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Home My WebLink About06-15-26 Public Comment - B. Muldowney - Questions related to DURD balanceFrom:bobmul9 To:Bozeman Public Comment Subject:[EXTERNAL]Questions related to DURD balance Date:Monday, June 15, 2026 11:43:46 AM Attachments:DURD_General_Fund_Obligation_Final.pdf TIF_Preface_Letter_Mayor_Morrison.pdf CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you recognize the sender and know the content is safe. Mr. Mayor, Deputy Mayor and Commissioners In my researching of the DURD TIF balances, I came upon some information that I feel, as a member of theBozeman community, I must bring to your attention. Please see my note and brief financial analysis. As these may have bearings upon discussions around the currentbudget conversations, it is timely that this information is shared with the Commission. Thank you. Kind regardsBob Muldowney CITY OF BOZEMAN — DOWNTOWN URBAN RENEWAL DISTRICT Finance Section Analysis — Annual Increment in Excess of Inflation-Adjusted $750,000 Threshold FY2012–FY2025 │ All figures from audited Annual Comprehensive Financial Reports (Eide Bailly LLP) │ Fund balance chain verified across all 14 years Ordinance 1409 — Finance Section Ordinance 1409, adopted November 1995 and amended by Ordinance 1628 (2005) to extend the return-trigger period from year 11 to year 15, contains the following Finance provision (Ordinance 1409, p. 25): “…tax increment payments made to the Tax Increment District after the 15th year of payments or after the annual tax increment reaches an inflation adjusted $750,000, whichever occurs first, shall be returned to the taxing bodies as such payments would normally accrue to those bodies with the exception that those payments which are pledged to the payment of principal and interest of any outstanding tax increment bond shall remain with the Tax Increment District… The provisions of this paragraph shall be accomplished by separate interlocal agreement between the City, County, and School District.” The 15-year time trigger is calculated from the first year of tax increment payments. Year 1 = FY1997; Year 15 = FY2011. The return obligation therefore attaches beginning FY2012. How the Return Obligation Is Calculated The Finance section establishes two protected amounts that remain with the district before any return obligation arises. Bond debt service. Payments pledged to principal and interest on any outstanding tax increment bond are expressly carved out. The Series 2020 Refunding bonds ($3,689,000 at 2.44%), which refunded the original Series 2009 bonds, are a legitimate and authorized district obligation. Annual debt service is approximately $332,000–$335,000. Inflation-adjusted $750,000 threshold. After debt service, the district retains up to $750,000 adjusted for cumulative inflation from the 1995 base year, using annual CPI-U averages (U.S. Bureau of Labor Statistics, base 1982–84 = 100; 1995 index value = 152.4). This provides the district an annually indexed operating budget. The return obligation equals what remains above both protected amounts: TIF Revenue − Bond Debt Service − Inflation-Adjusted $750,000. Where this figure is positive, a return obligation arises; where it is zero or negative, no obligation exists for that year. The Interlocal Agreement (Laserfiche ID 44679) The Interlocal Agreement for the Bozeman Downtown Tax Increment Finance District is on file in the City’s Laserfiche repository as a 7-page attachment to a Commission memorandum from Finance Director Anna Rosenberry and City Manager Chris Kukulski (Laserfiche ID 44679). The Agreement was presented to the City Commission on May 2, 2011 as a consent agenda item, executed pursuant to Commission Resolution No. 3718. Both Gallatin County and Bozeman School District #7 had each previously approved it. The Agreement implements Ordinances 1409 and 1628 and governs the distribution of Remaining Funds beginning FY2012. Under the Agreement, Remaining Funds — defined as annual TIF revenue above debt service — are distributed annually among the City, County, and School District proportionally by mill levy share (MCA §7-15-4286). At the FY2012 estimated distribution rate: City/TIF $274,985 (170.19 mills); Gallatin County $137,646 (85.19 mills); Bozeman School District #7 $322,407 (199.54 mills). This is consistent with the Finance Director’s confirmation at a recent City Commission meeting that the County and School District are receiving their respective pro- rata shares. Section 2 of the Agreement contains a critical pledge-back provision: “Regardless of the County or School District actions, the City of Bozeman hereby pledges its remaining funds to the City of Bozeman – Downtown Tax Increment Finance District.” As a result, the County and School District receive their pro-rata distributions annually, while the City’s share is recycled back into the TIF fund rather than flowing to the General Fund. This pledge-back is a discretionary policy commitment — it is not compelled by Ordinance 1409 or by state statute. MCA §7-15-4291 is permissive (“may”), not mandatory. The Agreement could be renegotiated by the City, County, and School District as co-signatories; a future Commission could elect to direct the City’s share to the General Fund or to other authorized public purposes. Annual Increment — Finance Section Obligation FY2012 through FY2025 Fiscal Year TIF Revenue (Actual) Bond Debt Service Net After Debt Service Inflation-Adjusted $750K Threshold City's Excess Above Threshold (Pledged Back to TIF — Interlocal §2) ACFR Source FY2012 ← trigger year $731,796 $447,738 $284,058 $1,129,921 $0 FY2012 ACFR p.121 FY2013 $806,435 $430,600 $375,835 $1,146,654 $0 FY2013 ACFR p.131 FY2014 $817,363 $433,438 $383,925 $1,164,862 $0 FY2014 ACFR p.121 FY2015 $1,039,099 $596,584 $442,515 $1,166,339 $0 FY2015 ACFR p.146 FY2016 $985,532 $797,116 $188,416 $1,181,102 $0 FY2016 ACFR p.153 FY2017 $1,081,545 $792,398 $289,147 $1,206,201 $0 FY2017 ACFR p.157 FY2018 $1,232,868 $721,473 $511,395 $1,235,728 $0 FY2018 ACFR p.165 FY2019 $1,270,887 $597,863 $673,024 $1,258,366 $0 FY2019 ACFR p.159 FY2020 $1,685,252 $1,011,189 $674,063 $1,273,622 $0 FY2020 ACFR p.157 FY2021 $1,841,880 $371,198 $1,470,682 $1,332,185 $138,497 FY2021 ACFR p.145 FY2022 $1,483,518 $332,372 $1,151,146 $1,440,453 $0 FY2022 ACFR p.152 FY2023 $2,240,188 $330,150 $1,910,038 $1,499,508 $410,530 FY2023 ACFR p.133 FY2024 $2,656,682 $332,831 $2,323,851 $1,546,260 $777,591 FY2024 ACFR p.113 FY2025 $2,967,130 $335,292 $2,631,838 $1,563,484 $1,068,354 FY2025 ACFR Note 13 CUMULATIVE CITY EXCESS PLEDGED BACK TO TIF — FY2012 through FY2025 (14 verified years) $2,394,972 Memo: Total TIF revenue captured, FY2012–FY2025 $20,840,175 Memo: Total bond debt service paid, FY2012–FY2025 $7,530,242 Green rows indicate fiscal years in which the City’s excess above the inflation-adjusted threshold exceeded zero. Bold amounts in the excess column represent the City’s pro-rata share of Remaining Funds that, under Section 2 of the Interlocal Agreement, is pledged back to the TIF district rather than flowing to the City General Fund. Years showing $0 reflect years in which Net After Debt Service did not exceed the threshold. Supporting Notes Obligation trajectory The City’s excess above the inflation-adjusted threshold is a recent and accelerating phenomenon. For FY2012 through FY2020, net increment did not exceed the threshold and no excess arose. The first excess appeared in FY2021 ($138,497), was absent in FY2022 due to an assessed-value dip and has grown materially since: FY2023 ($410,530), FY2024 ($777,591), and FY2025 ($1,068,354) — 38% larger than FY2024, which was itself 89% larger than FY2023. With downtown valuations continuing to rise and bond debt service fixed at approximately $335,000 per year, the City’s excess will increase in each subsequent fiscal year. Policy context The cumulative $2,394,972 in City excess represents funds kept within the TIF district via the pledge-back rather than contributing to general municipal services. For context, the 2024 public safety levy sought approximately $1.9 million per year to fund additional police officers. The cumulative four-year City excess (FY2021, FY2023, FY2024, and FY2025) exceeds that figure. The pledge-back is not improper — it is authorized by the Interlocal Agreement and governing statutes — but it is discretionary, and its continuation represents an annual policy choice by the Commission. FY2020 debt service The $1,011,189 figure in FY2020 reflects the final-year payment on the original Series 2009 bonds at their higher coupon rate. The Series 2020 Refunding bonds that replaced them carry a 2.44% rate, reducing annual debt service to approximately $332,000–$335,000. This reduction is a primary reason the City’s excess above threshold has accelerated in recent years. Data integrity All revenue and debt service figures are drawn from budget-to-actual schedules in each year’s audited ACFR. The fund balance chain has been verified across all 14 years: each year’s ending balance matches the following year’s opening balance to within $1, confirming that every figure is sourced from the correct fund in the correct document. The chain runs from $1,261,334 (FY2012 ending) through $9,694,474 (FY2025 ending, audited by Eide Bailly LLP). Bozeman Downtown URD Accountability Project | All figures sourced from audited ACFRs | June 2026 1 June 15, 2026 Mayor Joey Morrison Deputy Mayor Douglas Fischer Commissioner Jennifer Madgic Commissioner Emma Bode Commissioner Alison Sweeney City of Bozeman, Montana Dear Mayor Morrison, Deputy Mayor Fischer, and Commissioners Madgic, Bode, and Sweeney: Re: Finance Section Analysis — Annual Increment in Excess of the Inflation- Adjusted $750,000 Threshold — Downtown Bozeman Improvement District TIF I have been speaking about the Downtown Tax Increment Financing (TIF) balance at recent Commission meetings and proposing the return of the non-obligated balance to the General Fund to support city safety by expanding police funding without requesting an additional mill levy. I have been accessing