If you’ve been having trouble keeping up with business closures in Missoula lately, you’re not alone. Just when it seems the situation in here couldn’t possibly grow more absurd, even more iconic local businesses and longtime Missoula institutions forever closed their doors this month, including Pita Pit, Green Light, Lucky’s Market and JCPenny. The dust has barely settled from the last round of closures, claiming the Old Post American Legion Hall, Iza and Zoo Brew, among many others, all within the space of three months
Many displaced shopkeepers say they were forced to close down because their landlords increased rents. Others were obliged to vacate after property taxes suddenly multiplied. Both reasons highlight the effects of Missoula’s ongoing gentrification disaster.
The Green Light’s shop owner Sabrina Smith corroborates this fact. She says that after 11 and-a-half years working retail in downtown Missoula, she is retiring because her rent increased last January by about 30%, then increased again due to property taxes.
And the same vice squeezing locals out of their business is likewise pinching residents from what affordable homes remain that haven’t yet been bulldozed to install giant monuments of gentrification; projects that permanently contaminate entire neighborhoods with construction blight, ugly architecture, and fly-by-night tourists who only spend their summers in Missoula and consider the locals their compliant servants.
26% of Missoula’s work force must now commute from outside of Missoula largely because they cannot afford to live in town anymore. A chilling parallel to the housing crisis currently playing out in California’s Bay Area, where housing prices have ballooned to such an absurd degree that an annual salary of $120,000 is now considered “low income.”
Additionally, as many as 40% of Missoula residents are what is referred to as “income independent”, meaning they do not have to rely on income from local wages to pay for their costs of living here. Some of these residents are remote workers who draw silicone-valley level incomes from out of state businesses, while still others are simply independently wealthy people who do not need to work at all.
But Missoula’s income disparity insinuates an even more chilling reality. It’s the case today that 24% of people living in Missoula are one-percenters. Considering that Missoula’s income disparity is now the 33rd highest in the nation, it would seem Missoula isn’t so much becoming the “Austin of the Northwest” as it is to becoming Montana’s Jackson Hole.
Locals aren’t happy about this deadly trend, and they’re starting to become savvy to its causes. And one cause increasingly stands out above the rest: the misuse and abuse of Tax Increment Financing (TIF).
TIF constitutes an elaborate taxpayer-giveaway scheme that bankrupts cities through a morbid process of death-by-a-thousand-cuts. This kind of Voodoo economics directly causes property taxes to spike, in-turn causing rents to skyrocket, thus displacing locals and gentrifying entire communities.
But some TIFs are more egregious than others. The Missoula Redevelopment Agency (MRA) are all-too happy to cough up TIF money, even to organizations who don’t ask for it. But when developers hold the blight gun to the city’s head, they coerce our public officials to ensnare us all in highly regrettable quagmires that accelerate the decay of our fragile community.
Five years ago Peter Lambros threatened the MRA with “mall blight” if it didn’t cough up millions in public financing for a road, namely the Mary’s Avenue extension. Lambros said millions had already been invested, claiming that without public TIF the whole deal would collapse.
Peter Lambros presented a cartoonishly-dismal picture, threatening “future blight” if the city didn’t grant the Lambros Cartel millions in taxpayer subsidies to build that unnecessary road. The Lambros Cartel and Southgate Mall Associates got their $7.6 dollars of public money, plus several more millions in additional TIF money, then turned around and flipped the entire property to Ohio-based Washington Prime for $58 million.
But it gets even better!
Not only did MRA director Ellen Buchanan assure us that it’s fine for Peter Lambros to screw over the taxpayers of Missoula so brazenly because apparently Missoula requires a better road to the mall, when asked whether Lambros would have to repay the millions of taxpayer dollars granted to them through TIF, Buchanan dug in even further:
As reported by Sarah Gravlee last week:
Ellen Buchanan Director of the Missoula Redevelopment Agency, the group that manages TIF funding, said the city has been trying to identify an east-west connection between Reserve Street and Brooks Street for decades. This project gave them that opportunity.
“So, that’s what the money’s for,” Buchanan concluded. “It’s for a city street.”
The only problem with that story is that this so-called “public” street was requested by Peter Lambros specifically to get Lucky’s Market into Southgate.
Buchanan knows that, and she knows it looks bad.
According to Councilman Jesse Ramos, that road was explicitly requested by Peter Lambros to get more customers into his mall. “It’s in the minutes for that meeting,” he says. “It’s public record.”
So is Buchanan lying?
It seems obvious that the road would naturally be desired by Lambros for the purposes of attracting customers into the parking lot, but Buchanan continues to spin it as nothing more than a benefit for the community. Unfortunately, locals are well aware that these millions in TIF subsidies did little more than complete a road that nobody uses except to access Southgate Mall. Indeed, the very shape of the road itself indicates to whom its fruits would benefit, and it wasn’t the Missoula community. What a great deal for Lambros, and yet another cold shoulder for Missoula taxpayers.
The above map featuring “SOUTHGATE MALL” indicates “JCPENNY” on the western corner and “OLD SEARS” on the eastern. That “old Sears” would become Lucky’s Market. Both businesses are directly contiguous with this road which was meant to give life to them. A superb example of the fact that no speculator, no matter how well spoken, has a crystal ball for what the future will bring.
And even as the ideology of the MRA’s master-plan narrative crumbles, Ellen Buchanan doubles down on the vapid claim that the City desired this unnecessary road through that part of town since the 1990’s. But the only reason anybody would ever use that road is to go to the mall or the shops around the mall. Trying to navigate that area is a nightmare, new road notwithstanding.
