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Cedar Rapids, Iowa 52401
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CEDAR RAPIDS - Cedar Rapids leaders are looking at expanding an already generous tax break program for a high-dollar project for the third time this year, OK'ing up to $4.4 million in tax breaks over a 16-year period for a $30 million apartment building on the old Loftus Lumber site in the gateway to the New Bohemia District.
Illinois developer Richard Sova's project - a four-story, mixed-use building with 146 market-rate apartments, 186 covered parking stalls, a raised courtyard, and 8,000 square feet of commercial-retail space - serves a community benefit, as defined by the city's economic development program, because it provides much needed urban housing and puts a long vacant property back to use.
'I'm a happy guy,” Sova said after the meeting. 'That's the (incentive) we negotiated. It is going to make the project work.”
After much consternation about breaking from standard practice - the third time so far this year and seventh since 2014, with at least two more on the horizon - the City Council voted 7-0 Tuesday, with two council members absent, to negotiate an agreement based on the proposed terms.
The agreement would tentatively be finalized by votes in August and September, although some council members called for more information and clarity before they vote 'yes” next time.
‘6 years extra'
The project is plotted on Third Street SE between Ninth and 10th avenues SE.
Building that project at that site - taking up the entire block - is an expensive proposition, Sova said. The covered parking alone costs more than $4 million. If not for the additional money generated by extending to 16 years - beyond the city's standard 10-year, 100 percent break for housing - the project wouldn't have worked financially, he said.
The timeline calls for construction beginning in October with completion in January 2021.
Several council members said they want further clarification of the 'community benefit” program, which is a flexible category allowing city leaders leeway in awarding tax incentives. The incentives are paid out through tax revenue generated from increased property value through a financing tool called TIF, or tax increment financing.
State law caps TIF use - which sequesters taxes from other jurisdictions, such as the city general fund, schools and the county - at 20 years.
'When we see a 10-, 12-, 15-, 20-year abatement, that's a lot of taxes,” council member Scott Olson said. 'I'm in kind of an awkward position. While I support the project, I want to vote for the project, (but) what I'm uncomfortable with is we need to make sure we're all on the same page when we start doing these longer-term incentives. And I'm not saying that this project doesn't need the six years extra.”
The Cedar Rapids economic development program includes nine options based on community needs, such as for historic preservation, urban housing, providing high-quality jobs and redeveloping large retail spaces.
For those, developers know if they meet those specific needs, they can receive a 10-year, 100 percent tax abatement for a housing project or a 10-year, 50 percent for a non-housing project.
The community benefit is the 10th option, as a catchall for projects that go beyond the others.
'Part of the success of our program is its reliability or predictability, would be a better a better way to put it,” council member Tyler Olson said. 'Perhaps, we update what our current standards are, you know, in the face of a new reality, and then also kind of continue to dig in on what defines community benefit.”
Jennifer Pratt, the city's community development director, noted the city only uses the community benefit exemption if a project meets two criteria. It must be a project the City Council has said it wants, and the developer must open its books to show the project cannot be completed without the additional incentive.
She noted of the 91 times economic development incentives have been awarded since the program was created in 2014, the community benefit exemption has only been used seven times.
She said the council will have the chance to make alterations this fall as part of the annual review of the economic development incentive program.
City staff and council member Ann Poe noted the incentives are not based on the number of years, but rather the financial gap or dollar amount needed to make the project work.
No low-income units
Council member Ashley Vanorny requested some of the units be made affordable for lower-income rentals. Sova told The Gazette later the cost was simply too great to incorporate such units.
Former Mayor Ron Corbett spoke at the meeting in favor of the development, saying this was one of the easy 'yes” votes council members likely envisioned making when they ran for office.
'You have a chance to do something no other council has been able to do - secure a development for that site,” he said.
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