Von Maur deal may prompt closer look at Iowa TIF laws

CORALVILLE - The city of Coralville's use of tax increment financing to entice the Von Maur department store chain to its Iowa River Landing development may prompt a review of an Iowa law.

State Rep. Nick Wagner, chair of the House Local Government Committee, said he's deeply concerned about the way tax increment financing was used in the deal. He said the agreement, which officials have said includes incentives worth nearly $10 million, could result in the departure of Von Maur from Iowa City's Sycamore Mall, and it may have swayed the chain from choosing Coral Ridge Mall instead.

“It's a case of government picking winners and losers, and in this case they're picking themselves as the winner because they are the developers of the project,” said Wagner, a Marion Republican.

Coralville City Administrator Kelly Hayworth said the city's use of tax increment financing to redevelop a blighted area - it once included a strip club, an adult bookstore and aging underground diesel storage tanks - was a “very classic case of what you could or would consider that the law was developed for.”

The Iowa River Landing project was incorporated into the city's First Avenue-Highway 6 tax increment financing district, which includes Coral Ridge Mall, via a narrow strip of land along Interstate 80. The city was thus able to use property tax revenues collected from the Coral Ridge Mall to fund the project.

Wagner, a former Marion City Council member, said Marion had a conservative philosophy regarding tax increment financing's use, and officials did not allow it to be used for financing retail projects.

Tax increment financing effectively freezes the property tax payments on a site at predevelopment levels and diverts the additional taxes that would be generated by the improvements into a fund. The fund generally is used to repay debt incurred for development-related costs such as water, sewer, sidewalks and street grading.

Wagner stopped short of saying a bill to modify Iowa's tax increment financing law would be introduced, although he indicated that is possible. He said TIF is a valuable tool when used properly.

“We should have some periodic review of that program and make sure taxpayers are getting their money's worth,” Wagner said.