116 3rd St SE
Cedar Rapids, Iowa 52401
IOWA CITY – The City Council will use an alternate funding option to bypass a petition calling for a public vote on a $2.5 million deal for a 14-story downtown building.
That move Tuesday night was criticized by people who organized the petition drive in an attempt to put the public financing part of the project on the ballot in a special election.
Resident James Knapp accused the council of “railroading this down the throats of the taxpayers.”
But council members disagreed, saying the building – with retail, office and housing elements – would be good for the city.
The council voted 7-0 to issue $3.1 million in revenue bonds to raise $2.5 million to put toward developer Marc Moen's building planned for 114 S. Dubuque St. The total project is estimated at $10.7 million.
Those bonds are different from the general obligation bonds the council initially planned to use when it OK'd the $2.5 million tax increment financing deal with Moen in April.
But general obligation bonds are subject to a reverse referendum, and supporters of a grassroots effort seeking a special election on the funding turned in a successful petition earlier Tuesday.
In gathering the signatures of 862 eligible voters – above the required 697 – the petition drive forced to the council to act. Its options were to abandon the $2.5 million commitment, call a special election or go with the petition-proof revenue bonds.
Council members said they were elected by voters to make these kinds of decisions. Susan Mims said council members waded through a lot of details, and she and council member Jim Throgmorton said they'd heard a lot of inaccuracies from the public on the project.
“I don't believe economic development can be done by the public-vote process,” Mims said.
Opponents of the deal claimed Moen is a wealthy developer who does not need $2.5 million in public financing. They also questioned why the public should have to provide funding for a private project that a bank would not.
“Why take a risk with public money that private capital isn't willing to take?” Caroline Dieterle asked.
The revenue bonds the council ended up picking cost an estimated $300,000 more than the general obligation bonds because of higher interest rates.
But the city got a commitment from Moen to pick up the present value of that difference, $170,000. Kevin O'Malley, the city's finance director, said the city would invest that money and, over the 20 years the bonds are paid back, the city should make up the rest.
Moen has said the project would not happen without the $2.5 million in city assistance. The building is to have retail space on the first two floors, three floors of offices, and condominiums and apartments above. He said people already have expressed interest in the condos.
The city estimates the value of the property, which has been home to a Wells Fargo branch, would increase from $569,520 to an estimated $9.8 million with the high-rise.
Over the 20-year repayment period, the total cost of the revenue bonds will be about $4.1 million, O'Malley said.