Subdivisions, Zoning and Economic Development

Andrew Hagemeier, director of Community and Economic Development, is back on the podcast this week to help bust myths about subdivisions, zoning and land use. Other topics include tax increment financing, the Wye Water System project and affordable housing. 

Be sure to check out the TIF and TEDD 101 episode for a primer on how tax increment financing works.

Thank you to Missoula's Community Media Resource for podcast recording support!

Transcript

Josh Slotnick: [00:00:10] Welcome back, everybody, to the agenda with the Missoula County Commissioners. I'm Josh Slotnick and I'm here with my fellow commissioner and friend Dave Strohmaier. Juanita Vero is out this week, and this week we're joined by our very own Andrew Hagemeier, who's director of Missoula County Community and Economic Development. Today, we're going to do some myth busting about development projects from subdivisions to Tiff and more. And we're going to hit on the why and a little bit of the aftermath of the legislature. So thanks a ton for joining us, Andrew.

Dave Strohmaier: [00:00:36] Yeah. Welcome, Andrew. I love myth busting. Yeah. And why don't we just dive right into it? Sometimes I get the sense that folks may assume we have godlike powers as the board of county commissioners. And if just enough folks can show up to a meeting or raise their voice loud enough that we have full discretion to do whatever we would like in terms of denial of a project. Andrew, can you talk to us a little bit about what what our sideboards are?

Andrew Hagemeier: [00:01:07] Yeah. This is something that you see everywhere, right? This isn't just like a Missoula County problem, but it's it's anywhere in the country that deals with development. In Montana, we have a we have different layers of tools that we use as local government to manage growth and development. We have our comprehensive planning, which is also called a growth policy. And that's strictly a policy based document basically says where we want commercial, residential, industrial land uses to go and what type of development we want to see that sets the stage for our regulations, our regulatory tools, which in Missoula County we have zoning, which is an actual set of rules that development must follow. And then we have subdivision regulations. Subdivision regulations are meant to guide the division of property. That's all they do is tell us how we split up land into different units of ownership and how we provide infrastructure. So in parts of Missoula County, we have zoning that takes care of the well. This is what should go into that subdivision.

Josh Slotnick: [00:02:03] Zoning can be about use.

Andrew Hagemeier: [00:02:04] Yeah, yeah. Zoning sets the rules for development. When we talk about where residential, commercial, industrial should go, our zoning code says this is where they should go and that makes it regulatory. So in this case, if you have a subdivision, it says how many houses, what types of houses, what density of houses. It sets all that stage. And a developer comes in, they propose their subdivision, they meet the zoning code. It's pretty straightforward. Generally you don't see too much chaos around that with the public, but sometimes you do. And then with the subdivision review process, these things have to go on. At the same time, the division of land in zoned areas, that's the only regulatory tool that we have. And so what happens is people look at all of the aspects of the development. That's what this is what the public is thinking about. They're thinking about the density, the intensity, the uses. But the regulations only actually guide the division of land. Right? We do have to evaluate the impacts of that. And there's we call them 608 criteria. There's part of statute that says we have to evaluate the impacts to agriculture, agriculture, user facilities, wildlife, uh, yeah, public facilities, things like that. And so you do evaluate those impacts. And if there are impacts you require mitigation, right? It's directly proportional. You say, well, if you're going to add so many trips to the road, you have to contribute so much.

Josh Slotnick: [00:03:20] To widen the lanes or something.

Andrew Hagemeier: [00:03:21] Upgrade the road only when you have impacts that can't be mitigated. Does the governing body have the decision space to deny a subdivision.

Dave Strohmaier: [00:03:31] So the decision space does not include if an impact exists. Well, let's talk about mitigation. What does what does that mean. Because in some people's mind mitigation means, uh, no impact whatsoever at all. Uh, and I don't think that's quite right.

Josh Slotnick: [00:03:48] No, it feels like mitigation is sanding off the sharp edges of an impact, like making the road wide enough to handle the additional traffic. Not well. If there's additional traffic, we have to say no because the road can't change or we're going to add a crosswalk or a stoplight or something to do with water, or we'll take care of the stormwater that would be dealt with if this land land is moved in a certain way.

Andrew Hagemeier: [00:04:12] Yeah, there are going to be impacts to any sort of development.

Josh Slotnick: [00:04:14] Any change, any change, any.

Andrew Hagemeier: [00:04:16] Impact. So the threshold is adverse impacts, things that are bad for public health and safety, bad for the environment, bad to agriculture. So simple impacts or small impacts maybe require just low levels of mitigation. More significant impacts like putting in a roundabout might you know, you might have to do do more there, but it also has to be directly proportional to the impact. I mean, you can't ask for them to put in a brand new four lane highway if they're only adding a thousand trips. Right? Right, right. So there's a whole evaluation that the planners do to address what those impacts are. And then on top of that, according to statute, we have to ask the developer if those mitigations.

Josh Slotnick: [00:04:57] If they are willing to.

Andrew Hagemeier: [00:04:58] Do, if they're willing to do it, and if they're not willing to do it, then you can say, okay, well, then we'll deny it. So they're always willing to I mean, sometimes you negotiate, right? Well, they'll say, well, how about this condition instead of this condition? But, you know, it's a very small decision space to say no.

