With two dissenting votes, the Billings City Council approved, on Monday, an amendment to the agreement the city has with Lockwood Water and Sewer District (LWSD) that paves the way for the LWSD to expand its sewer district boundaries to provide service to property owners in the TEDD in Lockwood. The amendment allows the expansion without requiring the property owners to sign waivers to protest any future annexation proposals, which became a point of contention over a year ago.

The agreement imposes an 18 percent surcharge for the property owners of the TEDD (Targeted Economic Development District) for any treatment of sewage they get from the city, and makes clear that the agreement in no way impacts negotiations for any future need for water that Lockwood might have. It was also accompanied by a letter from Yellowstone County Commissioners committing themselves to cooperation with the City of Billings in planning future land use restrictions at the city boundaries, said City Administrator Chris Kukulski.

The action paves the way for the development of the TEDD in the most environmentally desirable manner possible, as an industrial park which it is hoped will entice new businesses to the area. That Billings providing sewage treatment is the most desirable way for development to happen — which is sure to happen with or without the agreement — was mentioned as a significant reason for their supportive vote by some of the council members, while others in opposition said they believed that the city was being short changed, since the 18 percent surcharge will generate only $24,000 annually in extra revenue, according to Kukulski. City staff said that the justification for the surcharge is for the additional risk the city faces in meeting regulatory requirements of the Department of Environmental Quality.

LWSD Manager, Mike Ariztia, explained that the next steps involve getting approval of the LWSD board, which earlier rejected a draft proposal because of changes it made to the basic contract they have had with the city for the past 12 years. Ariztia noted that the board had questioned why the issue of future water supplies should be included in an agreement about sewage. LWSD functions as two districts – -a sewer district and a water district. Kukulski said that he thought that mention of it was important because in the past there seemed to be people who believed that promises had been made about future agreements that were not written down. He wants to make sure that no such confusion exists in the future.

Ariztia further explained that once the LWSD board accepted the amendment, a process would be initiated to legally include, within its boundaries, the area which was analyzed for the establishment of the TEDD, which would include properties that are not currently part of the TEDD but could be in the future. That process requires the approval of a majority of the TEDD property owners and the acceptance of the LWSD board.

The agreement with the city also reduces by half, a million dollar bond that the city required of LWSD 12 year ago when they entered into their agreement to guarantee performance. Kukulski said that he believed that the district has demonstrated their viability and the reduction is appropriate.

The Tax Foundation has released the latest edition of its International Tax Competitiveness Inc. which shows that the US ranks only 21st in the developed world for tax competitiveness.

A well-structured tax code is easy for taxpayers to comply with and can promote economic development while raising sufficient revenue for a government’s priorities. In contrast, poorly structured tax systems can be costly, distort economic decision-making, and harm domestic economies, explains the Foundation. 

While the U.S. tax system has become more competitive in recent years, it still ranks in the bottom half of developed countries and behind what are often considered high-tax countries like Sweden (#7) and regional competitors like Canada (#18) due to several uncompetitive features:

* A progressive individual income tax with a top rate of 46 percent, including payroll and personal income taxes.

* A partial territorial system that doesn’t exempt foreign capital gains income (one of the most onerous international tax systems of any OECD nation).

* Among the strengths of the U.S. tax system is the allowance of full expensing for business investments in machinery; however, that is set to expire soon.

The Center Square

Only one in five of the 143 largest statewide public retirement systems in the U.S. are resilient, a new analysis published by the bipartisan nonprofit Equable Institute shows.

Public sector funding peaked in 2001, with nearly 3 out of 4 statewide plans 90 percent funded or better. By 2020, one in five statewide plans have a “resilient funded” status.

[Montana’s retirement funds for teachers and for public employees face a $4.5 billion shortfall, according to legislators serving on a special committee that met last January to discuss the problem in Billings. The Montana Teachers Retirement System (MTRS) and the Montana Public Employees Retirement System (MPERS) have reached this state of affairs primarily because of overestimating the rate of returns on the state investment fund from which future retirement benefits are paid. They said that they expect that the problem will have to be addressed during the next state legislative session.]

The report, “State of Pensions 2020,” analyzes trends in public pension funding, investments, contributions, cash flow and maturation of retirement systems that had more than $1 billion in assets through 2019.

The current estimated funded ratio for 143 statewide plans is 67.9 percent, near the lowest point in modern history. And five states – California, Illinois, New Jersey, Pennsylvania and Texas – account for more than 50 percent of unfunded liabilities.

