In $3.6 million Merc giveaway, MRA is poor negotiator

The Marriott hotel envisioned on the site of the former Missoula Mercantile building

Residents of Missoula and its partisans abroad know about the years-long saga that is the Mercantile. A Macy’s as recently as 2011, the historic downtown building sat vacant for six years, thwarting various development plans until HomeBase Montana offered to knock it down and build a Marriott in its place. The city’s Historic Preservation Commission denied that permit, in what might politely be called a complex process. The city overruled the committee, and HomeBase demolished the Merc in April. Then, at the end of June, the Missoula Redevelopment Agency voted to give the project $3.6 million in tax increment financing.

It was not a bailout. Most of the TIF money reimbursed the developers for stages of the project that had already happened: $1.5 million for “deconstructing” the building by reclaiming its materials instead of demolishing it outright, $336k for preserving the old pharmacy, and $150k in reimbursements for asbestos removal. All these were conditions of the original deal, which HomeBase had already met without running into cash-flow problems. Any suspicion that the project might need our $3.6 million to survive was erased by developer Andy Holloran, who told the Missoulian the hotel would generate more property tax revenue than expected because developers had “added $5 million more to the total project costs, including 27 more rooms than the original design.”

What, then, did the city of Missoula get for its $3.6 million? The things we bought—deconstruction, asbestos abatement, the pharmacy, and a guarantee the project would move forward—were already ours. This TIF money neither extracted concessions from the developers nor saved the project. So is the MRA saying that paying $3.6 million to expand the project was a wise investment, because a bigger hotel will generate more tax revenue? If so, that’s a new vision of the agency’s function. Historically, the MRA has acted to encourage new development projects, not invested in ones that were already underway.

A lot of public money went to a private business venture in this deal. Given how little the public seems to have gotten, its worthwhile to ask in whose interest the MRA negotiated. Reimbursing developers for what they agreed to do on their own dime does not strike me as sharp dealing. You can read all about it in this week’s column for the Missoula Independent. We’ll be back tomorrow with Friday links!