Josh Slotnick: [00:05:14] And I think therein lies the myth that Dave was pointing at. And I think some of this is because of literally because of the architecture of the room of Sophie Moyes, which is beautiful room. But the three of us are sitting up on this dais and sort of a judge like atmosphere, and people come before us, literally come before us, stand at this podium. And the whole situation is nerve wracking and it reeks of power over here and kind of supplicant over there. And I think that atmosphere caters to the sense on the part of the public that we can just say yes or no, when actually our ability to say yes or no is constrained by these 608 requirements. What are the impacts on these five set of criteria, and are those impacts mitigated? And only when these adverse impacts aren't mitigated can we say no. And often what we hear from people, very legitimate and reasonable criticisms about a potential development that will actually have an effect on their life. But these things that they're worried about and concerned about are not listed in those 6 or 8 criteria. Things like, I have been looking at that mountain for 40 years, and now there's going to be a house in the way. I don't want that. That's and yes, who would want that's going to be terrible. But Viewshed isn't in one of those 6 or 8 criteria. This isn't about wildlife or public safety or emergency services or something like that.

Dave Strohmaier: [00:06:32] Well, and I would hazard a guess that certainly in the years that I've been doing this job, it has seemed as if with each legislative session there is a.

Josh Slotnick: [00:06:42] Trimming.

Dave Strohmaier: [00:06:42] A trimming and eroding a contraction of our decision space as a governing body in some respects.

Andrew Hagemeier: [00:06:49] Yeah. I mean, what happens is, you know, you get some pet project, some someone was wronged by Yellowstone County, or so they thought in their mind. And then.

Josh Slotnick: [00:06:58] They get legislature.

Andrew Hagemeier: [00:06:59] Changed. Exactly.

Josh Slotnick: [00:07:00] Yes. We used we used to be able to consider agriculture in a way that we can't now.

Andrew Hagemeier: [00:07:04] Character is not something that that is not a space to deny a subdivision in. Right. And that's what zoning is for. People are concerned about character in Missoula County. You need to have zoning.

Josh Slotnick: [00:07:14] And I wonder I think there's we all are affected by a certain legacy here. And I think you're totally right on the trimming that there was a time, a long time ago when county commissioners, city councils and mayors could say yes or no with less constraint. And this whole system is designed where the public input is, when the subdivision is going to be given the thumbs up or thumbs down by the electeds. And we get very little input on zoning. So zoning happens. And when we went through when you were a real part of our land use element, and then a huge part of making our zoning happen, it seemed people only wanted to comment about the this owning that was near them. Yeah. And that that makes total sense. And then they put their real comment effort on attempting to stop, protest or alter a subdivision again that is right near by them. It makes total sense. But if the power now is around commenting on zoning, not on subdivision, we end up with a lot of angry people.

Andrew Hagemeier: [00:08:09] Yeah, we don't want to gloss over the fact that the public comment period in a subdivision is important too, right? I mean, I have seen subdivisions where we did not anticipate we the planner. We didn't as planners didn't see an impact. It didn't come up in the environmental assessment. And and the public shows up and they've got pictures of the property under water, you know, and um, and this was in Flathead County, where they very rarely deny anything. And the commissioner was like, yeah, no, we're not going to approve the subdivision. Things do come up where they, the public does bring very real significant adverse impacts that we have not addressed.

Dave Strohmaier: [00:08:43] So but simply the fact that I don't like any change whatsoever or don't want to see something on the adjoining property is not in and of itself grounds for denial.

Josh Slotnick: [00:08:53] And those are certainly grounds for being angry and disappointed and bummed about the changes that have happened in your neighborhood. But there's a house across the street from my house that interrupts my views just built.

Andrew Hagemeier: [00:09:02] Yeah. I mean, Missoula County is growing by, what, 1 to 2000 people per year? This place is going to change.

Josh Slotnick: [00:09:07] Yeah, there's.

Andrew Hagemeier: [00:09:08] No all need to accept that.

Josh Slotnick: [00:09:09] There's there's no way around.

Dave Strohmaier: [00:09:10] But but I think at least, uh, in, uh, in some instances that we've seen as of late, I think there is a spark of recognition on some people's parts that one way to manage growth or to direct it in a way that lessens impacts is through zoning, where and it's not going to solve all all of the issues that folks might have. Because if you have a specific, uh, business that you do not want to see in your neighborhood, zoning is not necessarily going to prohibit that particular business. It might be able to direct commercial or residential development to one place or another. So it's not going to do everything that folks want, but it is a mechanism to help realize your vision for your community. And if you don't have it, I like to bring this up constantly. Sorry, Ravalli County to our south, but if you look at highway 93.

Josh Slotnick: [00:10:06] Sorry, not sorry they made that choice.

Dave Strohmaier: [00:10:08] Yeah, it's you kind of get what you get when you have no zoning and and there's a whole lot of lamentation about what a place has become. But that's largely a function of our freedom loving spirit in Montana, not wanting to be regulated. And if you don't accept some de minimis regulation, you get what you get.

Andrew Hagemeier: [00:10:27] Yeah. I mean, highway 93 is going to be a nightmare in the future, right? Hamilton is going to get further and further and further away from Missoula over time, not because of distance, right? I mean, it's not continental drift. It's because there's going to become more and more and more stoplights because they do not regulate land use along that corridor.

Josh Slotnick: [00:10:44] Hey, so onto I want to go back to zoning and subdivision a little bit. And something you were part of the Montana Land Use and Planning Act. How will things change for people given that this thing is in place?

