A proposed land swap and construction of a public parking lot at the former Gateway West Mall got at least a preliminary nod of approval last week from the Kalispell Urban Renewal Agency.

The advisory board voted 4-1 to recommend that the fast-track project keep moving, at least for now.

If done as planned, the estimated $1 million project could be used to extend the life of the West Side Tax Increment Finance District, a financing mechanism on track to sunset next March. But extending the tax district is not the only aim, City Manager Jane Howington said.

“There were some unanswered questions, [but] I think there was enough evidence of benefit to not eliminate it at this point,” Howington said.

The city would swap property it owns north of the mall (part of the parking lot surrounding it) for the former Gateway Cinema Movie Theater site, a vacant and flood-prone property owned by developer Phil Harris.

It then would raze the theater and build a public parking lot in its place, using tax-increment funds to pay the debt.

A request for engineering services says the city wants at least 255 spaces in the lot and the possible use of permeable concrete pavers to cut the need for stormwater drainage infrastructure.

HOWINGTON SAID SHE sees several benefits from the project, which is just one item in a busy December agenda playing out as she prepares to depart for a city manager job in Newport, R.I.

It would alleviate blight at the old theater building, free up city property for future development and extend the life of the tax-increment district for as long as the debt for the project is outstanding, Howington said.

Another privately owned property essentially landlocked near the theater also would benefit from better access, she said.

Additionally, the project would create enough public parking for the city to meet a lease requirement that says it must provide 500 parking spaces for TeleTech Holdings Inc.

The publicly traded company leases about 60,000 square feet of the mall for a call center.

That space is owned by the city and Flathead County Economic Development Authority. They bought and renovated it using TIF funds, and are about 55 parking spaces short of their 10-year lease obligation.

TeleTech’s lease expires in March 2014. At last count, the company had roughly 800 full-time employees in Kalispell, more than the 425 employees it needs to retain for free rent.

The former Gateway Mall sits in a sea of parking. But parking has been an issue at times and that could worsen with another major tenant, said Kellie Danielson, director of the Flathead County Economic Development Authority.

“Right now the parking is fairly adequate. This is planning for the future,” Danielson said of the city’s proposed project.

“If TeleTech wants to add more employees, and there have been discussions about that, one of the items that would matter is do we have enough parking to accommodate that.”

Some TeleTech employees are parking bumper-to-bumper along Glenwood Drive to be closer to the company’s east entrance. The proposed public parking lot would be on the west side, but TeleTech employees or other tenants could park there and enter through an entrance on that side, Danielson said.

URBAN RENEWAL  agency members recognized some value to extending the life of the tax district. Its fund holds about $2 million and generates some $400,000 a year — money that can be used to help foster development, alleviate blight or improve public infrastructure.

Keeping the West Side TIF alive past March would give the Kalispell City Council time to consider expanding it to overlay a West Side Urban Renewal Plan that recently was expanded to run along the railroad tracks from Seventh Avenue West to the eastern city limit.

That plan spells out new redevelopment goals for the expansion area, from removing the railroad tracks to replacing aging water and sewer lines, installing new sidewalks, improving the fairgrounds, and addressing nearly 19 acres of vacant land and buildings in the area.

A financing tool such as the tax-increment district could help get those things done, drawing in tax revenues that come in over and above taxable value caps placed on properties inside the district almost 15 years ago.

“We realized how many properties had vacant or dilapidated buildings and talked about a scraping program to use TIF funds to help get them back to shovel-ready sites,” Howington said. “We thought it would be nice to set an example and do it so people can see what we mean.”

Letting the existing tax district sunset and starting a new one for the expanded West Side Urban Renewal Plan would likely mean years of waiting for it to build up a sizable increment as property values rose over time.

If it sunsets, the TIF fund would disburse its revenue to local taxing entities such as the city, county and schools.

But that sunset revenue would count against their ability to levy taxes the following year, as opposed to keeping the district alive and making special distributions from time to time, as has been done in the past, Howington said.

MANY THINGS could derail the proposed project. Appraisals are pending, and could make Harris decide not to swap.

The city bought its swap property from American Capital, the owner of the mall, with restrictions that it can be used only for parking. Those needs to be lifted to make it developable.

“We’ve had some verbal assurances, but until it’s inked it’s just another hoop,” said City Attorney Charles Harball.

There’s also the ability to issue marketable bonds 45 to 60 days before the tax district sunsets next March. The city wants bonds with a shorter-than-usual call window so the debt can be paid off and the district can sunset in short order if desired, Howington said.

Finally, there’s the City Council. Several members have advocated for letting the tax district sunset, given the lack of a suitable project. It’s not clear if they’ll support this one.

Howington plans to ask the council at its Dec. 19 meeting to include the land swap and parking lot project in the West Side Urban Renewal Plan, the next step toward making it eligible for TIF funding.

Other steps would require the council’s approval, including a contract with an engineer for designs and cost estimates.

“We have a very tight schedule,” Howington said. “If council wants to table it to a work session, that would probably kill [it]. If the engineer doesn’t come in with a design on deadline, that could kill it. We also have requirements for borrowing ... This isn’t a done deal even if the council approves it.”

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com