116 3rd St SE
Cedar Rapids, Iowa 52401
IOWA CITY - City officials are considering a $1.75 million tax incentive to help renovate the old Von Maur location in Iowa City Marketplace for new anchor tenant Lucky's Market, a Boulder, Colo. natural food grocery store.
Lucky's and the mall - formerly Sycamore Mall - made the announcement in July that Lucky's plans to open in Iowa City next spring.
Jeff Davidson, Iowa City economic development administrator, said providing the incentive - half the cost of the project - will pay off for the city in the long run. The incentive would be in the form of tax increment financing, in which the mall's taxes pay off the incentive over several years.
In this case the repayment would be over six or seven years, he said.
Landing Lucky's will secure other new tenants and stabilize the existing tenant base, and in turn restore lost tax revenue after the departure of the old anchor, Von Maur, to Coralville, Davidson said.
'The reason we are so interested in this is the taxable value of the mall has fallen since Von Maur left,” Davidson said. 'What this will do is it will increase the taxable value back up. That is whey we feel this is appropriate us.”
Iowa City Council will consider when it meets on Tuesday setting dates for a consultation and public hearing in October, which is required to amend the Sycamore and First Avenue Urban Renewal Plan. After those hearings, the City Council can then address whether to move forward with the tax increment financing plan being developed by Davidson's group.
'It is imperative for the survival of a mall to have an anchor tenant since the other leases are relaxed if the anchor leaves,” Wendy Ford, Iowa City economic development coordinator, wrote to City Manager Tom Markus. 'To have an anchor tenant requires an investment in tenant space improvements, which is the anticipated project.”
The mall's value has plummeted under the weight of retailer departures, from $16.4 million in 2011 to $10 million in 2014. An estimate based on property valuation shows the mall's tax contribution declined from $669,778 in 2011 to $367,803 in 2014.
Still, the practice of tax increment financing has come under debate with some saying the tax breaks are too lucrative. Von Maur was lured away to Coralville through tax incentives estimated between $11 and $16 million.
Peter Fisher, who studies tax and budget issues and is research director of the nonpartisan Iowa Policy Project, questioned Iowa City's plan to offer tax breaks.
'Lucky's is picking that site because Iowa City is a good location for their kind of business,” Fisher said. 'It raises the issue of whether it is really necessary. There's also an issue of whether it is fair to existing grocery stores and other retail competing with that site.”
'If they can't come here without subsidies, does that mean the market can't sustain it?” he said.
Fisher also questioned whether it is wise for the city to pick up half the tab of the renovation.
'It does seem problematic to me,” Fisher said. 'I would want whomever is moving there to commit enough of their own money. If you make it too cheap, what's their reason to stay there five to 10 years from now, if they didn't put much money in.”