Andrew Hagemeier: [00:10:56] I mean, going back to our what our system and land use enabling system in land use is today is we you know, we have these different tools like growth policy, the zoning and the subdivision regulations. And our statutes right now make no connection between any of them. There's no real direct link between how you plan and then how you regulate. And what happens is, is if you're navigating a development process as a developer, you have to go through something like 13 criteria for the growth policy and 11 criteria for zoning, and then six criteria for subdivision. And they're all different. Every single one of them is different. But in planning theory, they're all supposed to be connected. Right. So it's a broken system in terms of how development occurs and how the outcomes we have so that that affects the development community or housing, but it also doesn't produce the outcomes that our communities want, right? We go through these big planning processes. We create this vision for we for what we want our community to look like. Oftentimes, it's really kumbaya and everyone's really excited at the end of that process. But then we don't follow through with our regulations because our enabling statutes don't require it, and we don't get the development that we as a community that we envision. So what the Montana Land Use Planning Act does is it tries to bring those things together and you write your comprehensive plans. We stopped using the term growth policy. That was like my crowning achievement in that whole legislation. So we write your comprehensive plan and then you are required to follow up with Sony. And then you were required to every five years to evaluate your zoning and update your zoning.

Josh Slotnick: [00:12:19] And the zoning reflects the comprehensive growth plan.

Andrew Hagemeier: [00:12:21] Yeah. That's if you say we're going to grow in this direction, the zoning, you put the zoning in place to grow.

Josh Slotnick: [00:12:26] In a sense, it's think of it as the comprehensive growth plan is kind of the narrative description and the zoning is the technical nuts and bolts, the teeth that actually make the vision become real.

Andrew Hagemeier: [00:12:36] Right, exactly. And then your subdivision regulations, which is your division of property, really just focuses on the division of property then. Right. And what what will occur is the law is set up. It emphasizes planning in such a significant way that we don't do in Montana right now. And it emphasizes implementation of our planning. So we're going to get better outcomes for our communities over time. I mean, it's going to take decades, right? It isn't going to be a fast thing, but we are going to be able to facilitate development in a way that actually represents our visions for our communities. It doesn't happen today. So it does change the paradigm in which how the public interacts.

Josh Slotnick: [00:13:11] This is the piece I really wanted you to hit on.

Andrew Hagemeier: [00:13:13] And so what it does is it really emphasizes the the public participation and the in the planning process and the development of our regulatory tools. But once that development is proposed, if it's not changing any of that, if it's meeting all of our rules, if it's meeting our vision, it's an administrative approval. It is simple.

Josh Slotnick: [00:13:32] So that means if someone comes and proposes a subdivision and it's in line with zoning and in line with the subdivision regs, it's administratively approved. Rather than having a public meeting with 40 angry neighbors in front of the Board of County commissioners. Right now, people will be like, what the hell? This thing's being built across the street from my house, and I never even got a chance to stop it. This is terrible. And the response would be, oh, the time to participate was in zoning. 18 months ago when we did this, which I can only imagine will be cold comfort.

Andrew Hagemeier: [00:14:00] Yeah, yeah. And there are catch. There are safety nets in that. So there are if there are adverse impacts that we didn't anticipate in our planning and our zoning, say if someone's going to build a Walmart and we only anticipated 5000 trips per day on this road, a Walmart will add 8 to 10,000 trips per day to a road. I mean, significant amount of traffic, right? So we only anticipated five of that. And now we've got this Walmart coming in and they're going to add 10,000 trips per day that would that could trigger that public hearing process. Right. So because there are actual impacts to discuss as a community, but if it's not doing that, if it's within all the boundaries and there are ways to to appeal and, you know, there are safety nets within the statute. But, you know, I live on the north side, there's the Rivera project is going in right behind me, right?

Josh Slotnick: [00:14:45] That's a lot of houses.

Andrew Hagemeier: [00:14:46] 400 units. Zero public hearings. We are doing this today like we approve development all the time today. The reason why zero public hearings on that Rivera development, it was zoned for it. It met the City of Missoula comprehensive plan multifamily units. Multifamily buildings are a permitted use. We have community said this is a permitted use. This is what we want to see here. But if that developer wanted to come in and just subdivide that property into five lots, six lots and do five six homes, then under current statute, that would require a public hearing, right?

Josh Slotnick: [00:15:19] So interesting. And one of those the former has a way bigger impact.

Andrew Hagemeier: [00:15:23] Way bigger 400 is way bigger than six.

Josh Slotnick: [00:15:26] Than than the latter.

Dave Strohmaier: [00:15:26] Well, and and I think in a similar vein we have heard recently from individuals were, I think, also erroneously under the assumption that we are the final arbiter for building permits. And, and that just as with the subdivisions or zonings we have or zoning, we, uh, we have somehow full rein to to give a thumbs up or thumbs down, uh, kind of in an arbitrary and capricious manner. Similarly, we could which we can't do. But similarly, the assumption is that if someone comes in for a building permit and if you don't like that business, if you raise your voice loudly enough with the Board of County commissioners, we can deny it. And that is, uh, that too is a myth.

Andrew Hagemeier: [00:16:13] I would absolutely I mean, think about, like, if we had to, like, you wanted to put in a bay window that you needed to go get permission from the county commissioners. It's obscene. Right?

Josh Slotnick: [00:16:22] So across the country, in places that say high amenity communities, we've seen this housing crisis, demand outstripping supply and prices soaring for a variety of reasons, for sure. An aftermath of the 0809 crisis. But also people say some of the issue is with this ability for regular neighbors to stop subdivisions and the kind of changes that you and others made happen in the Land Use and Planning Act happened all across the country. In other places, the idea of kind of ending NIMBYism, not in my backyard ism and making development easier to happen if that development coincided with things like a comprehensive growth plan where there had been prior public input. I just want to bring this up because it feels like we I'm not going to say we're on the cutting edge, but I'd say the leading edge is out there in the podcasting sphere world and people talking about the housing crisis. We were doing this, making this change.

Andrew Hagemeier: [00:17:13] Yeah. The Montana Land Use Planning Act has gotten an incredible amount of notoriety within the planning community across the country for aligning these things and actually using planning as a tool to address our housing crisis rather than, you know, planning as a lot of circles has become the scapegoat for sure.

