Big Sky EDA spends money to boost Billings and bring more business to town

Billings businessman Chris Dimock says he was glad to write a check that helped lure Bresnan Communications’ new $4 million regional operations center to Billings.

Local economic development officials worked for more than a year assembling a $1.6 million incentive package that helped land the Bresnan deal. The package included a $500,000 federal appropriation, about $809,000 in subsidies provided by Yellowstone County taxpayers and $300,000 in private capital.

By TOM HOWARD
Of The Gazette Staff

http://www.billingsgazette.com/index.php?id=1&display=rednews/2004/05/17/build/local/30-bseda-spends.inc

The private dollars were raised through the private, non-profit Big Sky Economic Development Corp., of which Dimock’s company, OneEighty Communications, is a member.

The Bresnan deal marks the first time that private money raised through the Big Sky EDC has been used to attract new business to Yellowstone County. Big Sky EDC, a private, non-profit corporation, was formed in 2002 as a way to supplement local taxpayer-supported economic development efforts through the county’s economic development agency, Big Sky Economic Development Authority.

To date, 50 member-investors have pledged more than $450,000 over three years to Big Sky EDC, an offshoot of the Big Sky Economic Development Authority, which is funded in part by a countywide property tax levy.

Dimock, president of OneEighty Communications and chairman of the Big Sky EDC board, said that when he moved to Billings nine years ago, "There wasn’t much going on in Billings for economic development. There was always a history of Bozeman, Missoula and Butte getting things done. I was frustrated that in Billings we couldn’t seem to get our act together."

Business investment

Attracting new business with money contributed by private investors has been used in several Montana communities but is relatively new in Billings. Dimock says private businesses gain a sense of ownership in the community when they contribute to Big Sky EDC.

Brent Johnson, chief operations officer of OneEighty, said he welcomes the competition that Bresnan might give his company and doesn’t believe the contribution gives Bresnan an unfair advantage. He considers OneEighty’s contribution to Big Sky EDC as an investment in the community that will pay dividends a few years down the road as Billings grows and more new business comes to town.

"The EDC is a good opportunity for like-minded businesses to work together," said Dimock.

Dimock said the Big Sky EDC’s 50 members represent a wide variety of businesses, including banks, engineering firms and architectural firms and law offices. The Billings Gazette is among the contributors.

The $1.6 million incentive package for Bresnan equates to about $16,000 for each of the 100 jobs that are expected to be created initially. Bresnan said it expects to increase its employment in Billings over time.

Maureen Huff, a Bresnan spokeswoman, said the financial package was not the only factor in Bresnan’s selection of Billings. Availability of land, a well-educated work force and a stable economy also were considered, she said. Bresnan also look at Cheyenne, Wyo., and Butte.

An analysis by the Center for Applied Economic Research at Montana State University-Billings predicts that the Bresnan operations center will generate economic benefits that far exceed the cost of the subsidies. The study predicts that Bresnan will generate $65 million in additional payroll locally and an additional $2 million a year in tax revenues over the next 10 years.

The deal

In the fiercely competitive effort to attract new business, subsidies are commonplace. Joe McClure, executive director of Big Sky EDA, said government and private industry can help boost employment by creating public-private partnerships.

"On one extreme you have socialism, and on the other end of the spectrum you have a totally free market. In reality, neither one works," McClure said.

The Bresnan deal includes safeguards that protect the investment of taxpayers and private investors, he noted. Some of the payments to Bresnan are made over 10 years. If Bresnan doesn’t meet its obligations, the payments cease.

Under the agreement, Bresnan estimates that it will have 175 full-time employees within 42 months after the new operations center is completed. That figure includes 67 Bresnan employees who were already on the Billings payroll before the operations center was announced, McClure said.

However, Bresnan must pay back a portion of the subsidies if it ceases business or abandons the operations center during the next 10 years, or if the company’s Billings work force falls below 117, McClure said.

Here are details of the $1.67 million incentive package that helped bring the Bresnan center to Billings.

• $119,000 from Big Sky EDA’s business incentive program. This money comes from county taxpayers and is part of Big Sky EDA’s budget.

