C.R. approves $1 million incentive for former church site

CEDAR RAPIDS - In mid-February, City Council members wondered if they were being asked to give developer Steve Emerson too big an incentive for the three-story office building he's constructing on the site of the former Peoples Church, 600 Third Ave. SE.

But after a closer review of the development proposal, the council has decided that a 10-year property tax break, using a process known as tax increment financing, makes sense.

Officials estimate that the 45,000-square-foot building will generate $1.366 million in new property tax revenue over 10 years, and 75 percent of that money - $1.024 million - will be returned to Emerson to help cover his cost to develop and build. The city will see the remaining $342,000 in new revenue over 10 years and the full amount after that.

City Manager Jeff Pomeranz said Cedar Rapids had received very little property tax revenue from the site when it was a church with a parking lot next to it.

Council member Scott Olson, a commercial Realtor, called Emerson's project important to the downtown and the city, though initially he thought the 75 percent tax break seemed high because it would lead other developers to expect the same if they built something downtown.

Member Kris Gulick, president of the Iowa League of Cities, said David Swenson, an Iowa State University researcher who has studied the use of government incentives, has suggested a “but for” test: “But for the incentives, would the project get done?” he asked.

Gulick also said Emerson is taking on more risk as the first developer to build a new office building downtown in several years.

Colleagues Monica Vernon and Pat Shey concluded that giving similar incentives to the next developers willing to build on land in or near downtown - sites that aren't generating much property tax revenue now - might not be a bad position to be in.

“That may be a good problem to have,” Shey said.

Emerson has put the size of his total investment in the project at $9.6 million. He said he would continue to build the structure without the property tax break, but that would leave him unable to continue his other development work in the downtown. Those projects include the Town Centre and Palmer buildings.

Emerson has said his new structure, which he has called “a very high-end, class A building,” is keeping tenants downtown who were planning on leaving and it is luring other tenants to the area.