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10-year tax break for Knutson Building approved

Some question lack of information about plans

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CEDAR RAPIDS — A historic restoration project some city leaders say remains a mystery has been approved for tax breaks and other public investment.

The City Council voted 6-2 to authorize a development agreement to fully restore the 129-year-old Knutson Building, which includes $367,000 to reimburse emergency stabilization costs and a 10-year, 100 percent tax reimbursement.

“This project generates property taxes, so there’s a positive return there,” said City Council member Kris Gulick. “It may take us 10 years before we start collecting revenues on it, but we were going to incur the $400,000 for sure if we didn’t do anything with the demo.”

The agreement is between the city and Knutson LLC, which is a company formed on July 28 by B.J. Hobart of Hobart Historic Restoration. Her company had the winning proposal for renovating the Knutson.

As part of the agreement, the firm receives the city-owned Knutson Building, which started as a condensed milk factory and has sat vacant in recent years, and two adjoining vacant lots, 525, 529, and 533 Valor Way SW for $1. The Hobarts will invest $7 million in the Knutson restoration as well as construct a second, adjacent three-story building.

The agreement includes three phases. First, the developer must submit stabilization plans for the dilapidated building within 45 days, and thereafter complete stabilization within 90 days. Second, they must get the State Historic Preservation Office to sign off on the rehabilitation, and third, after that approval is gained, the remodel must be complete within one year.

The targeted closing date is March 1, 2017

“This provides a time period for the developer to work through the state historic preservation office, to secure the tax credits and get approval of the plans, and complete the abatement and stabilization, which is on the requirements before closing,” said Caleb Mason, an economic development specialist with the city.

The property will be required to be listed on the National Register of Historic Places and listed as a local landmark, which restricts future changes.

The remodeled Knutson Building will include 12 market rate apartments on the second and third floor, and commercial on the first floor. The city is considering leasing all or parts of the first floor of the building, and would need to make a decision by Nov. 1. City leaders have discussed a need for staging and/or concession space for the adjacent McGrath Amphitheatre.

Much less information is available about the second building other than commercial on the first floor and an unknown number of housing units on the second and third floor.

While the plan gained approval, it diverted from normal city processes on a few fronts, City Council members Justin Shields and Ralph Russell noted. They both voted against the plan.

A project outline was never presented, vetted or discussed before the City Council, nor was there a chance to question the developer. The plan also doesn’t include the value of the anticipated tax break, or specifics about the second building. Mason noted those plans need approval at a future date. The development agreement requires construction on that second building within 12 months of completion of the Knutson and completion within 18 months thereafter.

“I think our process really needs to be looked at here,” Russell said. “I’m asked as an elected official to approve contracts that I have not seen the proposals, we have not heard anything from staff on what the proposal was, and as one of our public speakers said here today there’s a name change as to who is doing the project.”

“There’s just too many unknowns here for me to be voting favorably on the project,” he said.

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