• A $500,000 appropriation in the 2003-04 federal budget, to offset Bresnan’s construction costs. Sen. Conrad Burns, R-Mont., was instrumental in landing this money.

• $80,000 a year over 10 years, for a total of $800,000, to offset Bresnan’s operations costs. This includes $50,000 a year from Big Sky EDA’s business incentive program and $30,000 a year in private capital from Big Sky EDC.

• Bresnan will also qualify for a property tax abatement program that helps for new and expanding businesses. Bresnan’s new building, to be built at 19th Street West and Monad Road at an estimated cost of $4 million, will see its property taxes reduced by about $190,000 over 10 years under this program, McClure said.

• Bresnan may also qualify for a new state program that provides money to train workers in new and expanding businesses, McClure said. No figures were available on the value of this program.

Other deals

How does the Bresnan deal compare with other recent development projects that have landed in Montana?

International Malting Co. announced plans last year to build a $60 million malting plant north of Great Falls. A $33.7 million loan from the Montana Board of Investments was the most significant economic incentive, said John Kramer, president of the Great Falls Development Authority.

The loan is believed to be the largest in the 20-year history of the board, which makes loans from the state’s coal-tax trust fund.

The plant is expected to go on line in 2005 and will process between 8 million and 12 million bushels of malting barley a year. Kramer said the malt plant would provide about 35 full-time jobs.

The biggest benefit of the plant isn’t necessarily its payroll, but the creation of a market for value-added Montana agriculture products. Kramer estimates that the malting plant will generate between $10 million and $20 million a year in economic benefits.

Advanced Silicone Materials Inc. built a $500 million production plant near Butte in 1998, the Butte Local Development Corp. came up with a creative financial package to provide infrastructure such as streets and utilities.

Evan Barrett, executive director of the Butte Local Development Corp., said Butte-Silverbow created a tax increment financing district surrounding the ASIMI plant. Under the program, 60 percent of the company’s property taxes are diverted to develop $50 million worth of infrastructure for the industrial park surrounding the plant. The Board of Investments also provided low-interest loans.

"It was a good creative effort. We’re trying to be creative with the tools we’ve been given," Barrett said. The silicone plant employs 246 people with an annual payroll of $13.8 million.

Stream International opened a call center in Kalispell four years ago after Flathead Valley businesses contributed cash to land a business that at one point provided up to 900 jobs. The city of Kalispell and the Flathead Port Authority bought and renovated a retail mall for $2.5 million as part of a $4 million incentive package that included free rent.

Gov. Judy Martz named Stream the Montana Company of the Year for 2002. Then Stream closed its operation last August, citing financial difficulties.

Since then, Flathead Valley officials negotiated to lease Stream’s former location to Teletech Holdings Inc., which provides the same kind of customer support and technical services as Stream. Teletech has announced recently that it has begun accepting applications for its new Kalispell call center. Teletech’s entrance into Kalispell comes on the heels of its decision to close a call center in Topeka, Kan. Liz Harris, director of the Flathead Economic Development Authority, said Teletech will be required to pay $140,000 a year for the office space, just as Stream did. But no other loans or grants were extended to Teletech, she said.

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About Bresnan Communications

President and Chief Executive William J. Bresnan started the company in 1984. Bresnan Communications is privately owned, so there are few public details about its finances, including revenues or net worth. Bresnan Communications and three other corporations own the stock.

• Bresnan now employs 800 people and offers cable and broadband services, including voice, video, data and interactive TV in four Rocky Mountain states. The pioneer in cable and fiber optics is headquartered in White Plains, N.Y. The Web site is: http://www.bresnan.com.

• In 1994, Bresnan built a telecommunications network in Poland and sold the business in 1999 to a Polish holding company. Bresnan also operated in Chile from 1994 to 1996.

• In February 2000, Bresnan sold all of its U.S. operations to Charter Communications, now the fourth largest cable company in the United States. The deal was priced at $3.1 billion in stock and cash, including assumption of $1 billion in Bresnan debt. As a reward for completing the deal, 70 top executives split another $200 million among themselves.

• In November 2002, AT&T Broadband sold all of its cable television systems, including properties in Montana, Wyoming, Colorado and Utah to Comcast Communications Corp.