Josh Slotnick: [00:17:30] Yeah, totally. I mean, between banking, bad lending and Planning's ability to let the public stop subdivisions, those are the two prime movers in terms of blame for causing this shortage of housing.

Andrew Hagemeier: [00:17:43] Yeah, and overregulation has played a role in that. But communities are addressing that. I mean, we when we updated our zoning code in 2022, when we adopted that.

Josh Slotnick: [00:17:53] Again, leading edge.

Andrew Hagemeier: [00:17:54] Yeah, we everything that the legislature has done since.

Josh Slotnick: [00:17:57] We did.

Andrew Hagemeier: [00:17:58] It's already in our zoning code. We've already done it.

Dave Strohmaier: [00:18:00] So where are we at right now with implementation of this statute that you, uh.

Andrew Hagemeier: [00:18:05] Yeah. We are. There was a suit filed. It was called the maid Lawsuit. Montanans Against Irresponsible Development, I believe. Is that the acronym for Maid? Um, it was basically a group out of Bozeman. It went through the district court. The district court sided with the state in this case, the state, because they approved they they signed these bills. So in every single count, except for the public participation piece in the Montana Land Use Planning Act. So that kind of gutted the Montana Land Use Planning Act. That, of course, is being appealed to the to the Supreme Court because the way the district court set it up is the county commissioners are going to have to approve every building permit. They're going to have to every single, single family home is going to come go to the county commissioners.

Dave Strohmaier: [00:18:47] That was that was part of the complaint.

Andrew Hagemeier: [00:18:49] Or they the judge said, anything that requires discretion requires public input, public participation. So if the building department isn't sure if the grade is one inch, if this foundation is one inch above the grade or two inches above the grade, that that's discretion there. It's being appealed. It'll be interesting to see what comes out of it, because right now it's it's sort of a the decision is not well thought out. Well.

Dave Strohmaier: [00:19:12] Let us hope that we do not review every building permit.

Andrew Hagemeier: [00:19:15] It would.

Josh Slotnick: [00:19:16] Be ridiculous.

Andrew Hagemeier: [00:19:16] Yeah.

Josh Slotnick: [00:19:17] So can we switch gears to Tiff? Yeah. So the legislature really took on tax increment financing. Why? Why do you think they were so elevated about tax increment financing as a development tool that if you look around greater Missoula, you see the results of this tool totally work? In fact, it's not disputed even by people that hate it, that it does spur on economic development. Why do people hate it?

Andrew Hagemeier: [00:19:40] It's really well supported across both parties. You know, actually there's just some disagreement on specific aspects of it.

Dave Strohmaier: [00:19:48] So, so, so is it that some folks are are wanting to see tax revenue flow sooner rather than later to various taxing jurisdictions? That's revenue generated from the tax increment finance districts? Or is it in some cases, the fact that some are of the mind that this development would happen of its own accord? So why are we localizing the use of this tax increment?

Andrew Hagemeier: [00:20:14] That's the latter. I believe that development has the ability to do anything it wants. And why should local government be using any sort of subsidy. Right.

Josh Slotnick: [00:20:23] Yeah, we would we wouldn't want to encourage or enhance commerce, job creation, money spending, investment in our community. Of course we would. Of course we would. In fact, we would do everything we can legally to make those things happen. We want people to be employed and prosperous and have our downtown neighborhoods and other commerce districts look great and be vibrant and alive. We have every reason to make that happen.

Andrew Hagemeier: [00:20:45] Yeah. And almost all the infrastructure we have is public and publicly owned and paid for by the public. Like your roads. Every road you're driving on, you know, the public paid for that for sure.

Dave Strohmaier: [00:20:55] We have no toll roads in Montana. Yeah.

Josh Slotnick: [00:20:57] So and I know we've talked about this, Andrew, from being longtime Missoulians, remembering a time when our downtown right out the window was kind of boarded up and crappy, and the mall was the center of commerce and not dissing them all, but it had all left downtown and it looked like, well, that's the end. And this same trend was happening in cities of our size across the United States, I would say, were it not for urban renewal districts and TIF as a tool, we would not have seen the rebirth of our downtown. And now it's a center of commerce.

Andrew Hagemeier: [00:21:25] Yeah, absolutely. I agree with that. I mean, I remember when Jim Marinos was in downtown Missoula and everyone thought they were insane.

Josh Slotnick: [00:21:32] I remember that as well. And the river ran green with copper. It was a totally different kind of place.

Andrew Hagemeier: [00:21:38] Yeah. Yeah. I think tax increment financing. Maybe I'm biased, but maybe not. It's probably the most powerful economic development tool we have in the entire state. Yeah, it's certainly the most powerful economic development tool that local jurisdictions have any control over.

Josh Slotnick: [00:21:52] Yeah. We don't have any tools in our toolbox in terms of economic. Think about the one you know.

Andrew Hagemeier: [00:21:58] You and I joke about like the the peak Missoula Missoula. Yeah.

Josh Slotnick: [00:22:01] 95 to oh five. We've had this discussion.

Dave Strohmaier: [00:22:03] The golden years.

Josh Slotnick: [00:22:04] Yeah. That was it was peak Missoula peak 95 to oh five.

Andrew Hagemeier: [00:22:07] Um, prior to peak Missoula when we were still transitioning out of a timber economy. You know, I think when I was a kid, there were like four mills.

Josh Slotnick: [00:22:14] There were four.

