City pays $450,000 in failed 2007 effort to save Westdale

CEDAR RAPIDS - Add $450,000 in cost to the city's long-standing effort to figure out a future for what became a dying and is now the former Westdale Mall.

In late April, the City Council reshaped its property tax incentive package to add a loan guarantee that Frew Development Corp. said it needed to keep at its $90-million-plus transformation of the mall property into an office-retail-residential center.

The same month and without public comment, the city acknowledged in a court document that it paid $450,000 as part of a settlement in a legal dispute at Westdale Mall reaching back to 2007.

Back then, eight years ago, the City Council and former City Manager Jim Prosser were working to attract a private developer to buy and re-imagine how the mall, then in foreclosure, might become something new, something like what Frew Development is now attempting.

In the 2007 dispute, two entities that owned 'outlots” or property on the periphery of the mall site sued the city after the council agreed to establish a temporary development moratorium.

The council and manager thought the city's chances of attracting a developer for the entire site would be hurt if they let smaller, easier-to-develop parcels be sold or redeveloped while leaving the hardest part, the mall proper, as is.

Kevin Caster, a lawyer for Shuttleworth & Ingersoll PLC in Cedar Rapids, said Tuesday two owners of outlots, Ditman Partners LLC and CRSC LLC, filed the suit against the city in October 2007, arguing that a sale of their property fell through because of the moratorium and related actions. Eventually, the property sold for a diminished value, he said.

The moratorium put in place in March 2007 was abandoned by the end of 2007 after the city gave up in its effort to lure a redevelopment firm to the property. Some in the public, too, had told the City Council that they wanted Westdale Mall to stay as it was, believing it would see a retail resurgence, which never came.

Caster said the property owners who sued the city initially sought a larger amount and said that the $450,000 settlement was a compromise.

In the agreement, which the city provided Tuesday, the city acknowledges the payment of $450,000 as part of a 'compromise settlement” in which those bringing the lawsuit agreed in April to release the city from any further liability. The city did not admit any liability.

The agreement and payment came to light when Carol Martin, a longtime citizen follower of Cedar Rapids government, spotted the payment in the city's bills and asked the City Council about it last week.

City Council member Pat Shey was on the council back in 2007, and Tuesday recalled being a 'reluctant” supporter of the moratorium.

'I go back to the original decision, thinking (without the moratorium) somebody could piecemeal off the outlots and then you end up with squat there,” Shey said. 'We were trying to maximize the value of the place.

'This wasn't an easy vote for me, because a lot of times you just want the private sector and the market to get it done. But there weren't any suitors until Frew stepped up” in 2012.

Shey said Frew's current investment - with all of the mall except for anchor stores Younkers, JC Penney and the former Von Maur store already demolished - is a welcome result.

'It's always been important to the public that something happen with Westdale,” Shey said.