Downtown businesses will pay a special assessment to offset some of the cost of Whitefish’s new parking structure.

City Council on July 17 approved creating a parking special improvement district to build the garage that will be attached to the new City Hall building.

Through an SID, downtown business owners directly share in the cost of parking because of the benefit they derive from the $7.4 million structure.

Businesses face an average annual assessment of $348. The district is set to provide $750,000 over 20 years for operation and maintenance costs for the garage.

The district includes 491 properties. Of that, 194 would be assessed and 297 are exempt.

The assessment is based on a number of factors, including proximity to the parking garage, square footage of each property, and credit for parking spaces provided by the business. Properties are exempt if they are residential, vacant, federal properties or outside city limits.

As vacant properties develop into commercial use, every assessed property’s assessment is reduced. So the amount the property owners are assessed at the beginning of the assessment period will likely be the maximum amount that will be assessed, according to City Manager Chuck Stearns.

Councilor Jen Frandsen asked why business licenses weren’t used to determine a building’s usage for the formula that sets the amount of the assessment.

Stearns said business licenses aren’t always a true picture of how a building is being used. He said city staff would likely meet resistance if it knocked on doors to find out a property’s usage.

Businesses are assessed based on their proximity to the parking garage.

Tier one forms a square of about 1/8-mile from City Hall. 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.

Tier two is a square about 1/4-mile from City Hall. The northern boundary is Depot Street and the southern is Fifth Street. Properties between Miles Avenue and Kalispell Avenue are included in the second tier. Tier one properties would pay double those in tier two.

The SID will not be assessed until the parking structure is complete or nearly complete. It likely won’t be built until the fall of 2017.

The current downtown parking SID, which was used to create some of the surface parking lots downtown, will expire after the fall of 2015.

In May 2013, 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.