The institute, which works with public retirement system stakeholders to solve complex pension funding challenges, found that nationally, public pension funding has been in decline since 2001. Despite the decade-long bull market, the recession following coronavirus shutdowns leave them in a worse position than the Great Recession did.

State and local public employee retirement systems in the U.S. manage over $4.3 trillion in public pension fund investments, according to Pew Charitable Trusts. Returns on these assets account for more than 60 cents of every dollar available to pay promised benefits, it found in a December 2019 report.

“About three-quarters of these assets are held in what are often called risky assets – stocks and alternative investments, including private equities, hedge funds, real estate, and commodities,” the Pew report said.

Research by The Pew Charitable Trusts found that since the Great Recession, public pension plans have lowered return targets in response to changes in the long-term outlook for financial markets. Pew analyzed the 73 largest state-sponsored pension funds, which collectively manage 95 percent of all investments for state retirement systems. The average assumed return for these funds was 7.3 percent in 2017, Pew found, down from over 7.5 percent in 2016 and 8 percent in 2007 just before the downturn began.

“The pension asset shortfall for statewide plans keeps growing,” the Equable Institute report states. “At the end of 2019, there was no net recovery from losses during the Great Recession and Financial Crisis.”

The institute estimates that unfunded liabilities will grow to $1.62 trillion in 2020, up from $1.35 trillion in 2019, and from $1.16 trillion in 2009.

“One of the most concerning findings from the report is a trend toward rapidly expanding net negative cashflows, as a result of plan maturation,” the report states.

“Although contribution rates have progressively increased (a positive trend from the perspective of plan funding), benefit payments are also growing steadily (because of increased retirements), resulting in a net negative cashflow of -$113 billion for 2019,” it continues.

Because the trend has steadily worsened since 2009, the institute says it will be increasingly difficult for governments to invest their pension plans back to health.

If assumed returns had kept pace with declining interest rates since 2001, the institute analysis says, average assumption in 2019 would have been around 5.1 percent. In 2020, the average assumed rate of return is 7.2 percent.

“We estimate the average investment return for statewide plans as of June 30, 2020 is -0.44 percent based on the most recent asset allocation reports from each plan,” the institute says. “This is 763 basis points below the average 7.19 percent assumed return for the fiscal year.”

The report also analyzed unfunded liabilities relative to state GDP and found that states with some of the most visible pension funding challenges, including New Jersey, Kentucky and Illinois, have the largest share of unfunded liabilities relative to their state’s GDP, topping 15 percent, respectively.

The Center Square

The U.S. Supreme Court on Oct. 13 stopped the 2020 Census head count in response to a request from the Trump administration, handing a blow to a coalition of local governments and civil rights groups that filed suit.

The coalition sued to stop the census count from ending Sept. 30, which the Trump administration had planned in order to meet a deadline stipulated by law. U.S. District Judge Lucy Koh ruled that the count could continue through Oct. 31, which the Trump administration appealed to the U.S. Supreme Court and won.

The administration argued the count needed to end immediately in order for the U.S. Census Bureau to have enough time to tally the numbers before a congressionally mandated Dec. 31 deadline. Counting and compiling all the data is necessary to accurately determine the number of congressional seats apportioned to each state based on population totals.

The U.S. Census Bureau argued before the court that it had already counted 99.9 percent of households in the U.S. in 2020. But census takers have raised concerns about the quality of the data being collected, and the American Statistical Association released a report Tuesday expressing similar concerns.

Their report, written by a task force of former Census Bureau directors and others, raises concerns about the shortened head count schedule, pending lawsuits and other issues. The task forces argues that outside experts should be given access to the data to help analyze its quality before it is used to determine congressional seats. They also recommended that federal law governing the census be reevaluated.

Results of the door-knocking phase of the 2020 census this year are similar to those received from the 2010 Census, Al Fontenot, an associate director at the Census Bureau, said in court papers. Nearly 24 percent of responses resulted from interviews with neighbors or landlords or someone other than the person living in the household that was being counted in both 2020 and 2010.

The 2020 Census, Fontenot said, is the first decennial census in which records from the IRS, Social Security and Medicare accounted for 13.9 percent of the information the Bureau collected about residents instead of receiving the information directly from them.

In addition to apportioning congressional seats, the population data calculated by the Census Bureau also determines how much of $1.5 trillion in federal money is allocated to states.

The state of Montana sold $52.2 million in bonds to continue financing infrastructure projects across the state and refinanced $32.4 million in bonds to take advantage of lower interest rates, which will save taxpayer dollars.

