Selling Helena – "We’re sorry but we are unable to return long-distance calls."

It’s an incredible message to hear upon reaching the voice mail system for a local agency charged with luring businesses, providing information for families looking to relocate and generally growing the Helena economy. And it’s a message president Cathy Burwell hopes to soon remove from the answering machine at the Helena Area Chamber of Commerce.

By JOHN HARRINGTON – Helena IR Business Editor

Thanks to a series of moves in the last few months by the Helena City Commission, Burwell and her staff may soon have the luxury of returning out-of-town phone calls, to say nothing of providing free relocation information to people who request it (the current cost of a packet is $15) and developing more services and programs for the member businesses around town.

In a sizeable reorganization spurred in large part when Sen. Max Baucus moved his local office out of the George D. Anderson Commerce Center on the corner of 6th and Cruse earlier this year, the city grouped almost all of the region’s economic development interests under one roof, lowered rents across the board and forgave more than $600,000 in loans to facilitate the deals.

The major moves included:

* Forgiving Gateway Economic Development Corp.’s $208,000 debt on its building on Poplar Street, and moving Gateway’s offices into the chamber building, in the downstairs space vacated by Baucus.

* Converting the remaining balance on a tax increment financing (TIF) loan into a grant on the entire chamber building, effectively lowering rent for the parking commission, Dowtown Helena/Business Improvement District and the chamber. The conversion also made the rent palateable to Gateway, whose monthly payment at the chamber building is roughly what the economic development nonprofit was paying on Poplar.

As a result, Gateway assumes full ownership of the Poplar building (estimated value: $500,000), which it can use to generate rental income as well as provide incubator space at favorable rates for nascent businesses. The chamber frees up working capital it can put into member services. And the city gets full ownership of the chamber building, with a capital budget in place to adequately maintain the facility, something officials say has been lacking.

Most parties say there’s little negative to the deal, though the city’s property tax collections drop as the chamber building becomes public. And, the city will need to reimburse the chamber for the equity stake it had built over the last eight years, the amount and timing of which are still under negotiation.

"It seems to me there’s not a downside to this restructuring," said City Manager Tim Burton. "It’s public money that built the building, public ownership that owns the building, we were able to cut the rent in half and maintain the building, so it’s just real logical in that sense. The agencies that focus on economic development come out stronger because of it. The city owns the building that public money was invested into, so it cleans that up. And by strengthening these agencies, it allows the city to maintain its focus on creating the climate where private business people are comfortable investing their own treasure within this community."

By the numbers

Several elements went into the original financing of the chamber building, ownership of which was essentially two-thirds public (via the parking commission and Downtown Helena) and one-third the non-profit chamber:

* $70,000 from the city, in the form of the land the building sits on (it was previously a parking lot)

* $35,000 cash from the chamber

* A $120,000 tax increment financing grant

* A $600,000 TIF loan, at 4 percent, to be repaid over 25 years.

By definition, TIF money, collected from downtown businesses since the early 1980s and dedicated to improvements within the downtown district, must be loaned (as opposed to granted) if it’s to be used for a private purpose, which in this case included the chamber’s one-third ownership interest in the building.

It’s the remaining balance on the TIF loan, some $469,000, that the city commission recently voted to turn into a grant.

"There’s positives and negatives with anything," said commissioner and budget hawk Steve Netschert. "I don’t necessarily like forgiving debt, and people deserve a good-faith effort to have those debts repaid. But we needed to look at what’s best for the city, and the services these businesses provide hopefully will advance our economic development."

City finance manager Tim Magee is quick to note that since two-thirds of the payments on the loan were being made by city agencies anyway, changing to loan to a grant for the most part just removes an accounting loop that had the city paying rent to itself.

"No matter how things fell out, the city was paying two-thirds of everything," he said. "So should we wrap it up now, or over a long period of time pay two-thirds of that money right back to us? Out of the $469,000 loan, we were going to pay two thirds of it, and we’re going to pay taxes that are going to come back partially to ourselves, but it’s government or tax money paying taxes."

Burton said that removing the property from the tax rolls will have no effect on the average taxpayer.

"It will have no impact at all, because none of that tax revenue ever made its way to an operating budget," he said. "It stayed within the TIF district."

In addition to being the current chamber treasurer, Helena Regional Airport manager Ron Mercer was on the chamber board around the time the building was built. He supports the recent moves, saying making the TIF money a grant will help the chamber and, by extension, the local economy.

"I wouldn’t say there was 100 percent agreement among the chamber and the city commission on how that building should have been funded," he said. "The city gains substantially in support of economic development, as well as acquiring a building that should be a community building anyway."

Mercer agreed that because TIF money is dedicated to downtown improvements anyway, the deal makes sense and won’t hurt the average citizen.

"The money never goes anywhere except downtown," he said. "The average taxpayer is not going to see any change. It’s just a matter of where is that benefit spent. In the long run, the benefits far outweigh the fact that this building isn’t going to be on the tax rolls."

Then, there’s the matter of the chamber’s one-third equity in the building, which city documents estimate at around $80,000, though that number could go slightly higher.

"We’ve told the chamber that we would secure their equity, and we would need some period of time, maybe five years, to buy that equity back from them," Burton said. "They paid a higher rent over the life of the building to accumulate that equity, so it seemed fair to the commission to pay that back."

Selling Helena

From Burwell’s view, turning the TIF loan into a grant will make the 800-member chamber, the third-largest in the state, more financially secure.

"The building was not generating enough cash to keep itself up and we were paying a huge amount of rent," she said. "It became apparent we would struggle for many years if we didn’t do something differently. It has been costly for the chamber to be obligated to pay that kind of rent."

She admits that the financing change could be "a little sensitive. The commission just pulled ($13,500) a year out of the tax base, but a lot of that was really the city paying taxes to itself."

Burwell said before the deal, the chamber was paying in the neighborhood of $25 per square foot annually for rent, when the going rate downtown is closer to $10. It was a significant toll on the chamber’s $350,000 annual budget.

"I’m estimating we’re going to save $15,000 to $20,000 per year," she said. "That’s another employee almost. Not only that, but when the city pays back our equity, that will give us the resources and the capital that will strengthen our organization. We believe that money was intended to be granted rather than loaned, so it makes sense to turn it into a grant."

Burwell said that the new capital budget, funded in part by the chamber’s rent payments to the city, will allow for needed improvements like new carpet and fresh paint.

A one-stop shop

For Gateway, the move to the chamber building was a no-brainer. For a monthly rent payment that’s roughly the same as it paid on the cinder-block building on Poplar Street, Gateway gets comparatively posh office space downtown, in the same building as many of the area’s other economic development interests, as well as a space in its old location that it can use as a business incubator for a startup or other relocating business.

"The deal has already been a benefit," said executive director Sheldon Bartel. "We’re located next to the chamber and the BID, we’re getting walk-in traffic, refering people upstairs and they’re refering people down to us. People actually can find us, and it’s a great space to interview people. It’s professional, it’s clean, it’s downtown."

Tenants in Gateway’s building on Poplar include Helena Civic Television and the International Church of Helena. Gateway’s old office space is available for a startup business to rent.

"We now own a piece of land with a building and tenants," Bartel said. "We have a carrot now – we can offer a very low lease rate and we can use that as an attraction here."

It’s a move that should make economic development in Helena easier, which Burton said was the commission’s overriding goal.

"The whole purpose obviously is to bring focus to economic development activities, in not only Helena but the broader regional area," he said. "What we’re really talking about in terms of the Gateway and chamber discussions is, what’s our investment in economic development and our ability to do that in this region?"

John Harrington can be reached at 447-4080 or

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