IOWA CITY – A judge has denied a request to temporarily halt the Von Maur department store project in Coralville’s Iowa River Landing.
Johnson County District Court Judge Marsha Bergan, in a 17-page ruling handed down Monday, said a group of area developers and residents who have sued the city and its developer failed to convince her that they will be successful in their lawsuit. As a result she denied their request for an injunction to stop further transactions between the city and the developer, Oliver McMillan, related to the Von Maur project. (View the ruling below.)
Both sides argued that they would suffer irreparable harm if the judge did not rule in their favor, but Bergan wrote that the effect on the city of Coralville would be immediate while that on the plaintiffs would be “less dramatic and somewhat less predictable.”
Favorable construction bids Coralville has received could not be accepted and the start of construction in April and the planned opening of the store in May 2013 would not occur if the injunction was granted, Bergan wrote.
The plaintiffs, led by developer Gerry Ambrose and McDonald’s franchisee Kevin O’Brien, sued the city on March 1. The city and Oliver McMillan have filed a motion to dismiss the lawsuit, and Bergan said that will be heard at a later date.
Coralville City Administrator Kelly Hayworth said he believes Bergan’s ruling on the injunction bodes well for the city on the lawsuit. He also said it offered vindication for a project that has been harshly criticized by some local residents and officials and even some state lawmakers.
“She ruled quickly and she ruled very decisively, so I thought that was very good,” he said.
O’Brien said his group is “obviously disappointed” and will take some time to review the decision before deciding how to respond to the judge’s ruling.
“I don’t think we’ve exhausted all our options,” O’Brien said, declining to be more specific.
Coralville last year agreed to give Von Maur a $9.47 million grant to build a store in Iowa River Landing, which is southeast of the Interstate 80-First Avenue interchange. The city also provided other benefits it values at $4.5 million.
The city agreed to give San Diego-based Oliver McMillan a $1.5 million economic development grant to buy the property on the condition the firm would then sell the land to Von Maur for $10.
That sale is expected to occur in the next week or so.
The plaintiffs argued the land deal violated state law preventing a city of disposing of property by gift. Bergan, however, agreed with the defendants that Iowa’s urban renewal law says a public body shall not be restricted by other statutory provisions and that the transaction was not a gift because it involved commitments beyond money that must be taken into consideration.
The plaintiffs also said $1.5 million was not fair market value for the property and had an appraiser value it at $2.35 million. Bergan said that is not an accurate amount in this case because the Coralville City Council limited the market by seeking buyers who could provide an anchor tenant for Iowa River Landing and included other conditions, like when the retail operation must begin and for how long it must run.
The plaintiffs also argued that the incentives given to Von Maur by Coralville ran contrary to a state law that says public funds should not be used to get a business to relocate within the state unless the business is considering moving out of state or the relocation is related to an expansion that will generate “significant new job creation.”
The construction of the Coralville store will result in the closure of the Von Maur in Iowa City’s Sycamore Mall, a move that has angered city officials in Iowa City.
Bergan noted that the Coralville City Council’s resolution on the Von Maur deal stated the new store would attract further redevelopment and businesses to Iowa River Landing and the Coralville Von Maur would be 33 percent larger than the Iowa City store.
Bergan wrote that the Iowa Supreme Court has stated that the only time an “absence of public purpose” will be found is when it “is so clear as to be perceptible by every mind at first blush.”
“This is a great burden of proof for Plaintiffs to meet,” she wrote.
Hayworth said Bergan’s ruling on the injunction keeps the Von Maur project on track and should help spur negotiations for other proposals in Iowa River Landing that he said cooled off after the lawsuit was filed.
“Any time you have those question marks out there, I think it can have a major impact.”
The Gazette’s Dave DeWitte contributed to this report.IRL Injunction