The Board of Examiners executed the Bond Purchase Agreement. The bonds sold will continue financing projects such as Romney Hall, expansion of the Great Falls College MSU Dental Hygiene Clinic, and the Montana Heritage Center.

Interest rates for the bond issuances were historically low and ranged between .7 percent to 1.8 percent.

Additionally, the Board of Examiners approved refinancing $32.4 million in trust land bonds as well as water pollution control bonds. Refinancing will save the state $7 million.

The Montana Legislature passed and Governor Bullock signed legislation in 2019 to fund sewer, water, bridges, buildings and other public works projects.

Doubling Montana Unemployment Insurance Trust Fund will provide significant relief for 43,000 Montana businesses

Montana’s Unemployment Insurance Trust Fund will receive an infusion of $200 million from federal Coronavirus Relief Funds, which effectively doubles the fund.

The increased funding will provide “significant relief for 43,000 Montana businesses,” said Governor Steve Bullock, since it will prevent an 85 percent spike in a tax rate that they would otherwise have to pay.

 “Montana businesses have already been hit hard once due to COVID-19 and its economic impacts. The last thing we want is to see them hit hard twice by significantly increasing unemployment insurance rates,” Bullock said. “Boosting the trust fund will have a real impact on the ground for tens of thousands of Montana businesses next year and for years to come and will play a key role in the state’s economic recovery.”

“Business owners in Montana are doing all they can to navigate the economic challenges presented by COVID-19,” Todd O’Hair, president and CEO of the Montana Chamber of Commerce, said. “Every bit of assistance helps, and this smart use of Coronavirus Relief Funds will bring some needed predictability to unemployment insurance rates as we emerge from the pandemic.”

The minimum wage is determined by taking the current minimum wage of $8.65 and increasing it by the CPI-U increase from August of 2019 to August 2020. The CPI-U increased by 1.31% (unadjusted) over the year ending August 2020. To keep the minimum wage at the same purchasing power as the prior year, the wage should increase by $0.11 per hour. However, since state statute requires the wage to rounded to the nearest 5 cents, the 2021 minimum wage rate will be $8.75. 

In 2020, the District of Columbia and 29 U.S. states, including Montana, have minimum wage rates that exceed the federal rate of $7.25 per hour.  

Each year the Montana Economic Developers Association recognizes economic development achievements through its 2020 MEDA Award Winners.

There are two categories of awards: Impact Awards and the Anthony J. Preite Champion of Economic Development Award. Impact Awards recognize member organizations that demonstrate valuable and effective approaches to regional economic and community development. The Anthony J. Preite Award recognizes an economic developer who has significantly contributed to the profession, to the association, their economic development organization, and to the communities they serve as a whole.

The seven MEDA 2020 Impact Award Winners include:

Southeastern Montana Development Corporation (SEMDC) Powder River County Bridge Disaster Recovery Effort: SEMDC and Great West Engineering lead a recovery team to assist Powder River County in receiving a $7 million dollar grant to replace and or upgrade four bridges and resurface 18 miles of roads for $8.75 million dollar disaster effort.

Anaconda Local Development Corporation launched a multi-pronged approach to mitigate the effects of the economic shutdown due to COVID-19. ALDC acted quickly with its partners to mitigate the effects of the shutdown on businesses and stood at the forefront of information for opportunities and resources for businesses to keep employees on the payroll. Ultimately, ALDC aided over 30 businesses to make it through the initial COVID closure and reopening. A second Impact Award is given to Anaconda Local Development Corporation for its Anaconda Historic Signs & App Project. Historic building plaques were mounted on over 20 downtown buildings to increase historic education and tourism. In addition, an accompanying app with Montana Historical Society’s Historic Montana website takes users on a virtual tour of selected buildings, neighborhoods, and cultural sites. The Historic Signs project has brought people to the heart of Anaconda to be educated in a whole new light about the culture and history within the central business district.

Big Sky Economic Development’s Space2Place program, created through its Community Development Department, offers micro-grants up to $5000 to individuals and community organizations for creative placemaking projects. The program emphasizes how individual and community efforts can create incremental changes that enhance the beauty, vibrancy, and activation of our spaces, transforming them into engaging places. Space2Place has assisted in the development of twenty-three unique and engaging community assets which has transformed ugly to attractive, underutilized to engaging, and bland to vibrant.