Andrew Hagemeier: [00:22:15] Mills. And Missoula County used tax increment finance to build the industrial park. I mean, there was another there were a plethora of of tools they used there. But tax increment finance was a was a big part of that. They were hoping to attract when they originally did that, they were hoping to attract businesses from outside of Missoula. But what they found were all these, these businesses within Missoula that needed more room to expand and grow. And so what that development park helped Missoula transition out of that timber economy, right? It helped diversify our economy. It and it helped businesses that were already located here grow, add jobs. And if you think about, you know, the 70s and 80s where we were a timber town period.

Josh Slotnick: [00:22:52] We Milltown where a mill town.

Andrew Hagemeier: [00:22:54] Absolutely. We have fared so much better than a lot of other communities across the West.

Josh Slotnick: [00:23:00] The Bonner mill. My goodness.

Andrew Hagemeier: [00:23:02] Yeah, there's more jobs there today than right before the mill closed. Right? Wow. You know, when it was an operating timber mill. There's more jobs there today.

Dave Strohmaier: [00:23:11] So I guess before we leave Tiff, uh, going back to the legislative session that, uh, we thankfully just wrapped up. Yeah. Any, uh, successful attacks on tax increment financing over there in Helena?

Josh Slotnick: [00:23:26] Yeah. What were the changes?

Andrew Hagemeier: [00:23:27] Yeah. So there were some good changes made that, you know, there was really good. There was actually a lot of collaboration on a few of the bills. And so there were good changes made that just kind of cleaned up language and things like that. Everyone was supportive of it. There was some inclusion of additional, um, do more to include the other taxing jurisdictions in the process, the school districts and the fire districts, you know, in the process of round tax increment financing, which is good because those jurisdictions are affected by it. There was one bill that would have really negatively affected tax increment financing, and it's really complicated. So I won't go into the reasons why, but it would have made it so there was no incentive to create new districts. It wouldn't have affected existing districts so much, but it would have made it so like, why would we ever use this tool again?

Josh Slotnick: [00:24:08] Because it would restrict the amount of newly taxable gain that would occur at the sunset of a district.

Andrew Hagemeier: [00:24:14] That's correct. And newly taxable is the tool that we use to pay for new growth. Right. So if we're going to if we're going to facilitate all this new growth and then we don't get the benefit of it, then why are.

Josh Slotnick: [00:24:24] We going to say a newly taxable is how we've been making the budget work. Given that our mill cap, the amount of money we can generate from property taxes has been capped at half the level of inflation. Meanwhile, we pay for people's time, like your time at the full level of inflation, and we buy stuff like gravel and tires for sheriff's trucks at the full level of inflation. The only way we make that gap between half the rate of inflation and the full rate of inflation is because we have newly taxable property. Come on, coming online. We have been in a grow or die situation since the legislature.

Dave Strohmaier: [00:24:57] Sounds like a pyramid scheme.

Josh Slotnick: [00:24:58] It's it's a yeah it really is and.

Andrew Hagemeier: [00:25:00] Referred to that sometimes.

Josh Slotnick: [00:25:01] And for counties in our state that are not high growth man, they provide very little service and lean heavily on the state and the Montana Association of Counties to do what we can do in-house. And they just don't do much because they don't have the resources.

Andrew Hagemeier: [00:25:14] Every, what, 3 to 5 years. We add amount of people in Missoula equivalent to the city of Hamilton. Yeah. So how many firefighters, how many police does the city of Hamilton and how many administrators like? How many people do they have to make that city work? We have to constantly be thinking about that, right?

Josh Slotnick: [00:25:32] Do you think I want to get too deep into the weeds on legislature? But it might be worth explaining, Mr. Zolnikov. 117. That caps revenue at 4%. How will this affect us when a Ted district sunsets? Which is where Tiff is?

Andrew Hagemeier: [00:25:45] Yeah. I mean, so what happened was we there was Senate Bill two that was a tax increment finance bill that was going to restrict newly taxable when a tax increment finance district expires. They dropped that bill because of this bill. Senate Bill 117. Yeah. And that affects all of the revenue. So I don't think it takes away the reason to use tax increment financing the way that Senate Bill two would, because that was so targeted towards it. It just affects the county like any other development would occur. Right. So the more successful we are using tax increment financing and the more that we the more we're able to facilitate good development and our vision, it will have an impact. But I think because it's diluted across the county, it's just it's a county impact and not a tax.

Josh Slotnick: [00:26:24] I mean, 117 says when we go to raise taxes, we can collect as much money as we got last year, plus a bump that's equivalent to the full rate of inflation. And or we also get 75% of the value of newly taxable, as long as the full rate of inflation. And the 75% of the value of newly taxable doesn't breach a threshold of a 4% increase from the year before. So okay.

Dave Strohmaier: [00:26:46] Listeners, I hope you're paying attention out there.

Josh Slotnick: [00:26:48] We're going to take.

Andrew Hagemeier: [00:26:49] A.

Josh Slotnick: [00:26:49] Test. So shorthand is if inflation is 7%, we're paying costs at 7% for stuff in people's time we're only capped at four. We're kind of screwed and we get no growth. So if we have if we have high inflation and low growth, we'll be screwed.

Andrew Hagemeier: [00:27:04] Yeah. One of the things that came out of the legislature when I look at Big Picture is I don't think they thought this through, but we're one of the faster growing states in the country, right? I mean, this year I think we're at 15th, so we've dropped down some. But previous years we were six. Even at one year, we were the second fastest growing state in the country. This is in terms of proportion. Not sure. Right. Um, I mean, more people moving to Austin in a day than probably Montana in a year, near. But local governments have to keep pace with that growth, right? They really did a lot in this session to make it more difficult for local governments to address this population explosion. I mean, the newly taxable that what you're just talking about, Senate Bill 117, there was a bill that really curtailed our ability to use impact fees. And impact fees are a way to make developers pay for growth.

