF funds to a project that seemed to be fully planned and financed without government subsidy?

Several community members also expressed their displeasure on social media and at public meetings, calling TIF a corporate handout. One resident addressed the mayor directly, saying he had “sold out the community.”

This brings up the question of “but, for” in the TIF debate. The idea is that, “but for” the involvement of the redevelopment agency in a project to help offset infrastructure related costs, the deal would not go forward. But in the case of the Southgate Mall, the argument was that the “but, for” hurdle was not met. Other projects, too, have been highly questionable on whether they cleared the “but for” threshold.

And while the Southgate Mall deal is an example of the conflicts over TIF in Missoula, it’s certainly not the only project to receive this level of scrutiny. It likely won’t be the last.

Arguments about using TIF money to support projects without a “pay back” mechanism built in are common.

So are perceptions of TIF funds going to pet projects- it’s even been called a slush fund by some of its more cynical opponents. In summer 2020, the redevelopment agency was approved to seek a communication firm to help manage the messaging around TIF projects.

As the dialogue around TIF evolves, community engagement is a critical component of projects that truly are bettered by public/private partnership. Like so many topics, strongly polarized views end up leaving little room to find common ground.

Strong public outreach about TIF funding is a challenge, but a worthy undertaking in the quest to grow Missoula in a sustainable way.

Thanks for watching How Does That Work? This wraps up our series on TIF funding. Let us know what you think by commenting below. You can see more videos like this by subscribing to Sterling CRE.