Iowa City economy hums along despite losses from 21-only

Up a flight of stairs from a main drag in downtown Iowa City, 20- and 30-somethings, along with some older patrons, are celebrating Clinton Street Social Club's one-year anniversary.

A chalkboard lists “featured libations” behind 12 nondescript taps of craft beers, while black-vested bartenders mix concoctions such as the Homestead Basil Julep and the Havana Slinger. Dining room patrons peruse non-bar-food-sounding menus promising pot pies, a Social Club quiche and oyster po' boys.

The mixed crowd and old-timey motif contrasts the atmosphere of the previous tenant at 18 1/2 S. Clinton St. One-Eyed Jakes was famous for its 21 pitchers of beer for $21 birthday special, and earned regular police blotter attention for alcohol infractions, such as underaged drinking.

Jakes was seen as a poster child for problems in a community losing patience with public intoxication and underaged drinking downtown. After years of consideration, the public supported a controversial 2010 law to ban those younger than 21 from bars after 10 p.m., even as critics predicted the law would doom the business community downtown.

The argument went that less foot traffic would hurt merchants, who soon wouldn't be able to make rent. Property values would plummet. Vacancies would dot the town. City coffers ultimately would see declining tax revenue, critics said.

The Jakes-to-Social Club conversion is an example of what's changed and what hasn't in Iowa City since the so-called 21-only ordinance was instituted by Iowa City City Council on June 1, 2010, and upheld in a public vote that November. Three and a half years later, on this coming Tuesday, voters will be asked whether to repeal or maintain the law.

Aside from some notable casualties, in 2013 the area is humming along, for good or bad, on the backs of bars and restaurants as it tries to transition into a more mature and retail-diverse district.

Gerry Ambrose, who owns downtown property including the building that houses a bar and music venue called the Blue Moose, was among those who feared the worst.

"My opinion is it hurt downtown Iowa City," Ambrose said last week. "People are not making the money they were making before because of 21-only."

But the numbers, which some caution can't be taken as a direct cause and effect of 21-only, seem to paint a different picture.

Property values provided by the Johnson County Auditor's Office are up 15 percent overall since 2009. Only five properties have sold downtown since 2010, a sign of value, some say.

In the most recent sale earlier this year, the owners of Formosa restaurant paid $1.175 million to buy their space at street level in Plaza Towers, 221 E. College St. The price was $300 a square foot, which is highest since 2002 and the third highest ever in downtown Iowa City.

A review of sales tax receipts in the downtown Iowa City area provided by the Iowa Department of Revenue shows bars and restaurants saw a downturn in 2010, the first year with the 21-only law - but those businesses rebounded. From 2009 to 2012, bars and restaurants showed 12 percent growth in sales tax receipts, which outpaced the 6 percent growth for all other retail downtown.

Downtown sales tax revenues, 2009-12

Create infographics

“It certainly seems to be healthy,” said Peter Fisher, a professor of urban and regional planning at the University of Iowa and research director of the Iowa Policy Project. “There doesn't seem to be a lot of vacancies, and there are new buildings going up. It seems to be going in the direction the council had hoped.”

Jim Bell, who's owned the Deadwood Tavern on Dubuque Street for 22 years, said 2012 was the "best year we ever had." The Deadwood had a 21-and-up age limit before the 2010 law passed.

Steve Harding, who owns the Wedge Pizzeria in the pedestrian mall, also reported the strongest year ever in 2012. He said business downtown is good, particularly for a bar or restaurant.

George Wittgraf, who owns the Union, a large college-student oriented bar expected to suffer, said the ordinance forced him to change his business model some, such as opening earlier and refocusing as an underage dance club. Sales are on par with before 21-only.

"It's food and alcohol," Wittgraf said. "That's what downtown will continue to be about. Everything else will continue to go to the mall or the (Iowa River) Landing. It is not a place for retail."

While the Union survived, others did not.

Eleven establishments with full liquor licenses, including One-Eyed Jakes, have closed shop in the walkable downtown since May 2010. A large commercial space that once housed the iconic sports bar, the Fieldhouse, sits vacant in the heart of the pedestrian mall, and has for much of the last three years.

A new law that law limits the proximity of new bars could be partly to blame.

However, the space for the old Fieldhouse - the Fieldhouse business has moved a block way - is one of only a handful of empty venues downtown.

“With vacancies, instead of taking six months or longer to lease, it's much shorter,” said real estate agent Jeff Edberg, who has a tenant lined up for one of the two vacancies on the multiple listing service. “You can find a credible tenant with in two weeks.”

Despite the 11 closings, more full liquor licenses are on the books today in the downtown area, than in May 2010 just before 21-only became law, from 58 to 59, according to the Iowa Alcoholic Beverages Division.

Buried in those numbers is this: Of the 11 establishments that closed, there were eight bars and three restaurants. Since then, 12 new establishments opened, including nine new restaurants, one specialty shop and two bars.

The mix of what opened versus what closed, and the increase in retail, reflects the transition occurring in the district.

Iowa City developer Marc Moen bought the building that housed Vito's, a bar and restaurant that closed in the aftermath of 21-only. He paid $1 million, and spent another $2 million to renovate with 12.5 percent public financing.

That building now houses a movie theater, a clothing boutique, an art gallery and an engineering firm. In a 15-square-block area at the heart of downtown, 131 non-food or drink retailers are now open, up from 120 in March 2010, according to the Iowa Department of Revenue.

The re-fitted Vito's space, Jakes-to-Social Club, the increased retail and other changes such as the 808 bar to an upscale casual Italian restaurant called Basta, symbolize the transition from trouble-prone large bars to diverse businesses that appeal to a more mature crowd, said Iowa City Mayor Matt Hayek, a proponent of 21-only who added that his law firm's holiday party was at Social Club.

“It's hard to argue with what came of those places,” Hayek said. “They didn't sit empty. They didn't result in boarded up windows.

"Entrepreneurs who had good ideas turned them into better spaces and added to the diversity of businesses downtown. From my perspective, downtown is stronger than it has been in decades.”