Memorandum
REPORT TO:
City Commission
FROM:
David Fine, Economic Development Manager
Cola Rowley, Assistant City Manager
Chuck Winn, City Manager
SUBJECT:
A Resolution Relating to Tax Increment Revenue Bond (South Bozeman Technology Tax Increment Financing District); Preliminarily Authorizing the Private Negotiated Sale of Such Bond and Authorizing the Process for Selecting a Purchaser Thereof
MEETING DATE:
September 22, 2026
AGENDA ITEM TYPE:
Resolution
RECOMMENDATION:
Consider the Motion: A Resolution Relating to Tax Increment Revenue Bond (South Bozeman Technology Tax Increment Financing District); Preliminarily Authorizing the Private Negotiated Sale of Such Bond and Authorizing the Process for Selecting a Purchaser Thereof
STRATEGIC PLAN:
BACKGROUND:
The Bozeman City Commission approved a development agreement with Big Sky ICINF, LLC, the master developer of the Montana State University Innovation Campus (MSUIC) in 2022, which was subsequently amended in 2026. Under the development agreement, the City agreed to reimburse the developer for eligible costs associated with public infrastructure serving the Engine Works building, formerly known as the INDUSTRY Project, and the Aurora Project.
The public infrastructure was necessary to support construction of these buildings. It also served a broader public purpose by helping transform the Innovation Campus into a shovel-ready technology park consistent with the South Bozeman Technology District Plan. The developer installed the infrastructure at its own expense and constructed the two buildings as required by the development agreement.
From 2012 through 2022, the City, Montana State University, and other stakeholders pursued several efforts to install the infrastructure necessary to develop the campus as a technology park. Those efforts did not result in the required infrastructure being completed. The use of tax increment financing provided the mechanism needed to complete the public improvements and facilitate private development on the campus. Staff believes the new taxable value and shovel-ready development sites would not have been created but for the availability of tax increment financing. The Engine Works and Aurora buildings have now been completed and placed on the tax rolls. New development within the campus currently generates approximately $520,955.17 in annual tax increment revenue.
Developer Reimbursement
Big Sky ICINF, LLC is seeking reimbursement of $3,465,627 in documented costs associated with the installation of eligible public infrastructure serving the Innovation Campus. Staff will confirm the eligibility and amount of the reimbursable expenses in accordance with the development agreement and applicable law before bond proceeds are disbursed.
Proposed Bond Financing
The City anticipates issuing approximately $3,894,000 in tax increment revenue bonds with a term of approximately 25 years. The proposed principal amount includes: $3,465,627 to reimburse the developer for eligible public infrastructure costs; costs associated with issuing the bonds; and funding for a debt service reserve account. Assuming a principal amount of $3,894,000, an interest rate of 6.25%, and a term of approximately 25 years, the maximum annual principal and interest payment is expected to be approximately $303,875. The bonds would be payable from tax increment revenues generated within the South Bozeman Technology District. The bonds would not constitute a general obligation of the City, and the City’s general taxing authority would not be pledged to their repayment. The financing terms presented in this memorandum are estimates and remain subject to market conditions, lender proposals, final financing documents, and any additional approvals required before issuance.
Private Placement Process
The Resolution would authorize the Finance Director and the City’s municipal advisor, Baker Tilly Municipal Advisors LLC, to solicit and evaluate proposals for a private negotiated placement of the bonds and to pursue the financing structure determined to be in the City’s best interest. A public bond offering can sometimes produce a lower stated interest rate. However, public offerings generally involve additional underwriting, disclosure, legal, rating, and administrative costs. For a financing of this size, those additional costs may outweigh the benefit of a lower interest rate. Private placements are commonly used for smaller bond issuances because they can reduce issuance costs, simplify the transaction, and provide greater flexibility in negotiating financing terms.
Staff and the City’s municipal advisor will evaluate proposals based on the overall cost of financing, interest rate, repayment terms, required reserves, prepayment provisions, lender fees, legal requirements, and other material conditions. Authorizing the private placement process will allow staff to identify the financing proposal that provides the best overall value to the City and the South Bozeman Technology District.
Conclusion
Approval of this Resolution will allow the Finance Director and the City’s municipal advisor to initiate and pursue a private placement of tax increment revenue bonds. The proposed financing will fulfill the City’s reimbursement obligations for eligible public infrastructure costs under the development agreement while matching the debt obligation with tax increment revenues generated by the development that the infrastructure made possible.
UNRESOLVED ISSUES:
None at this time.
ALTERNATIVES:
As suggested by the Commission.
FISCAL EFFECTS:
The estimated maximum annual debt service of $303,875 would be paid from tax increment revenues of the South Bozeman Technology District. Current development within the Innovation Campus generates approximately $520,955.17 in annual tax increment revenue. Actual debt service and available revenues may vary based on final financing terms, taxable valuations, mill levies, tax collections, and other factors affecting the District’s revenues. Approval of this Resolution does not commit the City to issuing bonds or create fiscal impacts, which will be the subject of a future Resolution to issue the bonds.