Zoeller said the bad year for TIF does not jeopardize the reimbursement agreements already approved by the City Council, but that TIF would need to reverse the trend to keep it that way.

“We cannot tolerate year-on-year losses or 0% growth,” he said.

Harkins said EBURD may not be able to fund as many projects this year, but project developers should still apply for TIF because funding could be delayed for a year at any time.

An upcoming financial commitment for the downtown TIF is a $5 million allocation for a $42 million hotel project to be built in place of the old City Hall, which the City Council approved in March. This amount will be paid out over five years.

The project was approved because the hotel will generate a high return on investment for the city due to high property taxes, said Sean Lynch, chairman of the Downtown Billings Partnership, which manages the downtown TIF.

At next week’s City Council meeting, Council will vote on three motions that DBP, the TIF board, is recommending the Council reject: for the Alberta Bair Theater, the Billings Depot and the Art House Cinema, which is requesting funds to replace the Babcock canopy. All three buildings are city-owned and have previously received TIF funds. The ABT is the largest recipient of TIF funds to date, at $3.5 million.

The DBP does not want the city to view the TIF as a “piggy bank” for the maintenance of the buildings for which it is responsible, Lynch said.

“The city has a tendency to buy and own things that it has no idea how to maintain, like these buildings or parks,” Lynch said.

“You have to sell them or set up a maintenance fund to maintain them,” he continued, especially because TIF will eventually expire.

The rejection of these projects has nothing to do with the lower tax revenue or commitment to the hotel project, Lynch said. The DBP is currently prioritizing residential and mixed-use projects because that is what the survey requested from downtown businesses that pay into the fund. There is a “multi-layered reason” for this, Lynch said.

“The more people there are on the streets, the safer it is,” he said.

TIF helps make new construction projects in the city center more attractive by offsetting some of the demolition costs and higher project costs associated with working in confined spaces, says Tim Goodridge, who was EBURD director for five years.

“It’s much more expensive than putting a building in the middle of a field,” he said.

Both local and state officials are discussing ways to improve TIF.

At the city’s budget and finance meeting, Council Member Jennifer Owen brought up how the regulatory environment impacts the feasibility of construction projects, which in turn impacts TIF revenues. For example, building department policies can discourage construction projects by making compliance with building codes expensive.

Despite this year’s revenue decline, city leaders still view TIFs as an important mechanism for funding local projects. At Monday’s City Council meeting, council members discussed expanding the south Billings district so TIF money can be used to fund a new South Park swimming pool.

“It’s local dollars being spent locally,” Goodridge said. “It’s unusual and difficult to get those funds to local people.”

Local governments value TIFs because their funds can be used for a variety of projects: financing infrastructure, businesses and housing.

“That’s the Achilles heel of the issue,” Goodridge said. “You come under fire when people don’t agree with your interpretation.”

The Council’s Legislative and Local Affairs Committee recently discussed advocating for TIF-friendly policies during the upcoming legislative session, as TIF legislation continues to generate controversy in the House.

The House Interim Finance Committee is revising TIF legislation as part of its broader property tax reform effort. Proposed TIF changes that could be introduced in the upcoming legislative session include revising the definition of forfeiture, requiring advisory committees for each TIF district and requiring public hearings before approving some TIF bonds.

TIF advocates are already working with lawmakers to maintain TIF-friendly policies, Wyeth Friday, the city’s planning director, said at the legislature’s meeting.

“There have been some good conversations to prevent the bills from going wrong,” he said.