City Council declares tourism a Front Street goal; begins process to reimburse $3.6M in Merc construction costs

Tourism development – think hotels, attractions, convention centers – is now a commercial goal on Front Street in downtown Missoula.

On a 10-2 vote Monday night, City Council members endorsed the addition to the Front Street Urban Renewal District Plan, setting up consideration later this month of a $3.6 million reimbursement to developers of the nearly finished Mercantile hotel at Front and Higgins.

It was the reimbursement – using Tax Increment Financing dollars – that proved controversial.

The vast majority of the council spoke strongly in support of tourism as an economic driver in downtown Missoula – and of the Merc as the centerpiece of that new focus.

But council members Heidi West and Jesse Ramos questioned the real economic value of tourism and the justification for providing TIF dollars to a private corporation for a private commercial venture.

Ellen Buchanan, director of the Missoula Redevelopment Agency, provided the background and justification for the resolution and ordinance.

“In 2009, when the Front Street URD Plan was adopted, there was no anticipation of the tourism development we have now,” she said. “At the time, we thought we’d have Macy’s downtown for years to come as the retail anchor at Front and Higgins.”

A major hotel development simply was not envisioned for downtown Missoula, she said, much less the disappearance of department stores brought about by online shopping.

But by January 2010, Macy’s was on its way out of downtown Missoula, and later that year downtown’s retail anchor was gone. The building sat empty and in increasingly decrepit condition for six years.

“Retail has changed in America,” said Councilwoman Gwen Jones. “That’s the reality.”

The five-story, $40 million Marriott Mercantile hotel was an unexpected but welcome replacement for those lost downtown dollars, Jones said, one that coincided with and will feed a tourism boom.

HomeBase LLC, the hotel’s Bozeman-based developer, has scheduled a February opening for the hotel and its 200 rooms, with a diverse collection of ground-floor restaurants and retail shops to follow.

Ramos provided the counterpoint Monday night, saying he was “confused” by his fellow council members enthusiasm for the development.

“Let’s face the facts,” he said, “I’m the Republican up here and I’m the one opposing giving money to private corporations and I’m the one opposing giving money to private, multinational, huge corporations that are very, very wealthy.”

“I don’t understand the drive by the council to promote tourism,” he said. “Tourism is supposed to be a naturally forming industry that is created and driven by the market and the beauty. It is not supposed to be driven by government.”

Jobs in the tourism industry, Ramos said, are service jobs. “They do not pay a living wage, so why are we focused on promoting service jobs? Hotels, restaurants, boutiques … you’d be hard-pressed to find anyone earning more than $10 an hour in those places.”

“It’s great for the rich people to come to Missoula and visit us, but they don’t have to actually live here,” Ramos said. “For the people who work those jobs, they are not living-wage jobs.”

As for the developers of the Mercantile hotel, Ramos said he will not approve any reimbursement of construction expenses when that request comes before the council later this month.

His message to HomeBase LLC and others that may bring future projects to Missoula:

“If you can’t afford to do this without the help of the taxpayers, then don’t do the project,” Ramos said. “You’re on your own. This is the private sector, we’re not your babysitter. If you can make money, do it, but don’t come to us for a handout.”

The monologue drew a sharp rebuke from council president Bryan von Lossberg, who said he “didn’t understand any” of Ramos’ rant so was going to instead “get back to the facts.”

“This is a private development on a private piece of property,” von Lossberg said. “This is something that was going to happen. And by investing TIF money, we got some things for the public good of the community that we would not have otherwise received as part of that.”

“This is not a handout to the developer,” he said.

Von Lossberg ticked off a list of requirements the City Council placed on HomeBase during its protracted consideration of the building’s removal and replacement three years ago.

“The council decided that we wanted the building deconstructed rather than demolished,” he said. “There’s a cost involved with that. Then we made a determination that we wanted to save the most recent portion of the historic building that was in the best condition, and that was the pharmacy.”

At every step, the council’s decisions added costs to the construction.

The TIF funds promised to the Merc’s developers by the Missoula Redevelopment Agency’s board in June 2017 are reimbursement for the added costs of environmental remediation, deconstruction, historic preservation, underground utility placement and right-of-way improvements.

HomeBase could receive up to $3,597,844, if needed bonds are approved by the City Council. The MRA board’s decision is not binding on the council, Buchanan said Monday, so the developers knew they were taking a risk.

But von Lossberg and others said they are in favor of the reimbursement because the extra conditions added by the city “made good things happen that otherwise would not have happened, for the good of the community.”

When the council imposed the costly extra requirements on HomeBase in 2016, “we deemed it in the public good” to use increment funding to make that happen, von Lossberg said.

Monday night’s vote to amend the Front Street URD plan – and to declare the Mercantile hotel’s construction an urban renewal project – was the start of the process now needed to provide the promised reimbursement.

What will follow, Buchanan said, is a referral to the council’s Administration and Finance Committee, to approve a bond resolution and development agreement between the Merc developers, the city and the MRA.

That was spelled out in the development agreement approved by the city and HomeBase LLC several years ago, she said.