Josh Slotnick: [00:27:53] Actually lessen the property tax burden on everybody.

Andrew Hagemeier: [00:27:56] Exactly. Um, so there's just not much investment in generally in infrastructure in Montana. And if you think about we're adding two Hamiltons a year to the state of Montana. That's a that's a lot of impact that.

Josh Slotnick: [00:28:10] Has to be tended.

Andrew Hagemeier: [00:28:11] Has to be attended to. So what's you know, the concern is that over time, it's going to be more and more difficult for local governments to provide services. And our communities are going to slowly degrade over time.

Josh Slotnick: [00:28:21] At the core of this, there's something that was either a misunderstanding or an opportunity to take advantage of optics and that people hate the amount of money they pay in property taxes. And then we're squarely placing the blame on local governments and saying, well, if we curtail local governments ability to provide services, then you won't have to pay for them so your property taxes will go down, when in actuality, that's not at the core of why your property taxes are high. But it sure looked fantastic. There's the optics. Look, we're helping you, property taxpayer, by curtailing local government.

Andrew Hagemeier: [00:28:49] Yeah. And I think in the reality of what happened, in my opinion, is that we've had this population explosion, the population explosion brought along real estate explosion in prices and that which has happened all over the globe, like what happened in Montana in terms of we.

Josh Slotnick: [00:29:02] Were not isolated.

Andrew Hagemeier: [00:29:03] Literally happened in Sydney. It happened in Singapore. It happened in Tokyo. It happened everywhere.

Josh Slotnick: [00:29:07] Everywhere where people wanted to live. The only places it didn't happen were in places that people were not.

Dave Strohmaier: [00:29:13] It's not a function of the liberal, uh, elected officials in Missoula County.

Josh Slotnick: [00:29:19] This is the we're the core epicenter and boundaried area of this problem.

Andrew Hagemeier: [00:29:23] I was just in Dubuque, Iowa this weekend. Dubuque, Iowa. Old mill town along the river. Mississippi River. And they were complaining about housing prices being outrageous there. And they were like 250,000 $300,000 for a house there and a beautiful old historic home.

Josh Slotnick: [00:29:38] But yeah.

Andrew Hagemeier: [00:29:39] Because, you know, probably ten years ago, five years ago, it was $80,000, $100,000.

Josh Slotnick: [00:29:44] And I'm going to I'm going to venture a guess. And I want to drift too far. But here we go into planning that Dubuque and having never been there, decided, you know, we used to put our butts toward the river and puke out industrial waste in the river and send stuff downriver. Wow. We just noticed the river is beautiful. We're going to turn towards the river and have riverfront trails, a riverfront, districts, lights, entertainment areas, bars, cafes, music venues and Dubuque has seen a mild resurgence. Are focusing on that river.

Andrew Hagemeier: [00:30:10] It's almost like you've been to Dubuque.

Josh Slotnick: [00:30:11] And I've never been.

Andrew Hagemeier: [00:30:12] There.

Josh Slotnick: [00:30:13] Yeah, it's just a recipe that I.

Andrew Hagemeier: [00:30:15] Thought it was going to be. I mean, I haven't been there since I was like nine, and I thought it was my memory of it. This is where my mom's from, and I'm just assuming it's going to be this dump.

Josh Slotnick: [00:30:23] Industrial post-industrial.

Andrew Hagemeier: [00:30:25] Collapse. Yeah, and they have done fantastic planning work there.

Josh Slotnick: [00:30:29] Because they have an Andrew Hagemeyer.

Andrew Hagemeier: [00:30:30] Yeah, well they do. These relatives of mine are think theoretically.

Dave Strohmaier: [00:30:35] Right, Andrew. So what are you working on these days?

Andrew Hagemeier: [00:30:37] Yeah. We've got a lot in the hopper that, you know, we just approved this water system out at the Wye, which is a really, really, really big deal. It's going to be a public water system.

Josh Slotnick: [00:30:45] Can you explain how it works? Yeah. Pretty novel.

Andrew Hagemeier: [00:30:47] We worked with a development team where the developer is going to build this water system, and it's going to serve a subdivision and it's going to serve a new manufacturer. It's going to create 450 to 550,000ft² of industrial space, which is a lot. It's going to result in a couple hundred, 300 jobs, which is a lot. That's more jobs than what we lost with the closure of these two mills.

Josh Slotnick: [00:31:08] Say that number again.

Andrew Hagemeier: [00:31:09] It's like 300 up to 300. Yeah. So the developer is going to build the water system. They're financing it up front. Once the water is turned on. Once we flip that switch and it's running, then the deal is the county purchases that water system from them and it becomes our water system. And we get to run it and we get to manage it. We get to make decisions on it. So it's not it will be to the greater public benefit of the area, not just to these two.

Josh Slotnick: [00:31:31] How are we going to pay for that?

Andrew Hagemeier: [00:31:33] Well, so we're using tax increment financing.

Josh Slotnick: [00:31:35] But there comes Tiff again.

Andrew Hagemeier: [00:31:36] Yeah. Um, about 5 million bucks in tax increment financing we'll use to purchase it. And then the developers putting in some skin too. They're putting in nearly a million bucks of their own money, but that they're not going to get back. Right. That's that's like, hey, I'm this is a good deal for me.

Josh Slotnick: [00:31:50] So you mentioned 300 new, new jobs, new businesses. How do these guys pay for the water.

Andrew Hagemeier: [00:31:55] The new jobs and new businesses?

Josh Slotnick: [00:31:56] The businesses. So new businesses are going to relocate out there or relocate for the first time. We get the water.

