Developer seeks $2.5 million loan from Iowa City for downtown building

IOWA CITY – Developer Marc Moen has asked the city of Iowa City for a $2.5 million loan to put toward a new high-rise building downtown.

Moen wants to build a 14-story building at 114. S. Dubuque St., the current location of a Wells Fargo branch on the Pedestrian Mall.  The Gazette first reported on the general concept for the plan in September, but a city memorandum released late Friday afternoon offers a more polished, detailed plan.

The building would cost an estimated $10.7 million to construct and include retail space on the first and second floors, office space on floors two through four, and 26 residential units on floors five through 14.

In a brief interview Friday as he was boarding an airplane, Moen said he has been working on the project for a year and the site is a great opportunity.

“I think it will make a real exciting office and retail environment, with the residential above that,” he said.

The residential units would be a mixture of for sale and for rent, and Moen said they'd be aimed at young professionals. They will be less expensive than most other owner-occupied units downtown, including his 14-story Plaza Towers on the Pedestrian Mall, he said.

Moen said the project would not occur without financial assistance from the city.

He is asking for $2.5 million in tax increment financing assistance to leverage private financing. The money would come in the form of a forgivable loan.

The City Council's Economic Development Committee will consider the request at a meeting starting at 8 a.m. Tuesday. The committee consists of council members Susan Mims, Michelle Payne and Mayor Matt Hayek. Any recommendation would go to the full council, which has the final say.

Tax increment financing, commonly called TIF, has gained a lot of attention in Johnson County since Coralville announced last year it would use TIF funds to bring a Von Maur department store to town.

That will result in the Iowa City Von Maur closing, a move that has upset Iowa City officials and has state lawmakers looking at TIF reform.

A TIF effectively freezes the property taxes on a site at predevelopment levels and diverts the new taxes, or increment, into a fund often used the project.

TIF supporters say such projects would not otherwise occur and boost the value of land and therefore property taxes paid.

Critics, however, note that the increment doesn't go to the city, county or school district during the term of the TIF agreement and say the money is too often unnecessary for a project to move forward.

Iowa City has a set of policies for granting financial incentives that city officials say ensure the proper use of public money.

For the new Moen project, the value of the property would increase from $569,520 to an estimated $9.8 million, according to the memo, written by Jeff Davidson, director of planning and community development, and Steve Long, community development planner. The taxes paid would go from $23,302 this year to an anticipated $234,792 annually.

They also wrote that the project:

• Would create jobs with the addition of retailers and high-end office space.
• Would take advantage of a parcel of land currently being underutilized compared with what the zoning code allows downtown.
• The lower-priced housing units may meet the city's definition for a “desirable project” that might not otherwise occur without financial incentives.

City officials want to add more young-professional and owner-occupied housing downtown. Getting more retailers and office space is another stated city goal.

The TIF would be over an approximately18-year period, according to the memo.

Moen's Plaza Towers is generally regarded as a successful use of TIF dollars. With those TIF obligations paid off – 12 years early – it generates nearly $1 million a year in property taxes annually, Davidson and Long wrote.