Big Sky Economic Development (BSED) Coulson Park Project is a second MEDA Impact Award for this organization. Big Sky Economic Development, collaborating with the City of Billings and community stakeholders, plan to design and develop Coulson Park which sits next to the Yellowstone River back dropped by the sandstone rimrocks. Through BSED’s hard work, grant writing, community participation and local and city leadership, Coulson Park has recently concluded a master plan and begun the funding process towards development. It was through many public outreach meetings, presentations, and conversations that the vision was not only identified, but passed on throughout the community.

The Choteau Area Port Authority (CAPA) has made great strides in community and economic development as a result of key partnerships, including holding a MEDA Community Review. As a result, CAPA has been able to assess, target, and implement economic development strategies for the community. Progress has been made in four key areas of focus: community enhancement, infrastructure, business support, and tourism and recreation. CAPA initiated the MEDA assessment and has been a supporter, facilitator, and driver of many projects and generated over $100,000 in grants for projects.

Great Falls Development Authority (GFDA) Bridge Financing Project is a prime example of economic development impact. Bridge financing is an effective way to make limited economic development loan capital create greater impact. In the ten years since GFDA’s bridge loan product, it has closed 11 bridge loan packages totaling $16,314,289 which has leveraged more than $121,617,469 in private investment in the Great Falls trade area. Every dollar of bridge loans has leveraged over $7 of investment. Because of their unique nature, each bridge loan project has required services of GFDA in business coaching, business development and lending staff to be involved, as well as a number of volunteer leaders. To date, no loan capital on bridge loans has been lost, and none of the current bridge loans are delinquent.

The MEDA Anthony J. Preite Champion of Economic Development Award is intended for a Montanan who has practiced economic development full-time who has significantly contributed to the profession, to the association, their economic development organization, and to their communities as a whole. MEDA announced the Anthony J. Preite Champion of Economic Development for 2020 is Jim Atchison, Executive Director, Southeastern Montana Development Corporation, located in Colstrip. Atchison has served in economic development for over 20 years and thrived through challenges of boom, bust, fire, flood, and pandemic. In making the 700 mile round trip to Helena to testify on key issues, Atchison will now have this very special award to add to his renown “tool box” for Montana economic development.

County Commissioners rejected the request for a zone change by Cherry Creek Estates in the Heights, following extensive testimony from residents opposed to the change, which would have enabled the proposed development of 33 two –family townhomes.

“My strongest opposition is that it would de-value properties,” said Commissioner Don Jones. His motion to deny was seconded by Commissioner John Ostlund, who said he agreed.

Commissioner Denis Pitman said he opposed the request because it would increase density, which would impact transportation and contribute to school overcrowding, and because the developers do not plan to build walking trails.

The request was to change the zoning from “Public” to “R-80”, by Cherry Island, LLC, which is managed by the Jock Clause  family who developed and managed the adjacent development of Cherry Creek Manufactured Home Park in 2001.

Those testifying in opposition said that the earlier development is today a source of much public criticism regarding how it is maintained and managed. It is seen as a source of much crime in the area.

By Evelyn Pyburn

The advisory board and officials who administer the TEDD in Lockwood are urging the county and city to come to an agreement soon about the terms under which to extend sewer to the TEDD (Targeted Economic Development District).

The most recent stumbling block is an unexpected proposal from the Billings City Administrator to the Yellowstone County Commissioners to “share” potential tax revenues from the TEDD. Administrator Chris Kukulski explained in a discussion session with county commissioners on Oct. 8, that property tax revenue sharing with the city is what he means with his frequent requests for better cooperation between the city and the county.

A commitment to be more “cooperative” in the future was one of the terms included in a tentative agreement between city council members and the county regarding the TEDD, discussed in a city council work session several months ago.

The City Council is scheduled to revisit the issue during their meeting on October 26.

It’s been a year-and –a- half of trying to resolve the issue of how the TEDD can become part of the Lockwood Water and Sewer District without the necessity of the property owners waiving their right to protest future annexation proposals, Woody Woods told Yellowstone County Commissioners. Woods heads the advisory board appointed by the commissioners who are the official authority of the TEDD.

“We are losing opportunities,” said Woods about the TEDD whose purpose is to attract new and growing industrial and manufacturing businesses to the community. Woods said there have been potential businesses that have come and gone because the TEDD was not ready.

