Whitefish City Council decided it favors a special improvement district as the mechanism to pay the costs associated with a new City Hall building and parking structure.

Council directed city staff at a Sept. 2 work session to move forward with creating an SID for the project. A resolution of intent to form the district likely will come before council in the next six months, according to City Manager Chuck Stearns.

During the work session, council OK’d a $750,000 SID for a 20-year term. That is expected to result in an average yearly assessment of about $375 for businesses within the proposed district.

Council also agreed to create two assessment tiers. About 190 properties are inside the assessment area. Those closest to city hall would pay a higher rate.

The first tier forms a square around city hall of what’s considered the core business district. The northern boundary line is Depot Street and the southern line East Fourth Street. Properties between O’Brien Avenue and Spokane Avenue would be included.

A circle beyond that square area of about 1/4-mile from City Hall would form the second tier of businesses included in the SID.

Stearns said council could change those boundary lines, but generally agreed that businesses within those areas benefit from the parking garage.

“Those in the second tier still have indirect benefits because cars using the garage clears off the streets around their properties,” he said. “This will help alleviate on-street parking.”

In May last year, council approved designing a new City Hall to be built at the current site along with an attached parking structure. At the time, council also said some kind of funding district needed to be established to fund operation and maintenance costs for the parking garage.

Expected costs for operation and maintenance are in the range of $50,000 to $70,000, annually.

In the months following, council has debated using an SID or a Business Improvement District to fund expenses.

Council hit a hiccup last spring when it was discovered that an SID couldn’t be used for operation and maintenance costs. However, Councilor Andy Fuery in March suggested the city create an SID for construction costs, thus allowing the city to divert some of the money previously slated for construction into a maintenance fund.

A BID is initiated by a petition of business owners who ask to create the district. At least 60 percent of those in the district must petition to be included. A BID can run for 10 years or less. The assessment is generally a flat fee that is based on lot size or tax valuation.

City Council can initiate the creation of an SID by passing a resolution of intent. Affected property owners can prevent the SID if those owners bearing more than 50 percent of the cost protest. An SID can’t exceed 20 years. Under an SID, owners can be given credit for providing off-street parking.

In the coming months city staff will evaluate business properties in the proposed SID and create assessment estimates for those businesses. If council approves the resolution of intent to create the SID, it will then hold a public hearing on the matter.