Petition seeks public vote on $2.5 million deal for downtown I.C.

IOWA CITY – Voters may decide whether a developer gets $2.5 million in taxpayer money for his downtown Iowa City high-rise building.

Or the city could change the agreement so that the project gets the money another way that is not subject to voter approval.

A petition drive started late last week seeking a special election on whether Marc Moen should get the money for a 14-story structure he plans to build on the Pedestrian Mall.

The City Council approved the agreement with a 6-0 vote two months ago, but opponents have said Moen is a wealthy developer and the public assistance is unnecessary.

“Why do we have to financially help someone who seems to be able to raise the money to build this project on his own?” said Gary Sanders, an Iowa City resident who is part of what he described as a decentralized effort to collect the signatures.

Moen, who also was the developer of the 14-story Plaza Towers building downtown, has said the $2.5 million is essential, and he reiterated that Monday.

“Honestly, it is an impossibility without it,” he said. “It is not going to happen without it.”

Earlier this year the city received an opinion from the National Development Council concluding that the project demonstrated a need for the $2.5 million.

City officials have expressed a lot of excitement about Moen's plans for a $10.7 million building at 114 S. Dubuque St. Called “The Park at 201,” the building is to have retail, office and residential space.

The cost of the deal between the city and Moen is estimated to be closer to $3.7 million when interest is added. The city plans to sell what are known as general obligation bonds to cover the amount.

General obligation bonds are subject to a reverse referendum, which is the goal of the petition. Kevin O'Malley, Iowa City's finance director, said Monday he has been instructed to look into financing the deal instead with TIF revenue bonds.

A petition is powerless against those bonds. But they have higher interest rates than general obligation bonds, and O'Malley said an initial estimate has it as being $300,000 more expensive.

The petition must be submitted before the City Council votes to issue bonds, which could occur July 10 at the earliest, said Sarah Holecek, first assistant city attorney.

The petitioners need the signatures of 700 eligible voters, which is 10 percent of the turnout from the last city election, to force the City Council to act.

Holecek said that if the petition is successful, the council would have two choices: call an election on the matter or issue the other type of bonds. She said voiding the agreement was not an option because of the city was already contractual bound to the project.

Council member Susan Mims said her preference would be for changing the financing if the petition is successful.

“I don't think you do economic development by public vote,” she said.

She also said the city does its due diligence before making a financial commitment. The city has an economic development policy that says city funding must be the last dollars in and that “but for” its assistance, the project would not happen.

Sanders, the petition organizer, said he did not know Monday how many signatures had been collected, but he said he had no doubt they'd get enough.

Sanders said his concern over the project was related to his belief Iowa City needs more taxable properties in light of tax-increment financing issues and an Iowa City Supreme Court decision that allows apartments to be converted to housing cooperatives, which pay lower taxes.

Under a tax-increment financing, or TIF, deal, new property taxes generated by a development go into a fund that's often used for the project. Tax-collecting bodies like the city, county and school district do not get the increment during the term of the agreement.

Sanders noted that Coralville has come under criticism for its use of TIF and said the Iowa Legislature failed to tackle “meaningful” TIF reform last year.

The Iowa City-Moen deal is a TIF agreement. The city says the value of the property would increase from $569,520 to an estimated $9.8 million with the high-rise.

Moen said the project is moving forward as planned and he is not paying attention to the petition.

“I'm just not even interested in getting involved in the other stuff,” he said.