Steve Arveschoug, Director of Big Sky EDA, expressed frustration that at one point they seemed to have reached an agreement among all parties, although not voted upon, which involved charging TEDD property owners a surcharge of 18 percent to have their sewage treated by the City of Billings, and that TEDD property owners would not in the future, should they need a new source for water, get it from the Heights Water District, and that the county commissioners would commit to being more cooperative with the city as new areas are developed at its borders.

In the agreement, the City abandoned its effort to require all TEDD property owners to waive any future rights to protest annexation, which the property owners unanimously refused to do. Having to be subject to such municipal costs defeats the purpose of an industrial park, which is hoped to attract manufacturing — capital –intense businesses that usually need to avoid high municipal taxes in order to be feasible.

County commissioners said they were puzzled about what was meant by being more cooperative, since they have no authority to require property owners to agree to annexation and they believed they were cooperative as much as possible.

That Kukulski was thinking of revenue sharing was a surprise to everyone. At no point during their discussions with city council members was there any mention of the county sharing tax revenue with the city, said Arveschoug.

Arveschoug said that if there is no resolve soon, he and his agency will start looking for another alternative for a turn-key ready industrial park.  He underscored that he did not mean to say that they would abandon the TEDD.

Commissioner John Ostlund asked Arveschoug what areas he was thinking about. Arveschoug said that while he didn’t know what may have changed in the interim, the study that EDA conducted of potential sites identified a promising site near Laurel.

Both Ostlund and Commissioner Don Jones voiced “major concerns” about the idea of sharing future tax revenues with the city. Commissioner Denis Pitman asked, “How would that work?”

It was noted that it could be as long as 20 or 30 years before there would be any tax revenues, and since the language proposed is so vague there would surely be problems in the future, dealing with such a stipulation. Pitman commented rather facetiously, “I guess we could say ‘yes’, and say it will be someone else’s problem.”

Also, there is a legal question about the ability of this board of county commissioners to make commitments on behalf of future boards.

Also, the unprecedented concept would have statewide ramifications, said Jones, and it “makes problems down the road.”

The agreement encountered another delay early last month when the draft document was reviewed by the board of the Lockwood Water and Sewer District (LWSD). LWSD Manager Mike Ariztia explained that they had anticipated seeing an addendum to the contract that the district has had for years with the city, but there were surprise changes in the contract. The board decided they needed to speak to legal counsel about it.  Ariztia said that the board did not want their support of the TEDD to impose any additional burdens on customers of the district.

Ariztia told commissioners on that those issues have been resolved, and the board will discuss accepting the agreement at their next meeting.

One of the surprise changes to the contract was a requirement that LWSD, too, would not be allowed to consider getting water through the Heights Water District should they need to find an additional water source. Kukulski defended his efforts saying, “I have to get six council members to say yes,” to the agreement.

Kukulski emphasized that the City of Billings requires that any entity getting water or sewer service must be annexed into the city. Since the Heights Water District gets its water from the city, that was the issue he was trying to address.

Arveschoug commented, “Kudos to Chris and his team. They were willing to take the waiver off the table.”

As an example of the county’s lack of cooperation, Kukulski cited that the county commissioners have been “resistant” to changes in an area where the city was proposing assessing service costs based on property values, “…and we have been struggling about how to pay for it.”

Ostlund asked if he was talking about the BUFSA (Billings Urban Fire Service Area), about which proposed fee increases are currently in negotiations. While the agreement for the city to provide fire service to areas just outside its borders has been mutually beneficial, Ostlund said the city’s proposed changes results in a 35 percent increase in what will be paid to the city, which would wipe out BUFSA’s reserves.

“It seems as though the city is trying to make a profit on county residents,” said Ostlund, referring to other dramatic fee increases recently being requested by the city, such as landfill fees.

Kukulski said, “We want to continue to figure out how to work through this. Neither one needs to lift our fist to get our way.”

Ostlund reminded that no matter whether an agreement is reached with the city, the TEDD will still develop, only it will develop in a less desirable manner. With a sewer system it “will be a different kind of development.”

Having a sewer system is important to assuring development happens in an environmentally sound manner. It was in fact the point made by the state’s Department of Environmental Quality, years ago, when they came to the city to implore that they iron out some kind of agreement with Lockwood, reminded Jones, who was on the city council at the time. “Septic systems are not good for the whole Yellowstone community.”

“An industrial park has enormous benefit for both the city and county,” Ostlund pointed out, “… and in fact the city will get more benefit….it’s like the refineries.” Ostlund explained that the kinds of enterprises they hope to attract could well employ “400 or 500 people” – people who will buy homes and pay taxes in Billings.