Iowa City seeks answers on tax deal between University of Iowa and Coralville

The Coralville PILOT agreement was reached in 2010

Gregg Hennigan
Published: March 27 2014 | 3:15 pm - Updated: 1 April 2014 | 10:15 am in

IOWA CITY – Iowa City Council members want information on a tax deal between the University of Iowa and the city of Coralville, and the types of questions being asked make clear they have concerns about it.

Council members have asked City Manager Tom Markus to get answers to about 15 questions on the payment in lieu of taxes agreement for a tax-exempt UI Health Care medical clinic in Coralville's Iowa River Landing district.

The Gazette reported early this month that the more than $1 million a year the UI pays the city was unusually high for the size of the property, at 150,000 square feet, compared with other so-called PILOT agreements nationwide.

Also, the payment is calculated using the full tax rate for the taxing district, which includes not just city levies but also Johnson County and the Iowa City Community School District, but the city keeps the full $1 million.

“I think the reason (we are asking questions) is there appears to be a very unique PILOT agreement that is very different than anything Iowa City has ever done with the university, and we want to understand why it is so different and should we be approaching our PILOT agreements differently with the university than we have in the past,” council member Susan Mims said Thursday.

The issue is no small matter to Iowa City, which is home to the UI and has most of the campus and the main hospital within its borders. The UI had $2 billion worth of tax-exempt property in Iowa City in fiscal 2012, according to the city.

Iowa City received $1.76 million from the UI in fiscal 2013 for providing fire service to 16.8 million square feet of campus. There are no other PILOT agreements between the two.

One of the questions from the Iowa City Council asks how much revenue Iowa City would get for UI property in its boundaries if it received the same amount per square foot that the UI pays to Coralville for the Iowa River Landing medical clinic.

Other questions deal with the UI-Coralville PILOT formula being based on the full tax rate for that district and the city keeping all of the money.

Coralville City Administrator Kelly Hayworth told The Gazette for the story earlier this month and again Thursday that the city keeps the full amount because the property is in a tax increment financing district. In a TIF district, the increased taxes resulting from a redeveloped property go back into the district.

Hayworth also reiterated that the site where the clinic was built was the best piece of land in the city-owned Iowa River Landing and city officials made clear that if they sold it, they would want a PILOT agreement.

“It was very clear, it was out in the open and it was an agreement that everybody understood when it was adopted,” he said.

The PILOT agreement was reached in 2010, and the city received its first payment last year after the clinic opened in fall 2012

Some of the questions, which were in the weekly packet of information for City Council members that is publicly available, would need to be answered by the UI or Coralville.

Hayworth said he would speak to Iowa City officials about it if asked.

UI spokesman Tom Moore said university officials would “be glad to discuss the agreement with the city manager.”

He declined to comment further.

Markus, the city manager in Iowa City, said he has always thought Iowa City’s agreement with the UI for fire service was fair, but council members read about the university’s PILOT deal with Coralville and wondered why it was so high for a 150,000-square-foot property.

“So when you see one that is as generous as the one they’ve negotiated with Coralville, the council is trying just to understand the significant difference in why it’s that way” compared with Iowa City’s, he said.

The Gazette could find no other PILOT agreement in the U.S. comparable to the one between the UI and Coralville. It’s rare for payments to be more than $1 million a year, and when they are they usually involve entire university campuses or large hospitals rather than individual properties.

Daphne Kenyon, an economist at the think tank Lincoln Institute of Land Policy and an expert on PILOTs, said she had not heard of payment as high as $1 million for a single property.

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