The Whitefish City Council on Tuesday will take the first step toward potentially allocating a portion of the city’s tax increment revenue to the proposed Whitefish High School reconstruction project.

A public hearing will be held to consider a resolution of intent calling for a subsequent hearing on an amendment to modify the city’s Urban Renewal District to include the high-school property as a blighted area in need of redevelopment.

Based on a straw poll of the council on Nov. 7, the resolution of intent would commit $1.75 million in tax increment revenue to the school reconstruction project.

However, since then the Whitefish School Board has formally requested that the funding be increased to $2.5 million in tax-increment funds.

A letter sent to the city on Dec. 16 by Whitefish Superintendent of Schools Kate Orozco said the school board believes the proposed school bond request needs to be reduced from $15 million to $14 million to “demonstrate fiscal restraint.”

The total cost of the school project is an estimated $19 million.

The funding scenario includes $2.5 million from the city, $1 million from tax increment revenue the school gets, $1 million in state grants and matching funds, $500,000 in private fundraising and a $14 million bond issue that needs voter approval.

The council can choose to amend the resolution to reflect the $2.5 million figure, according to City Manager Chuck Stearns’ council report.

A group of Whitefish area citizens called Whitefish Community Partners sent a letter to the city on Dec. 15 — a day before the school board’s request for more tax-increment money — saying the group supports the $1.75 million tax increment allocation.

“There were some who opposed the use of any commercial TIF funds and some who wanted a far larger contribution from this fund, but a compromise was reached at $1.75 million,” Whitefish Community Partners representative Brian Muldoon wrote, noting the political diversity of the group.

The city’s proposed contribution would give the school district $1 million up front and later would issue $750,000 as a dollar-for-dollar challenge grant to encourage private fundraising.

While the city has the financial capacity to meet either the $1.75 million or $2.5 million contribution to the school project, Stearns said the council needs to consider the impact it would have on projects outlined in the downtown master plan, such as parking facilities, a downtown boutique hotel, redevelopment of the Idaho Timber property and the redevelopment of the former North Valley Hospital site, to name a few.

“Unfortunately, given that some of these projects depend upon private development, it is impossible to project when those projects might come forward and what level of financial contribution will be appropriate,” Stearns said.

The council has had discussions in recent months about how to spend accumulating tax increment revenue over the next eight years. If left untapped, the tax-increment fund would have an ending cash balance of about $10.7 million when the tax increment district sunsets in 2020.

The school district already gets a portion of the tax increment revenue. When the Whitefish tax-increment district was established, the Whitefish school district negotiated an interlocal agreement — unique in the state — that gives the school its share of the increase on residential properties. The annual payment to the schools has increased to about $600,000 annually.

Features editor Lynnette Hintze may be reached at 758-4421 or by email at lhintze@dailyinterlake.com.