Andrew Hagemeier: [00:32:02] Yeah, we we created a special district that's a tool that we have as local government that will own and operate the system. And so we'll charge user fees so that all these people will pay like you do for your city. Well, you don't you're not. You're on a well, Dave. You pay for your city water.

Josh Slotnick: [00:32:17] So so the more users, the lower the operations and maintenance cost per user.

Andrew Hagemeier: [00:32:22] Yeah, yeah, that's how I'll end up.

Dave Strohmaier: [00:32:23] So to play devil's advocate, I can. I can hear this ringing in my ears from someone out there who is thinking, why did these two businesses not just bankroll this entirely and not depend upon public dollars through tax increment financing to to then purchase the system from them? Those dollars could be used to go back out to fire districts and other taxing jurisdictions. This, if they wanted it badly enough, they could have just done it on their own.

Andrew Hagemeier: [00:32:52] Yeah, they could have built a private water system. What we would have gotten is these we end up with this really fractured land use pattern out there. I mean, it's basically what's happening out there. It's like pushed in tribal area that the way development is occurring, it's terrible.

Josh Slotnick: [00:33:05] It's a little like if we go to the rhyme here from the opening of this conversation, highway 93. Yeah. But we can have a coherent, cohesive kind of plan. Also, if it's a larger public water system. We just made water available to create new businesses, new jobs, etc., as opposed to, well, now these two entities have water And you want water, you're on your own.

Andrew Hagemeier: [00:33:23] Yeah. So what we would have gotten is basically more straws on the ground that are more fractured and not connected. And the developers, they could have done that. But what they saw was an opportunity to benefit their community as well. They're all local people. I keep hearing, like these Californians that you're giving money to. No, no, no, these people live in Missoula.

Josh Slotnick: [00:33:41] These are two folks who both have deep roots here. So really what we were able to do was leverage private money to further public prosperity.

Andrew Hagemeier: [00:33:49] Yeah. And and they were they were on board with doing that. So there was civic mindedness of them. But it was also it.

Josh Slotnick: [00:33:55] Was a it was a great fit of civic mindedness and investment that fit well together.

Andrew Hagemeier: [00:33:59] Yeah. Yeah. So we're really lucky that we have these partners that are willing to do this, and we're working on a couple of other projects very similar. They're really early stages in planning. And so we hope maybe this summer we're able to start talking about it more publicly. I mean, when these things are kind of in these early planning stages, it's just really difficult to talk publicly about them because it could easily just go away tomorrow. And we don't want to damage people's reputations and things like that, or create expectations. But there's a lot of conversations about projects coming forward in the future at the Wye and Grant Creek crossing, out in Bonner. Um, we're working on a number of different housing initiatives. We're trying to create a policy around, uh, how to use tax increment financing to support workforce housing.

Josh Slotnick: [00:34:41] One of the things the legislature did was make it so we can use tax increment financing in a Ted, which is typically an industrial district in the county, to create workforce housing.

Andrew Hagemeier: [00:34:50] So we're creating a policy around that. We've got a couple other housing policies that we're looking at to down payment assistance, shared appreciation things that to help workforce housing.

Josh Slotnick: [00:35:00] So we're making policy and attempting to do things for Missoula County. But we obviously are not in isolation. If in this four in the morning, I was literally thinking about this and we're we're sailing our little boat, hopefully in the direction of prosperity and security and happiness for everyone who lives here. But if we're in a little boat sailing, we are influenced by the weather. And the weather in this case is the larger economic climate. And there are some big factors out there that are making some bad weather. And I'm thinking about the the interest rate on the long term Treasury bill, the flight of capital from US equity markets into international markets, the change in capital and credit markets from leaning into sovereign debt and municipal debt into corporate debt. And if you put all these things together, it's a large statement of, well, we, the general investment community, are not nearly as confident in the United States as we used to. I feel like that's the weather we're sailing into. So how do we go back to mitigating impacts? How do we mitigate the potential risk of sailing into such weather?

Andrew Hagemeier: [00:35:59] Yeah, it's challenging right now. I mean, there's a significant amount of uncertainty right now in the economy, and I haven't seen that directly relate locally yet. But I just got to think it's going to start coming.

Josh Slotnick: [00:36:10] I heard we had one of the coolest real estate Aprils in years.

Andrew Hagemeier: [00:36:13] I just was cruising on Zillow this morning and just kind of in preparation for this meeting. And there's way more homes available than I've seen in a long, long, long, long time.

Josh Slotnick: [00:36:21] I got way late at this morning at the gym. Why? I was late, really. And I met a guy who used to know on the on the local community council who's a realtor, and I said, how's the real estate business? And he said, it's great. We got inventory, but said, yeah, we have inventory in a way that we haven't had in years and years, which means houses are not going quickly.

Andrew Hagemeier: [00:36:41] That sounds good, right? There's more inventory. That's great. But the interest rates are almost 8%.

Josh Slotnick: [00:36:45] So so people aren't buying.

Andrew Hagemeier: [00:36:46] Right. And then on top of that, right now because of the uncertainty and the tariffs, I mean, the National Home Building Association, not exactly a Liberal think tank, said that the tariffs have already added about 11% to the cost of a home. Wow. Right. Already. So what's happening is and this isn't necessarily locally, I don't have the numbers locally, but nationally building permits are on the decline. So we're building less. We're already in a huge deficit in terms of the number of homes we need to house our population. This is going to increase that deficit. This is going to make things worse. So yeah, I mean, locally, what we need to do is we need to be working with these projects like I'm doing right now to find ways to get housing built. And but we need to make sure we're doing incrementally, making it smart, making strategic decisions and not diving.

Josh Slotnick: [00:37:29] So that's how we mitigate risk is is by moving slowly or we can't move too slowly phasing. I mean what what are some of the things we could do to.

