Tax breaks for upscale office/retail proposal designed to compete with the suburbs

Stiff competition for business in the metro area and the region, says Mayor Ron Corbett, is prompting the city to consider financial incentives for a local developer who is proposing to build a higher-end office and retail complex in northeast Cedar Rapids.

However, council member Scott Olson, a commercial Realtor, says the proposed incentives for the development called The Fountains go too far, will hurt competitors and may go so far as to tip the city to the point where anyone who wants to build any commercial enterprise anywhere in the city can expect a City Hall handout.

Corbett disagrees.

In the development matter at hand, the council on Tuesday will discuss providing local developer Joe Ahmann with a five-year property-tax deal valued by the city at up to an estimated $3.7 million. In exchange, Ahmann proposes to invest an estimated $34 million in his new office-retail development off Blairs Ferry Road NE and Edgewood Road NE, the city says.

Ahmann has said the development will feature 200,000 square feet of office space and 45,000 square feet of "upscale" retail space near the campus of Transamerica Life Insurance Co., formerly called AEGON USA, on 18.5 acres of land that Ahmann is purchasing from the insurance company.

Corbett on Monday called the five-year tax break - a reimbursement of the incremental increase in property taxes that would not result without Ahmann's investment - a reasonable incentive of limited duration.

"It gets down to this: competition," the mayor said. "Hiawatha has been aggressive and Coralville has been aggressive when it comes to commercial property. So Cedar Rapids also needs to compete. Even though we may at times be competing with other communities in the region, competition makes all of us healthier."

The Fountains development is taking place in an area -- which the incentive proposal seeks to define as an "urban renewal area" -- that has seen other recent commercial development, including a Hy-Vee Food Store, which has come without City Hall incentives.

However, Corbett pointed to another Ahmann development along Boyson Road in Hiawatha, where he said Hiawatha city officials provided development incentives, and Corbett ticked off a list of former Cedar Rapids firms that now have moved to that Hiawatha spot.

Corbett also talked about recent struggles that he's had in trying to keep or attract businesses in Cedar Rapids, only to find that the city does not have enough "Class A" office space that some of the businesses have wanted.

"We're losing business because we don't have the appropriate inventory of office space," Corbett said. "Not everyone can afford to buy a Cadillac. And the same is true when it comes to companies. But some have a strong desire for higher-end office space, and we've not had a very good inventory of that."

The mayor cited one recent episode when a company was looking for office space, and one of the recommended options for them was to renovate the former Kmart store site on 16th Avenue SW.

"Companies looking for higher-end space are saying, ‘Thanks, but no thanks,'" he said.

Council member Olson said he favors City Hall incentives for certain projects, such as those in blighted areas, for historic properties, for development in flood-hit areas, in the city's core or at places like the struggling Westdale Mall site.

"But to go and do this. It's going to mess up the market," Olson said.

"This is not an urban revitalization area," he continued. "If we do this project as an urban revitalization area, technically, there's not a single future project that would not qualify under those criteria. So anybody in the city could build anywhere and they could say, ‘We need this new retail mall, or we need this office building on the west side, I want the same tax abatement.'"

Periodically, Olson puts out an analysis of the local real estate market, and he said his most recent report identified 1.1 million square feet of available office space in the Cedar Rapids market, what he said was the highest amount of available space since he began issuing the reports in 2001.

Olson called for a compromise. He said Ahmann has said he has signed on an employer who will bring 100 jobs to Cedar Rapids, and Olson said he favors providing incentives for that part of one of the office buildings that Ahmann proposes to build.

Upon taking office in 2010, Corbett pushed hard to convince businesses to locate in Cedar Rapids' downtown to help with the downtown's recovery from the 2008 flood. In one well-publicized episode, Corbett and the city of Hiawatha competed for the Go Daddy company, which Corbett wanted to move to downtown, but which decided to move to a suburban office park in Hiawatha.

On Monday, Corbett said he still works to recruit businesses to Cedar Rapids' downtown, but he said he also wants to position the city to keep and attract businesses looking for something else.

"If the downtown option doesn't work for them, we need to look elsewhere," the mayor said. "Some people want a suburban location. And that's what this (Ahmann's Fountains project) provides - a suburban setting in the city of Cedar Rapids."