A new high-rise building proposed for downtown Iowa City moved a step closer Tuesday to getting $2.5 million from the city.
The City Council’s Economic Development Committee voted 3-0 to recommend that the full council OK a $2.5 million tax increment financing agreement with developer Marc Moen.
Moen would put the money toward a $10.7 million, 14-story building he wants to construct at 114 S. Dubuque St. on the Pedestrian Mall.
Committee members and city staff said the project fits with the city’s goals of attracting more owner-occupied housing and retail and office space downtown, and boosting property values.
“I’m excited about the project,” council member Susan Mims said.
She and fellow council members Michelle Payne and Mayor Matt Hayek sit on the Economic Development Committee.
Plans call for the glass building to have retail space on the first and second floors, office space on floors two through four, and 26 residential units on floors five through 14.
Moen, who also is the developer behind the 14-story Plaza Towers downtown, said in an interview that he’s had some inquiries about the retail space but couldn’t talk about what types of stores may be in the building.
The offices are to be the high-end “class A” type city officials want more of downtown. And the housing would include rentals and for-sale units aimed at young professionals.
Moen said the project will not happen without the tax increment financing, or TIF, assistance, as a way to leverage private financing. The city received an opinion from the National Development Council concluding the project demonstrates a need for the $2.5 million Moen requested.
The TIF would come in the form of a forgivable loan. The city would sell bonds to come up with the money, which would be given to Moen at the start of the project.
City staff said their most conservative estimate is it would take 18 years to repay the debt, but the period could be shorter.
Finance Director Kevin O’Malley said that factoring in interest payments, the total cost to the city is estimated at $3.6 million.
Iowa City officials and Moen have been critical of Coralville’s use of TIF last year to give Von Maur what some estimate to be $16 million to build a department store at the city’s Iowa River Landing development.
Moen is involved with a group of business people who filed a lawsuit earlier this month trying to block the Coralville-Von Maur deal.
Moen said the group’s goal is to stop what they see as the abuse of TIF, not do away with the economic development tool altogether. He said with Iowa City’s strict guidelines on TIF use, his downtown Iowa City building is an example of a good TIF project.
Jeff Davidson, Iowa City’s director of planning and community development, made a similar point in the meeting, saying Iowa City is not anti-TIF.
“We consider it an excellent tool and our primary tool for economic development projects,” he said.
A TIF effectively freezes the property taxes on a site at predevelopment levels and diverts the new taxes, or increment, into a fund often used for the project. In this case ,the money would go to Moen. Tax-collecting bodies like the city, county and school district do not get the increment during the term of the TIF agreement.
Much of Tuesday’s meeting was spent discussing the small park next to Moen’s site.
City Attorney Eleanor Dilkes said the city has the right to redevelop that land or sell it. Moen said the prospect of a large building or wall blocking the views from his glass-exterior building would kill his project.
Committee members said they couldn’t imagine the city ever selling a park, but their recommendation to the City Council on the TIF agreement will be contingent on the council granting an easement on that site for Moen or making it public right of way, either of which would limit a future council’s ability to allow something to be built there.
Hayek and Mims also said they’d heard from residents concerned about Moen’s building blocking the sun, but they said unless the city is going to restrict all future downtown buildings to less than a couple of stories in height, that was not reason enough to stop this project.
Moen said he hopes to have the building open by Aug. 1, 2013, which means construction would need to start this July.