Johnson County says no to tax rebate for developer

Condominium complex has unclear future in University Heights

An illustration of the proposed One University Place condominium complex. (Photo courtesy of Neumann Monson Architects)
An illustration of the proposed One University Place condominium complex. (Photo courtesy of Neumann Monson Architects)

IOWA CITY – Johnson County’s supervisors said Thursday the county will not participate in an agreement that would provide a tax break to the developer of a controversial project proposed for University Heights.

What that means for the $55 million housing and commercial project from developer Jeff Maxwell is unclear. His financial advisor, Dennis Craven, said it was too soon to say.

University Heights, which is enclosed by Iowa City and located just west of Kinnick Stadium, asked the county if it would use some of its bond capacity to back a tax increment financing agreement of up to $8.5 million with Maxwell Development, which is based in Iowa City.

The amount is beyond the small town’s $5 million bonding limit.

All five members of the county’s Board of Supervisors said at an informal meeting that they were not interested in using the county’s financial resources on the project.

“I do think it is awkward at best for a county to be involved in a housing and retail TIF” in a city, Supervisor Janelle Rettig said, using the common abbreviation for tax increment financing.

Supervisors said the pros and cons of the project are for the city and its residents to decide and their decision should not be seen as a commentary on it.

The project has divided the community, and it has a slim 3-2 support from the five-member City Council.

University Heights is a small town of about 1,000 residents that is made up almost entirely of single-family homes, and the Maxwell project would bring a big change to the community.

Maxwell has proposed two buildings with a total of nearly 80 condominiums and six commercial units at 1300 Melrose Ave., now home to St. Andrew Presbyterian Church.

Opponents say the project, known as One University Place, would be too big a change for the community.

Supporters say it would bring much needed development and a tax boost to the landlocked town, which has few options to grow.

In tax increment financing, a developer often keeps the difference between the existing property taxes and the amount generated by the redeveloped land for a set period of time.

The proposed Maxwell site currently is home to the church, which does not pay taxes. Church members still must vote on whether to sell but have indicated their interest, city officials said.

The TIF agreement is still being negotiated between Maxwell and the city, but an initial proposal called for the developer to get a maximum of $8 million or $8.5 million, depending on options, over up to 20 years. University Heights City Council member Mike Haverkamp, a project supporter, told the supervisors it likely would be less than $8 million over 12 to 14 years.

The TIF would be in the form of a rebate, meaning payments would not start until after the project is done. Haverkamp said that would protect the city, and the county if it participated, from any risk.

Another positive, he said, is Maxwell would keep 80 percent of the tax increment, rather than the full amount as is common in these deals, with 20 percent going to tax-collecting bodies, mostly the city, county and Iowa City school district.

“We are trying to be as cautious as we can in protecting our own municipal finances,” Haverkamp said.

But Rosanne Hopson, who’s part of the University Heights council minority opposing the project, said Maxwell doesn’t need the TIF to make the project a reality and said One University Place would change the character of the town for the worse.

“We’re not against development, this particular development would just overwhelm our community,” she said.

Some of the supervisors also questioned whether a TIF was needed for the project to be a success. They also said the county had never helped with a city’s TIF and worried that partnering with University Heights would open them up to requests from other cities.

Maxwell has told the city a tax rebate is needed because of “significant up-front costs” and the financial risk from the project.

Craven, the financial adviser, reiterated that to the supervisors. After the meeting, he said Maxwell and the city will have to revisit the matter. He said it’s possible the city could be asked to use some of its bonding capacity.City officials said they have more than $4.7 million of their $5 million limit available.

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