Coralville city council modifies Von Maur agreement in light of lawsuit

Earlier agreement said Von Maur could withdraw from agreement if lawsuit was filed

Dave DeWitte
Published: April 25 2012 | 5:30 pm - Updated: 3 April 2014 | 5:17 pm in
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CORALVILLE — The city of Coralville’s contingency plan to bring Von Maur to its Iowa River Landing development if it loses a lawsuit would be to substitute a virtually no-cost lease for a virtually no-cost sale of the site and other incentives.

The plan is included in a resolution approved by the City Council this week to induce the Von Maur department store chain to proceed with its store in Coralville despite the lawsuit.

An earlier agreement allowed the Davenport-based department store chain to pull out of the development in the event of a lawsuit challenging its legality.

The resolution, passed on a 3-1 vote with one member absent on Tuesday, says the city believes that its transaction with Von Maur is legal and will be upheld in court.

The original agreement called for the city provide a $1.5 million grant to its private development partner, OliverMcMillan, to buy a 7.5 acre store site in Iowa River Landing for Von Maur.

The agreement allows OliverMcMillan to sell the land to Von Maur for $10 and for Von Maur to receive $9.47 million for construction of the store itself. The company would spend about $4 million of its own funds on the store’s interior and furnishings.

The resolution approved Tuesday says the two sides will continue to work on preserving the original agreement if the city loses the lawsuit filed by 18 individuals and companies.

“We are trying to get the deal back as close as it was to when we wrote it the first time,” said Kevin Olson, Coralville city attorney.

In the city’s worst-case scenario, the court would strike down both its transfer of the land to Von Maur through OliverMcMillan and its payment of $9.47 million for the construction of the store.

In that event, Olson said the resolution provides for the city to buy back the store from Von Maur for an amount to be determined and to lease it to Von Maur for $10 a year for 50 years.

Olson said the city, OliverMcMillan and Von Maur will not need to use the modified agreements if the city and OliverMcMillan prevail in the lawsuit.

“I don’t expect the lawsuit to go away any time soon,” Olson said, noting that any court decision could be appealed by either party. He said the Von Maur store will likely be built and operating when the case is settled.

Council members Mitch Gross, Tom Gill and Bill Hoeft voted in favor, while Jill Dodds voted against at Tuesday’s council meeting.

In response to an emailed inquiry, Dodds said she understands the importance of having a strong anchor store in Iowa River Landing, but has philosophical concerns about the city owning a retail department store.

The lawsuit was filed in early March attempting to halt the transfer of the site for the store to OliverMcMillan and by OliverMcMillan to Von Maur for a token fee.

Among the lawsuit’s claims are that the deal violates Iowa laws restricting the use of economic development grants to encourage businesses to move from one Iowa community to another, and that it constitutes an unlawful gift of city property to a business.

The city has counter-sued the 18 plaintiffs, accusing them of illegally interfering in a contract with malicious intent.

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