City approves tax break for hotel and hospital projects

Commissioners approved two tax breaks during their April 19 meeting.

The first to the developers at The Gibson, who are remodeling the former Greystone Inn, and the second to the Great Falls Clinic for their hospital extension.

Both tax credits apply to the remodeling, reconstruction, or addition of an existing building or structure, and the tax credits are governed by state law. Projects that include works that increase their taxable value by at least 2.5 percent, as determined by the state, are tax-deferred during the construction period and for the following five years.

The city-approved tax relief applies only to city-levied mills.

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The state amended this law in 1985 to require both the county and city to approve the tax benefit on a project basis. If one authorizes the reduction and the other does not, the benefit applies only to those charged by the authorizing government agency.

In December 2015, the City Commission adopted criteria against which applications for tax reductions would be evaluated.

Starry Night Hospitality is remodeling the former Greystone Inn at Central Avenue and 7th Street and rebranding it as The Gibson, a boutique hotel that will be part of the Ascend Collection by Choice Hotels.

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The developers announced their plans in January 2020, but the pandemic slowed their progress.

Construction is currently underway.

As part of the tax reduction, the Montana Department of Treasury will gradually add the new taxes to the owner’s existing property taxes in increments of 20 percent each year over a five-year period, beginning with the 2022 tax year, city officials said.

At the current tax rate and post-construction estimates, the city estimates its lost tax revenue at approximately $109,620 in the first year. The city estimates its lost tax revenue over the five-year cut at about $328,860, according to the city’s employee report.

The staff recommended approving the cut for the Gibson project because it will ultimately have a positive impact on the city’s tax base.

The property has been “underutilized” for years and the remodeling will increase tax revenue, according to staff. The construction project is estimated at 5.8 million dollars.

The commissioners also approved a remodel for the $55 million Great Falls Clinic expansion to include a new three-story, 75-bed tower and other services and resources. According to the personnel report, the expansion is intended to create a further 150 new full-time positions.

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According to the staff report, “The applicant has stated that the increase in construction costs has caused the original budget estimates for construction to increase by at least 20 percent. The Great Falls Clinic states that these cost increases have created an unanticipated funding gap that the tax break can fill. Additionally, the Great Falls Clinic states that the hospital maintains a for-profit status that puts it in a unique position from other hospitals. Because the Great Falls Clinic competes with other not-for-profit hospitals, they believe the financial considerations associated with investments and future tax bills should be taken into account. They view this tax reduction application as an opportunity to level the financial playing field and ask the city to consider this application to support its expansion to meet the growing healthcare needs of the Great Falls community.”

The city estimates that it will lose about $397,168 over five years for this cut. That loss will go toward the city’s general fund, which staffers say is recovering from COVID, and the clinic has said the project will generate additional taxes upon completion.

The staff recommended approving the cut, but also urged the commissioners to “carefully balance the overall cost of the cut against the growing pressure on the city’s general fund and ability to deliver critical services.”

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