the publicly available budgets, financial reporting, the applicable Ordinances, as well as the City's Annual Comprehensive Financial Reports (ACFR). I have downloaded these documents onto my computer and utilizied Claude AI to assist with organization and evaluation of the details, as the documentation, as you well know, is voluminous. As stated during my prior public comments, I am not a CPA nor an attorney, although I have a professional understanding of the assemblage and presentation of audited financial statements for both privately-held and public companies. As a resident of the City of Bozeman, I feel compelled to present you with these findings, as they appear to warrant expert review by the City Attorney and or the outside auditor. As you know, the blight designation and establishment of a TIF to remediate those conditions downtown was established by Ordinance 1409 in 1995 and subsequently modified, in part, by Ordinance 1628 in 2005. Although I have additional comments regarding some of the items in the proposed FY2027 Biennium Budget, which I will address at a later date, I am writing to you today regarding a concern that surfaced during my review — one that I believe you should be made aware of at this time, as any necessary remedial action could impact 2027 planning. 2 The Finance Section of Ordinance 1409 includes the following provision regarding the disposition of tax increment payments in excess of the inflation-adjusted $750,000 annual threshold: “In addition, notwithstanding the provisions of Title VII, Chapter 15, Part 42, Sections 4282–4292 and 4301–4324 M.C.A., tax increment payments made to the Tax Increment District after the 11th year of payments or after the annual tax increment reaches an inflation adjusted $750,000, whichever occurs first, shall be returned to the taxing bodies as such payments would normally accrue to those bodies with the exception that those payments which are pledged to the payment of principal and interest of any outstanding tax increment bond shall remain with the Tax Increment District for the payment of such principal and interest. The cap of $750,000 shall be increased for inflation by a percentage equal to the percentage increase in the Consumer Price Index for all Urban Consumers — All Items (Source: U.S. Department of Labor, Bureau of Labor Statistics) from July 1995 to July in the year under consideration. The Board shall not issue any tax increment bonds later than the year following either the 11th year of payment or after the tax increment reaches an inflation adjusted $750,000, whichever occurs first.” The Finance Section of Ordinance 1409 was subsequently amended by Ordinance 1628 in 2005; however, the only change made at that time was the extension of the trigger threshold from eleven years to fifteen years. The inflation-adjusted $750,000 per annum cap and the associated return obligation to the taxing bodies appears to have remained unchanged. The concern is that we may be discussing and planning for a fund balance that does not fully exist. Attached hereto is a reconciliation prepared by Claude AI in connection with my review that reflects the TIF Revenue by Fiscal Year, Bond Debt Service, the Net Amount after Debt Service, the Inflation-Adjusted Threshold, and the amount that appears to be in excess of the threshold that, pursuant to Ordinance 1409 as amended, should have been remitted to the taxing bodies. I bring this to your attention to respectfully suggest that; as noted, the pertinent documents be reviewed by the City Attorney and or auditors. As a matter of transparency, I note, that Anthropic itself acknowledges at the bottom of the Claude AI application page: “Claude is AI and can make mistakes. Please double-check the responses.” I have made my best efforts to confirm the findings presented by looking through each year of City Ordinances from March 2005 to date1 for a document that may modify the inflation adjusted per annum threshold but found none. Although someone with closer access to the underlying detail and the appropriate professional licensure 1 Ordinance 1628 (2005) made a single amendment to the Finance section of Ordinance 1409 — changing the TIF termination trigger from year 11 to year 15 — leaving every other provision of Ordinance 1409, including the $750,000 inflation-adjusted cap, the CPI formula, and the interlocal agreement requirement, in full force and effect. 3 may reach a different conclusion upon examining documents to which I do not have access, or that I may have failed to identify during my review. I respectfully suggest that in light of the questions raised, disposition of any funds planned to be turned over to the BDP should be tabled until a review of the issue described is completed. I am providing this information solely in the spirit of civic responsibility to the community of which I am a part. The following Finance Section Analysis was prepared based upon the publicly available documentation reviewed: Respectfully submitted, Bob Muldowney Bozeman, Montana bobmuldowney@gmail.com