With malls across the country closing down and boarding up, Lambros was clever enough to realize that “future blight” might become a self-fulfilling prophecy. Even though Southgate wasn’t a “mall” anymore, choosing instead to identify as a “Mixed-Use Town Center,” it remained just as susceptible to the same economic forces currently driving all brick and mortars out of business nationwide as it was before.
Lambros clearly knew this. So he flipped the mall while it was still profitable to do so, but not before taxpayers built him this unnecessary road to make the sale more appealing. And Washington Prime Group did indeed bite for $58 million.
You’re welcome Peter.
From the developer’s standpoint at the time, the sole purpose of the Mary’s Avenue extension was to direct more traffic into the mall so that the owners could entice Lucky’s to move in. Because of this poor decision from the Council, tens of millions of dollars will be diverted from roads, from police, from fires, from schools, to benefit wealthy business owners.
But Southgate is just the tip of the iceberg!
When it comes to abusing the TIF statute, Urban Renewal District III really takes the cake. The Reserve Street pedestrian bridge that stands just a few short blocks away from the Southgate Mall, added an additional $5 million burden onto Missoula taxpayers, in an area of town that doesn’t seem “blighted” by any logical metric to thus justify TIF funding.
When asked how Larchmont Golf Course and a thriving industrial zone could possibly be considered “blighted”, MRA director Ellen Buchanan said at the time that the bridge “completed the trail, and people love to build on riverfront properties.” So even though the bridge didn’t eliminate blight in that specific area (URDIII), it apparently eliminated blight down the path, illustrating once again the desperate lengths these TIF addicts will go to justify their addiction.
This week, Councilman Jesse Ramos appeared on KGVO to elaborate:
“Urban Renewal District III, that’s the one the bridge is in … goes from the walking bridge, wraps all the way around Cabela’s, wraps back around 39th, wraps around the fairgrounds, wraps down through Bancroft, hits Mount, wraps all the way back around Reserve, and then comes around. It’s one square mile, so it’s a massive, massive district. It was created in the year 2000 because it was blighted, according to Montana Code Annotated.
As defined by Montana Code Annotated, “blighted property” is “an area that is conducive to ill health, transmission of disease, infant mortality, juvenile deliquency, and crime.”
Ramos explains that the district had a $10 million tax base in 2000. When the tax revenue was divided roughly equally, a third went to the city, a third went to the county, and a third went to the schools. In 2000, TIF funding froze the process. The only tax revenue going to the city, county and Missoula schools was a part of the original $10 million tax base. Property taxes still increased, but any increase in the tax base was skimmed off of the top and went to the Missoula Redevelopment Agency. TIF funding must be reinvested back in the same district; along with the pedestrian bridge construction, some of that TIF funding went towards the Missoula Mercantile, [to] construction at Southgate Mall, and [to] Stockman Bank.
“That TIF money is only supposed to be used for 15 years, so that district was created in 2000 and was supposed to sunset after 15 years,” Ramos explained. “But there’s a small provision within Montana Code Annotated which states that if you settle debt within the district, it extends the district out the length of the bond for a maximum of 40 years total. In September of 2015, the city council sold $5 million worth of bonds for that walking bridge built with TIF funds, and extended that district out until the year 2040. So, all the growth in that tax base is going to be skimmed off the top until the year 2040.”
And what company was it that helped “reimagine” Missoula’s Southgate Mall? The now notorious WGM Group; an organization with players working inside the Missoula City Council and other local government posts. The same organization now proposing the ludicrous commercial rezone that would bulldoze several historic buildings and displace Missoula locals to build luxury condos, blighting the skyline of Missoula and uprooting the fragile foundations of our community for all time. For once this spot zone is deemed legal, we open a Pandora’s Box of developments just like this all over Missoula in the form of precedent.
And on top of it all, the MRA, headed by Ellen Buchanan, awarded $50,000 in TIF subsidies to Lucky’s Market itself. That’s $50,000 that Missoula taxpayers are told would come back to us as a “return on investment” through property taxes generated by Lucky’s. But it’s awful hard to collect property taxes from the business we’re subsidizing when those businesses go belly-up in their first 24 months.
On top of it all, there’s the interest to think about, since TIF projects are bonded out, putting the city, and thus the taxpayers at its base, in astronomical debt. From a $7 million TIF we can expect at least an additional $5 million in interest to accrue, putting Missoula Taxpayers out by at least $12 million for a road to benefit a mall that is closing down like every other mall in America. And the trend indicates that’s exactly what’s happening. Because it isn’t just Lucky’s closing down shop.
Friday, Southgate Mall owners announced JCPenney’s would also close their doors, though the mall has indicated that it will announce plans for “redevelopment” of the JCPenney location soon; “redevelopment” that will likely involve even more TIF subsidies, awarded in vein to delay the inevitable sinking of Southgate.
Astonishingly, the city’s justification for these monies was to prevent “future blight” – a term that does not exist under state law, further illustrating the blatant misuse and abuses of the TIF statute.
It is not the job of the taxpayer to bail out private business, and if the mall is going to close we’re not going to stop it no matter how many tens of millions of taxpayer dollars we decide to throw at it.
When will Mayor Engen, the Missoula City Council, and the unelected TIF addicts working for the MRA, realize that they cannot take on Jeff Bezos and Amazon with taxpayer handouts?
We can’t reverse a nationwide economic trend with TIF subsidies!