CEDAR RAPIDS — City Council member Pat Shey made it clear last night that he is not happy that the city now will provide developer Frew Development Group up to $4 million more than anticipated in May in property-tax relief on the Westdale Mall redevelopment project.
How much additional cost is the developer taking on? Shey wanted to know.
Even so, on a 6-3 vote, the council agreed to amend its development agreement with Frew, an agreement that is just seven months old and, to date, has not resulted in any demolition or construction work on the $90-plus-million project. The project is an ambitious one with the goal to transform the long-struggling Westdale Mall into a mixed-use community that will feature three anchor stores, other retail storefronts, offices, restaurants, housing and a hotel.
The council vote last night allows Frew to forego 100 percent of the property taxes on the new investment at the 72-acre mall property for 14 years, up from the 12 years that was spelled out in the agreement reached last May with the city.
Jennifer Pratt, the city’s assistant director of community development, estimated that the amended property-tax break — called tax increment financing or TIF — will equal $24 million over 14 years. Of that total, the city will recoup $7 million for fronting some costs.
Shey directed his displeasure to Pratt in a series of question to which he appeared to already know the answers.
As Shey’s questions and Pratt’s answers revealed, Frew and the city reached their development agreement in May without current anchor tenant J.C. Penney agreeing to the proposed changes. Penney’s lease gives it a say over any changes.
Pratt said that Frew has told the city that he took on about $3.5 million in unanticipated, additional expenses that he now must make related to internal and external improvements to the space now occupied by J.C. Penney. In addition, Frew’s amended proposal also calls for the addition of a more costly parking ramp to the project to provide requested parking space without taking up more room for surface parking, Pratt said.
Pratt told Shey that Frew Development had sought three more years of TIF support, but was only getting two years in the amended agreement. Failing in its request for three years was an indication that the developer would be assuming some of the increased costs, Pratt said.
“Did we know there was a problem before May 14?” Shey asked, referring to the date of the city’s initial agreement with Frew. Shey then said the city did know, and he questioned the city’s research about the details of the deal before it was agreed to in May.
Council member Scott Olson said he supported the city’s partnership with Frew Development on the project, but he said he wasn’t sure the developer was contributing more as it asked the city to do so.
Outgoing council member Don Karr asked where the city “draws the line” on a developer who agrees to one incentive and then asks for more. The developer assumes risk and needs to accept that, he said.
“They’ve got to be big boys,” Karr said of Frew Development. “… We shouldn’t be their savior.”
Shey, Olson and Karr voted against amending the Westdale agreement with Frew.
John Frew, president/CEO of Frew Development Group, was in the council chamber last night but did not comment. He left after the vote.
After last night’s meeting, council member Kris Gulick, chairman of the council’s Finance and Administrative Services Committee, said the amendment to the city’s Westdale agreement with Frew Development still consisted of the incremental increase in future tax revenue that would not be coming to the city in any event unless Frew moves ahead with the project.
Gulick said Westdale Mall has been in irreversible decline for years with revenue coming to the city from property taxes on the same trajectory.
“No one was willing to pick up the ball” to bring new life to the mall property but Frew, he said.
Gulick said Frew also is assuming additional costs related to the J.C. Penney lease negotiation.
In a letter to the city, Frew said initial demolition work, which had been expected to start last June, will begin in January at the mall.
Frew was the project manager for the city’s hotel and arena renovation and for the construction of its new convention center. His firm is one of two in the running to build the proposed new parking ramp for the Cedar Crossing Casino if the casino secures a state gaming license in April.