• Six months later in March 2003, Bresnan Broadband Holdings LLC bought some of the cable systems in four Rocky Mountain states from Comcast and got back into the cable business. Bresnan paid Comcast $525 million in cash, plus stock and other undisclosed payments for a network serving 197 communities and 314,000 customers.

• Billings is offering Bresnan $1.6 million to build its first regional network center here, a subsidy that amounts to approximately $16,000 per job for 100 jobs.

Source: Bresnan Communications and other media.

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The dollars, cents of boosting Billings: BSEDA’s budget about one-third tax dollars

By TOM HOWARD
Of The Gazette Staff

http://www.billingsgazette.com/index.php?id=1&display=rednews/2004/05/17/build/local/32-bseda.inc

Big Sky Economic Development Authority’s budget for the 2003 fiscal year was just over $1.9 million. About one-third of the budget – $620,467 – comes from a countywide property tax levy of just under 2.5 mills.

The owner of a home valued at $100,000 paid about $5.70 a year to support the quasi-governmental agency.

Federal funds account for much of the rest of the budget.

The Department of Defense provided more than $307,000 to the Procurement Technical Advisory Center, which advises companies interested in selling goods and services to the federal government. Local businesses that have received training through PTAC have landed millions of dollars in federal contracts.

The Big Sky EDA budget for 2003 also included a $179,000 line item from the National Aeronautics and Space Administration. In 1999 the Montana Business Incubator, part of Big Sky EDA, received a $900,000 grant from NASA to transfer space-age technology to local businesses.

Two years ago, the business incubator and the NASA grant were transferred to the campus of Montana State University-Billings.

Big Sky EDA has 15 employees and a total annual payroll of $654,985.

Joe McClure, the organization’s executive director, makes $95,000 a year – more than Gov. Judy Martz, who makes $88,190, and close to the $98,800 salary paid to Dave Gibson, director of the Governor’s Office of Economic Development.

McClure makes more than any elected official of Yellowstone County. Commissioner John Ostlund makes $68,224, Bill Kennedy makes $58,114 and Jim Reno is paid $55,080. County Attorney Dennis Paxinos makes $81,431.

Although the county commissioners review Big Sky EDA’s budget each year, McClure works under the direction of the independent Big Sky EDA Board of Commissioners, Kennedy said.

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How Big Sky EDA grew to be

Yellowstone County commissioners created the Montana Tradeport Authority, the predecessor to Big Sky Economic Development Authority, in 1989. A law passed earlier that year by the Montana Legislature allowed counties to assess up to 2 mills countywide to fund a port authority.

Over the years, the agency has gone through several reorganizations and at least one name change. It was renamed the Big Sky Economic Development Authority in 1998 and for several years was usually called BSEDA. A couple years ago, the organization scrapped the acronym and has called itself Big Sky EDA.

In its early years, Tradeport focused on transportation issues. At different times, Tradeport officials advocated improving the highways between Billings and Great Falls and looked into developing a distribution center for Montana-made products. Neither of those projects went anywhere. Some highlights from Big Sky EDA’s history:

1993: Tradeport helped arrange financing for the Yellowstone City-County Health Department to consolidate its operations and move to a new location at 123 S. 27th.

1996: Tradeport pledged $500,000 to be paid over five years to secure the American Bowling Congress national tournament to MetraPark in 2002. The tournament took place as planned.

1997: Tradeport was the catalyst for a publicly funded business park named TransTech in west Billings. The 104-acre TransTech center was criticized by some developers who believed that the business park unfairly competed with private industry. In 2000, the Big Sky EDA board agreed to sell the TransTech center to Bottrell Family Investments LLP for $2.6 million.

2001: Joe McClure was named the executive director of Big Sky EDA, replacing Jerry Thomas, who retired in 2000. Later that year, McClure introduced a new industry recruitment plan designed to attract businesses Yellowstone County. Big Sky EDA has also focused on business retention, business start-ups and community development.

2002: Big Sky EDA led the effort to recruit a service center for Dell Computer Co. Dell instead chose Roseburg, Ore.

2004: In a deal put together by Big Sky EDA, Bresnan Communications announced plans to build a regional operations center in Billings, promising to bring more than 100 jobs to town.

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