Missoula County used tax‑increment financing and a fast public–private water project to spur growth at the Y

Andrew Hegmire, Missoula County’s director of community and economic development, told the Agenda podcast the County targeted the Y area for growth after a broad public land‑use process showed the site was well suited for development because of interstate access, rail lines and existing infrastructure fragments.

“The land use element… showed circles of where the public had said they thought growth was a good idea,” Hegmire said, citing a planning process that began in the late 2010s and engaged thousands of comments. He said the County shifted in its 2019 land‑use element from being "reactive" about growth to a proactive strategy that uses infrastructure and zoning to guide where development occurs.

To pay for the needed roads, sewer and water, Missoula County has relied on targeted economic development districts (TEDs), the county counterpart to tax‑increment financing. Hegmire described TEDs as a way to capture the new tax revenue created by development inside a defined geography and reinvest that increment in infrastructure projects inside the district.

“It's a diversion of new taxes,” he said. “When property values increase or when new property is built inside this circle, the increment, the new money is diverted… into a fund to do specific projects in that district.” County officials then can borrow against the relatively predictable annual TED revenue to fund large up‑front infrastructure costs.

Hegmire pointed to an older development park north of the airport as a local example: the County used tax increment financing decades ago to extend sewer, water and roads, which allowed existing Missoula companies to expand rather than relying solely on out‑of‑area recruitment. He said that strategy helped Missoula transition away from a timber‑dependent economy.

At the Y, two private developers (Grass Valley Industrial and a Montana Knife Company investor) built a pressurized public water system and sold it to the County on an accelerated timeline. Hegmire said the system cost about $6.1–$6.2 million; developers contributed roughly $800,000 and the County paid approximately $5.3 million to acquire the utility.

“We built the water system in about a year, transfer that thing to the county,” Hegmire said. “We bought it back.” He added that the TED revenues allow the County to demonstrate a predictable revenue stream to lenders: “We borrowed against future gains because we have enough money right now to make the payments.”

Early results at the Y include Montana Knife Company opening a facility with more than 100 jobs, and Grass Valley Industrial selling lots and anticipating roughly 350,000 square feet of industrial space over time — outcomes Hegmire described as permitting hundreds of jobs either newly created or enabled by local firms expanding into larger facilities.

Hegmire said the approach sped delivery of crucial infrastructure and reduced the County’s cost compared with a purely public delivery timeline. He characterized the model as a way to combine private capital and local government authority: private actors funded construction quickly, while the County acquired and owns the long‑term utility.

The County also framed the approach as adaptable to housing needs. Under a 2025 Montana legislative change, TEDs can be used to support workforce housing; Hegmire said the statute did not define the term, leaving local jurisdictions to set criteria. Missoula County staff have therefore focused TED support on infrastructure that lowers the cost of housing development rather than directly financing vertical construction.

The County now owns the water system at the Y and officials expect additional industrial and housing development in the district as utilities, roads and zoning align to support larger‑scale projects.

The episode closed with Hegmire noting that financing infrastructure is a widespread challenge for U.S. communities and that Missoula’s mix of TEDs, partnerships and zoning changes puts the County “right out there at the leading edge” of local approaches to enabling both jobs and housing.