A small request is sparking bigger talk about whether properties Kalispell annexes should have to be cost-neutral or pay the difference through a special charge each year until they prove they are.

“If they want us, they can pay for it. That’s my theory,” Mayor Tammi Fisher said at a council work session last week.

The discussion was prompted in part by Josh and Shelby Farnham, who are asking the Kalispell City Council to annex 3.5 acres at Three Mile Drive and West Spring Creek Road.

That includes a home and garage. They also want a neighborhood business zone to run a drive-through coffee stand the county wouldn’t allow with its agricultural zoning.

The Farnham property falls within a recommended annexation boundary that Kalispell approved last year and extends outside the city for roughly one-quarter mile.

Planning department records show the property sits just across Three Mile Drive from city limits.

But the Farnhams’ request has been on hold since April 2 as some council members grapple with a routine cost-of-services analysis that shows their property would cost the city $2,600 a year more for services than it would pay in taxes.

With no clear end in sight, Josh Farnham could only sigh and say he’s in no hurry when asked if he has exhausted his options to get a county OK for the coffee stand.

County planners recommended Farnham pursue the annexation. Farnham said the issue has moved beyond his pay grade. “It seems really confusing and all we want to do is open a coffee shop,” he told the council.

MAYOR Fisher wants to amend policies to let Kalispell charge property owners the difference every year if their annexation isn’t projected to be at least a break-even deal for the city.

“I don’t know if my little amendment would succeed, but I would like to give it a shot,” she said. “Otherwise, I have to say that I can’t justify annexing this property without an avenue to make it cost-neutral.”

Fisher aims to draft a policy for consideration by June 18.

PLANNING Director Tom Jentz warned the council that too much credence is being given to the cost-of-services analysis.

The analysis done for every annexation request uses general, per-capita costs for things such as police, fire and administrative services and road, water and sewer line maintenance costs.

The basic formula for costs: Department budget divided by the number of residents or “dwelling units” in Kalispell. 

Those costs are then applied to the property in question. Predictions may not match actual costs, Jentz said.

He added that Kalispell’s cost-of-services model requires a $375,000 house for an annexation to break even. That compares to the city’s $165,000 average house price — down from $240,000 just a few years ago.

An estimated $2,800 a year for the public works department to maintain 1,300 feet of county road Kalispell would assume drives most of the projected loss for the Farnham property.

That “loss” is the projected cost of services left after the couple pays their estimated property tax bill and special assessments and about $2,600 in one-time police, fire and storm water impact fees.

Strip out those road costs and the Farnham property is an underutilized commercial property likely to be redeveloped to a higher use in the future and a net gain for the city, Jentz said.

“They’re good to compare broad policy, bad to develop specific costs for individual projects, especially down to the penny,” Jentz said about the cost-of-services model used for annexation requests.

“They’re something you spend a lot of time developing or do briefly. We chose to do them briefly because to do them otherwise these are master’s-level projects.”

FISHER argues that realistic and billable cost figures could be reached without any overwhelming burden. A special yearly charge would be negotiated by Kalispell and the property owner.

“My proposal is an agreed-upon amount,” Fisher said. “If the landowner really wants us they will come to some sort of compromise.”

“They can deal with those nebulous figures, then present it to council and see if the council is interested ... We’re doing them a favor by bringing them in and they have to pay until it doesn’t cost us.”

Council member Randy Kenyon said the policy “sounds like a lawyer’s dream come true.” He suggested it go before the Kalispell Planning Board, which advised 4-3 against the Farnham annexation in March partly because of the projected cost.

A POLICY will be drafted, meanwhile, said Charlie Harball, city attorney and interim city manager. Questions and a number of details must be worked out to create a policy not found elsewhere in Montana, he said.

“Basically [the mayor] doesn’t think taxpayers should subsidize another development that comes in, that it should pay for itself. Good idea. But how is it going to play out?”

Compared to business or industrial properties, most residential properties barely or do not pay their way. Nor do schools, churches, hospitals, parks or other tax-exempt properties that make up about a third of Kalispell and are tax-losers but make it a more livable community, Jentz said.

Jentz suggested that Kalispell’s annexation policies should look beyond questionable and constantly fluctuating cost projections. The real question is if a property should be an integral part of Kalispell or not, he said.

Discouraging annexation in some cases will simply lead to county development that boxes Kalispell in, leaves no place to grow and does not necessarily reduce costs, Jentz said.

“If we turn our backs and just let them be there, they’ll be so close that they’ll still come in and use our parks and roads and services. If it’s right at the edge of the city like that, you have the option of getting some tax or getting no tax.”

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