Andrew Hagemeier: [00:37:37] Yeah. Phasing I mean like if we're going to build a water system, let's make it small and then let's incrementally add on to it. Right.

Dave Strohmaier: [00:37:42] But if you're going to make a portion of a project small to begin with, do so with the idea in mind that it's expandable as opposed to creating something that that then needs to be, uh, drastically retrofitted to expand down the road at some point.

Andrew Hagemeier: [00:37:59] I mean, like our water system, right? I mean, it's serving industrial users right now, but it's easily expandable to residential users. But all we have to do is really to expand it to residential uses is put in pipe. We don't have to put in the well. We don't have to put in the tape. We don't.

Josh Slotnick: [00:38:10] That's a great way to do it. Point out. So I want to ask you one other question before we get to our close. So as somebody who works in the world of economic development, if you were to make a prediction, I mean, there's lots of talk about recession and these intense impacts from tariffs, etc.. What would your what would your what's your projection?

Andrew Hagemeier: [00:38:26] You know, I'm really hoping that we're going to be okay. But I think a lot of people are worried about that stagflation problem. Right.

Josh Slotnick: [00:38:32] Yes. Which do you want to give that definition for folks.

Andrew Hagemeier: [00:38:34] Well, it's. Yeah. How bad I slaughter this. It's it's when you don't have economic growth but and you have inflation. Inflation.

Josh Slotnick: [00:38:43] That's exactly.

Andrew Hagemeier: [00:38:43] It. Yeah. And in terms of our housing market that would that would. Gosh we're running out of time because I want to I want to just go way back and talk about the recession in 2008 and how that absolutely decimated our housing market, not just our market, but our ability as a country to build housing. Because we lost developers, we lost builders. We lost people. The cement people, electricians, plumbers and tradespeople.

Josh Slotnick: [00:39:06] And we saw this horrible contraction in the lending market. And all of a sudden it became really difficult to borrow money unless you didn't need money.

Andrew Hagemeier: [00:39:11] We never built that back. Right. The developers never came back. People that left the trades to drive trucks in the back and never came back. So we don't have the infrastructure to the logistics to build as many houses as we used to. If we entered stagflation, I think that would just continue to kill that infrastructure.

Josh Slotnick: [00:39:32] And it feels, though, it feels like we're in that right now, in this, in this moment. Now everything could change next week. But in that growth is slowing and interest rates are high.

Andrew Hagemeier: [00:39:42] Developers, the thing they hate the most is uncertainty.

Josh Slotnick: [00:39:45] Every investor and.

Andrew Hagemeier: [00:39:47] They will tell you I mean I don't care what your zoning says. I just want to know what it says.

Josh Slotnick: [00:39:52] Follow the rules and we'll get there.

Andrew Hagemeier: [00:39:53] Yeah. That's what all they want is certainty. And when you're working with developers and this right now would be a I'd be nervous if.

Josh Slotnick: [00:40:02] You want to do our our final question.

Dave Strohmaier: [00:40:04] Sure. Here's here's the zinger. And we we ask this of all of our guests. In fact, I think we probably asked you before a time or two, but anything new in the world of culture. Uh, good book, uh, a poem, uh, a something you've seen visually that inspires you.

Andrew Hagemeier: [00:40:21] Right now I'm reading a book called The Death and Life of the American Great Lakes by Dan Egan, and I'm only about halfway through it, so I'm in the doom part. I'm hoping it gets better, but it's all about, uh, how invasive species are affecting the ecology of the lakes, and it's transferable anywhere. I mean, remember knapweed?

Josh Slotnick: [00:40:38] Yeah.

Andrew Hagemeier: [00:40:38] I mean, I'm.

Dave Strohmaier: [00:40:39] Familiar with that.

Andrew Hagemeier: [00:40:39] Yeah, that was like a big deal when knapweed showed up. And now now you think about knapweed and you're kind of like yeah.

Josh Slotnick: [00:40:44] It's kind of how I think about w. Like he was quaint.

Andrew Hagemeier: [00:40:46] Yeah. So right now it's a little bit overwhelming. And I think about Bryce, the guy that runs our noxious weed programs in Missoula County. Like, how does that guy sleep at night. Yeah, yeah. But yeah.

Josh Slotnick: [00:40:59] Well, well cool. Thanks for that.

Dave Strohmaier: [00:41:00] Yeah. And thanks for joining us.

Josh Slotnick: [00:41:02] And for all the good work you do and insight and experience. I know you could work at lots of places and it's a big deal. You choose to work for us. All right.

Andrew Hagemeier: [00:41:08] Thank you I appreciate that. Yeah. It's a good place to work.

Josh Slotnick: [00:41:10] Oh, glad to hear that.

Dave Strohmaier: [00:41:12] Thanks, Andrew.

Andrew Hagemeier: [00:41:12] Yep.

Josh Slotnick: [00:41:13] Thanks, everybody. Thanks for listening to the agenda. If you enjoy these conversations, it would mean a lot if you would rate and review the show on whichever podcast app you use.

Juanita Vero: [00:41:22] And if you know a friend who would like to keep up with what's happening in local government, be sure to recommend this podcast to them.

Dave Strohmaier: [00:41:28] The agenda with the Missoula County Commissioners is made possible with support from Missoula Community Access Television, better known as MCAT, and our staff in the Missoula County Communications Division.

Josh Slotnick: [00:41:40] If you have a question or a topic you'd like us to discuss on a future episode, email it to communications@missoulacounty.us.

Juanita Vero: [00:41:48] To find out other ways to stay up to date with what's happening in Missoula County, go to Missoula.

Dave Strohmaier: [00:41:55] Thanks for listening.