Iowa City debating whether to use city funds to acquire homes bought after the flood

Should people who bought homes in a flood-prone Iowa City neighborhood after the 2008 flood receive buyouts from the city?

That's a question the City Council is facing. Iowa City has a stated goal of purchasing all the homes in areas inclined to severe flooding, but that is being tested by a proposal to use city money to buy a handful of homes in the Parkview Terrace neighborhood that have changed hands since the flood.

The prospect that some of the post-flood homebuyers are looking for a way to make a quick profit, and possible city budget cuts, has left some council members cool to the idea.

“I personally am not interested in buying out somebody who bought after the flood,” council member Susan Mims said.

Soon after the flood, Iowa City officials targeted homes in Parkview Terrace and on Taft Avenue along the Iowa River for buyouts using federal and state funds, saying that's the only way to ensure those homes don't flood again.

Not everyone wanted to sell, however. Of the more than 130 homes in Parkview Terrace, the city has acquired more than 65 and hopes to eventually get up to 90.

City officials have said they would try to purchase the other homes as they came on the market in the years to come.

The owners of about five Parkview Terrace homes purchased after the flood are interested in buyouts, said David Purdy, the city's flood recovery specialist. But because they bought after the flood, they are not eligible for the federal and state funds.

City staff included $500,000 for city-funded buyouts in the five-year capital improvement program under consideration by the council. The council is expected to discuss the matter at budget meetings this month.

Council member Regenia Bailey argued for the proposal, saying that the city has said it would continue to purchase homes and it doesn't make sense to toss that aside when presented with a different situation.

Council member Terry Dickens said with the council looking to cut up to $3.5 million from the capital improvement program, that buyout money is not a high priority for him.

Also, Dickens said, the homeowners “knew what they were doing when they bought the house.”

Part of the issue may be the timing so soon after the flood. Jeff Davidson, the city's planning and community development director, said it may be more acceptable to some people if the homes were lived in for at least a few years and then came on the market.

Davidson said the city is not in negotiations with any homeowners for city buyouts so he doesn't know their motivations, but he speculated some were looking to make a profit by purchasing the homes cheap after the flood and either renovating and selling them or getting a buyout.

City officials would not disclose the names of the interested owners or the addresses of the homes because no offers have been made.

Stan Moore bought the home at 504 Manor Dr. in February 2009 and rents it out but said he is not among those who have inquired about a buyout. He paid $60,000 and renovated the home. It's now assessed by the city at $114,020, down from $158,100 before the flood.

“If they want to give me top dollar, I'd probably sell it,” said Moore, 55, of Fairfax. “Otherwise … it's a really nice property.”

Charles Jones, 27, has bought three Parkview Terrace homes since the flood and lives in one, rents one and has sold another. He said he is not interested in a buyout.

The owners of four other homes bought post-flood did not return messages seeking comment for this story.

Purdy said some of the owners bought homes before a second round of federal buyouts was made available, and when they found out about the new buyouts, they asked if they were eligible.

Davidson said if the city moves forward, they would consider each buyout on a case-by-case basis.

The city has offered 112 percent of a home's pre-flood assessed value for those purchased so far. Davidson said the city would not be restricted by that number in a city-funded program.

That presents the possibility of the city paying less than what it currently would but more than the new owner has invested in the home. That means taxpayers could save money, compared with the federal program, while the homeowner turns a profit.

“That's an interesting scenario,” Mayor Matt Hayek said, adding that he had not yet formed an opinion on the issue.