MSU Extension speaker explains SIDs to Havre crowd

A crowd gathered in Havre City Hall Wednesday to listen to a local government expert explain how Special Improvement Districts can help fund infrastructure.

"The challenge we are seeing across the state, not just in Havre or Hill County or along the Hi-Line, but across the state is that it's getting more and more challenging for local governments to find the resources, the money, to address their capital needs and that their budgeting becomes more and more constrained to annual operations," Montana State University Extension Local Government Center Director Dan Clark said.

Special Improvement Districts has been a major focus in Havre over the past few months, with Havre City Council looking into SIDs as way to make critical infrastructure improvements, such as roads and the utilities beneath them.

SIDs are created when residents or the city council propose creating an entity - a neighborhood or specific region in a town or city - to implement repairs, upgrades or improvements, such as streets, curbs, gutters and so on, and then if the majority of residents concur, the city creates the district. Bonds generally are sold to finance the work, and residents of the district are assessed a fee to make the bond payments.

In the late 1980s and early 1990s, the city had more than 20 SIDs within city limits. Now only three remain, with two expiring within the next year. Havre City Council started looking into SIDs after two proposed mill levies the city put on the ballot in previous years to help fund street repair through additional taxes were ultimately voted down by the voters.

The city council reached out to Clark earlier this year to give a presentation about SIDs in Havre to help educate those on the council and the community on how the city can utilize SIDs.

"The bottom line is that we know much more than we did before this meeting about how to creatively finance infrastructure improvements for the city of Havre," Bear Paw Development Corp. Executive Director Paul Tuss said after the meeting. "We have had a lot of conversations about how to do that, we have taken some proactive steps toward doing that in the community, but specifically the Special Improvement District option has always been a bit of a mystery to a lot of us. So by bringing Dan Clark with the local government center and MSU to Havre, it has really given us an opportunity to do a deep dive into how that funding mechanism works and how it might work for this community."

Clark said the steps of how to set up and execute an SID are specified clearly in the law, which is available for anyone to read. One thing he wanted to touch on with the Havre community were the duties and responsibilities a city government has and the roles citizens play in local government, as well as how a city can utilize SIDs to make infrastructure improvements.

He started the conversation by asking the crowd, "What is the difference between fairness and equity? Particularly in the context of local government. Are they synonyms or are they different? And if they are different, how are they different?"

He said that equity means the city is treating everybody the same, but fairness treats people based on what their needs may be. He used water rates as an example. On one side it is equity because everyone pays the same amount for the water, but on the other side, the fairness is people pay more or less depending on how much water they use. Property taxes are similar, he said. On the one hand everyone pays property tax, but on the other hand, a person who lives in a million dollar mansion pays property tax based on its assessed value.

"Everyone pays, but there is going to be a fairness there," he said.

Clark added that it is important for people to know how their local government works. He said a number of communities have capital improvement plans, which is something the local government center strongly encourages. With capital improvement programs, the city puts money aside, although the purpose for the money is specifically for upgrades for the city. The money cannot be moved around and used for other capital improvements.

He added that the city should be putting money aside every year, because any form of infrastructure can only be maintained for so long until it needs to be replaced. Capital improvement funds can only be used for this purpose.

"It's not that we are kicking the can down the road or defering maintenance out of a choice because we want to give a tax break to everybody," he said. "... It's just that they don't have enough resources coming in, revenue coming in, to take care of annual operations and deal with capital needs."

Cities have a number of duties to their citizens, he said, such as fire protection, law enforcement, roads and utilities, Clark said. But cities do not have an unlimited funding source. The city gets its funding from a number of things, such as property taxes, entitlement shares, or non-tax revenue; enterprise funds, or fees; and mill levies. He added that the city cannot move any of these funds around to fund projects it is not specifically allocated for, such as moving road funds to water and sewer funds.

The point of government is when people come together as a community and recognize that certain things cannot be done individually, he said.

But these funding sources are getting tighter every year, he said.

Entitlement shares - taxes - previously were collected locally, but then the Legislature in the early 2000s passed a bill changing the process so all the funds are now collected by the state and distributed to the cities, he said. He added that every year in the Legislature it is a battle to assure cities receive the entitlement shares.

Property taxes make up a large majority of a city's budget, but the state also restricts the amount of property tax the city is able to charge people, he said. The city is allowed to raise its taxes half of the rate of inflation average over the last three years.

If the city needs more it can attempt to pass a mill levy, which allows cities to tax hirer than the state has set, he added.

"You're getting further and further behind, that's why you look different 20 years ago than you do today," he said.

He added that the issues citizens are facing now they need to deal with and it is important for people to find representatives who can solve these problems.

"We are not getting ahead, we are falling behind," Clark said.

It's not just Havre, it's the entire state, which is why in many cities and towns around the state are looking into SIDs, he said.

Nobody wants higher taxes, but taxes go toward the services people rely on such as the fire department or water and sewage, he added.

He said SIDs are just another tool in the toolbox for a city and allows the city to have another funding source they can use for infrastructure improvements.

"It's not a tax, it's a fee, to which the city is able to provide service," Clark said.

Cities have the right to establish SIDs, he said, adding that the law was written into the state's constitution in 1972.

He added that SIDs have to be for a particular purpose, such as road improvements, sidewalks and a number of other things, but they do have specific guidelines the city has to follow in order for them to be used.

SIDs can be established by a city or brought to the council by the citizens, but the council and the citizens both have to approve it, he said. It can also be applied to one street or the entire city, Clark said, adding that the more people involved in the SID the cheaper it costs each citizen because of the cost share.

Cities have to discuss with the cities and alert citizens if the city is adapting an SID will directly affect them, he said. He added that any citizen has the power to protest a SID, but they will either need to send in a letter to the city or go to city hall and sign a petition. It is up to the city's discretion if it will apply an SID, although if 50 percent of the residents who will be affected protest the SID it will not go into effect.

"Citizens, you can engage that process, you can help shape that through the political process," he said.

He added that it is also up to the city how the SID's funding will be established as well as the application.

"The roads are not going to get any better on their own," Clark said. "We can all agree that doing nothing is not an option."

Clark said investing in infrastructure is not going to be cheap, but it is investing in the future and can bring more people and more businesses to an area.

"There is some tangible benefit that we are all receiving by having this taken care of," he added. "So we are all collectively going to pay into having this done."

He added that Havre, like many other cities across the state, is living off of investments made in the past. SIDs used to be a normal thing. Communities would have to make improvements to their area, but people were willing to invest in their communities.

"Havre is living today in somebody else's vision," he said. "Here's the question: What vision do you have for the next 20 years? The next generation coming up? That's the question you need to wrestle with. We are living on someone else's investment. They sacrificed to build what you have today. How are we as stewards of this investment. What are we, leaving for the next generation? It's not easy; it's hard and it's expensive."

Havre Public Works Director Dave Peterson said he thought Clark's presentation was good and thought everybody found out a little more about SIDs, and perhaps will push for it in the future.

He added that he thinks the city has some areas it could consider for SIDs.

"It was a better turnout than I thought it was going to be," he said, adding that it was positive.

Tuss said it was a great presentation with a lot of good information.

"I think it's a very practical funding mechanism," he said. "It's how we financed infrastructure year and years ago. Not that long ago Havre had multiple SIDs."

Havre Mayor Tim Solomon said it was a very educational meeting and he was happy to see the community turn out. He added that the city has a number of things to consider regarding the capital improvement plan.

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Dan Clark also spoke about the differences between a general government and a self governing government at the end of his presentation Wednesday. Look for more in Friday's edition of The Havre Daily News.