For Proposed TIFs, Allow Sufficient Time for Public Debate

[Note: A slightly different version of this short piece can be found at: Jim Throgmorton, “For TIFs, Iowa City needs to allow more time for debate,” Iowa City Press-Citizen (Jun 27, 2012), p. 7A.]

There has been considerable public debate about whether Iowa City’s Council should have subsidized construction of a 14-story building on the Ped Mall. Dissatisfaction with the Council’s April 3 decision have led some Iowa Citians to begin circulating a petition asking the Council to submit the subsidy to the voters at a special election.

Among those circulating the petition are good friends who are disappointed that I voted to support the building with a TIF.

Why I voted for the TIF

In brief, I voted to support construction of the building because I concluded it would be good for the downtown and good for Iowa City, and because the public benefits of the project would outweigh the costs and risks associated with the TIF.

What would Moen’s proposed building include? Retail on the first floor, retail or office on the second, “Class A” office space on the 3rd and 4th floors, 8 floors of “workforce housing” residential units affordable to people who earn not more than 150% of median household income, and 2 floors of luxury units (one on each floor), all in a building designed in a quasi-modernist style similar to the existing Plaza Towers.

Such a building would attract quality jobs to the downtown, provide high quality housing for people who work in the downtown area, enhance the vitality and health of the downtown both day and night, strengthen surrounding residential neighborhoods, and counter a common (if greatly exaggerated) perception that our downtown has become a dirty and dangerous place full of student-oriented bars, scruffy looking panhandlers, and dangerous teenagers fighting in Old Capitol Center. It will also increase property tax revenues almost ten-fold over the existing Wells Fargo building.

These are not trivial public benefits, in my judgment.

The widespread perception that there is no reason to go downtown is related to the fact that private investment is flowing into Coralville and North Liberty, and to the claim that our downtown is becoming just another node in the emerging “Creative Corridor” that stretches from Iowa City to Cedar Rapids.

Private investment is flowing into those two cities largely because of their aggressive use of TIF. In the short run this aggressive use of TIF is attracting investment away from Iowa City and undermining our ability to generate sufficient property taxes to pay for the services our residents have come to expect. In the longer run, it might also be placing our neighboring cities at considerable financial risk. I don’t believe we should respond passively and just let investment flow out of Iowa City.

Many objections and questions have been raised.

In the weeks since our Council voted to subsidize Moen’s building, many objections and questions have been raised.

The building will cover Black Hawk mini-park in shade.

I’m not persuaded this is a significant objection. The building would (like a sun dial) produce a shadow that would rotate across the Ped Mall, with the location and extent of the shadow varying by season and time of day. If a smaller building, say five stories, were built in the same location, its shadowing of the Black Hawk mini-park would scarcely differ from that of the taller building.

The building is too tall and completely out of scale and character with the rest of the Ped Mall.

This is an important concern. During the Council meeting I said if there was anything I could do to change the project it would be to chop off the top two stories of luxury residential units. On the night of our vote I also found myself tossing and turning in bed, thinking the building should be two or three stories lower.

But we were not being offered an 11-story building, or one that would conform with my ideals of good design. What we had in hand was a proposal to build a 14-story modernist building on a significantly underutilized site.

What are the alternatives? One is to leave the existing Wells Fargo building as is. I don’t see much merit in that alternative.

A second is to wait for some private developer to demolish the Wells Fargo building and meet existing market demand by building a four- or five-story building with ordinary retail space on the first floor and student apartments on the top floors. I can’t see how such a building would enhance our downtown.

If there is market demand for such a building, some private developer will meet the demand.

I agree. The question is, however, would the existing private market build Class A office space and workforce housing in downtown Iowa City? My sense is that private lenders thinks that is too risky. They’d rather go the risk-free route and invest in the sprawling commercial parts of Coralville and N. Liberty.

Why give public money to a wealthy developer?

We did not give the developer money. What we did was loan Moen $2.5 M, knowing that the loan (plus roughly $900,000 in financing charges) would be repaid over a maximum of 18 years.

Why aren’t Moen and other private lenders investing in the project?

In fact, they are. It is my understanding that Moen’s LLC is investing $3.5 M and that he intends to obtain $4.8 M in conventional bank loans. The City would loan his LLC the remaining cost of the building, with the loan to be completely paid back over time. What this means is: we Iowa Citians would be investing in the project, with the return on our investment being the public benefits stated above.

Will taxpayers’ interests be protected in the event the project fails or the developer goes bankrupt?

We discussed this risk during the Council meeting, and—based on a written report submitted by the staff and oral responses to the question—I concluded that the City staff had negotiated good ways of ensuring that the loan will be paid back as stipulated in the agreement. Some residual risk does remain, however, so the question becomes (as indicated above), do the public benefits outweigh costs and the risks? I think they do.

The Council’s decision-making process was flawed.

The fact that so many questions are being asked about the project tells me there was something wrong with the process our Council followed. I see two key flaws.

First, we did not provide the public with sufficient time to consider what they thought about the proposed project and subsidy, or to pose their questions and express their views prior to our decision.

Second, we Councilors did not give ourselves sufficient time to think about the proposed project and to deliberate with interested residents about it.

With these two flaws in mind, I will not support any new proposal involving a significant TIF unless we provide a minimum of two weeks between the time the staff proposes a TIF-based project and the date we would hold a public hearing and vote on the project.

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