City, PCI deal amounts to $13 million

A 75-page development agreement between Cedar Rapids and Physicians' Clinic of Iowa for a regional medical mall boils down to this: Property-tax revenue generated over 25 years will pay off the $13.24 million debt the city will take on for the project - $8.04 million for a new parking ramp and related costs and $5.2 million for street modifications.

The agenda for tonight's City Council meeting puts the development agreement on the consent agenda, meaning the council approves it without discussion.

Mayor Ron Corbett said the proposed agreement poses no financial risk to the taxpayer and would have passed easily weeks ago but for the controversy over closing a portion of Second Avenue SE.

The council also will vote tonight for a third and final time on closing Second Avenue SE from 10th to 12th streets SE to accommodate the new medical building.

The council has voted 6-3 to close the street on two previous votes, and Corbett has said support for the closure hasn't changed.

The development agreement is between the city; PCI, which is termed the 'employer'; St. Luke's Methodist Hospital, which will own the land for the development and is termed the 'developer'; an entity called PCI Regional Medical Mall LLC; and one called PCI Parking Garage Inc.

This is likely the first time that City Council-approved tax-incremental financing has been used in Cedar Rapids for a medical-services development, Corbett said.

Historically, tax-increment financing in Cedar Rapids has been used for industrial development. Two exceptions in recent years have been for an updated Hy-Vee Food Store at 1556 First Ave. NE and for home redevelopment in the Oakhill neighborhood.

The central financing idea of the development agreement does not take into consideration that the city, county, school district and smaller taxing entities receive property-tax revenue from buildings currently occupied by PCI - four buildings and one floor of a fifth building, according to PCI's website. The Cedar Rapids Assessor website puts the combined value at $19.4 million, which generates about $700,000 in property taxes each year.

City Council member Kris Gulick said the premise of the agreement is that the buildings vacated by PCI will house other companies that will pay the property taxes.

In the agreement, PCI agrees to have the medi­cal facility open by Jan. 1, 2014, with an investment of at least $40 million in the facility and parking ramp, and employing at least 315 people fulltime then and five years later. The average wage, excluding the salaries of physicians and the chief operating officer, must be at least $18 an hour.

The street improvements called for, upon the closing of Second Avenue SE, are:

• Convert 13th Street to two-way between Second and Third avenues SE, and convert Third Avenue SE to two-way between 13th and Eighth streets SE. Total cost: $700,000. Completion date: June 1, or 60 days after the closing of Second Avenue SE, which is expected to be April 1.
• Widen 10th Street SE to five lanes from First to Third avenues SE and convert Second Avenue SE to two-way between 7th and 10th streets SE and between 12 and 13th streets SE. Total cost: $3.4 million.
• Improve, extend or relocate sewers, water lines and power lines. To­tal cost: $1.1 million.

The plan to turn Third Avenue SE into a twoway street - one lane into downtown and two lanes out - is a lessexpensive option and one proposed by the city's traffic engineers.

A traffic study by Anderson-Bogert Engineers and Surveyors of Cedar Rapids recommended that motorists find new routes without major street changes once a portion of Second Avenue SE closes. Later, the Anderson-Bogert study recommended a more costly widening of Third Avenue SE to accommodate two lanes of traffic in each direction between 13th and Fifth streets SE. The cost of that work, which is not planned, would have been an estimated $2.7 million.

On Monday, the city said it would charge St. Luke's $466,877, plus $23,343 in closing costs, for handing over the twoblock stretch of Second Avenue SE, plus 11th Street SE between First and Second avenues SE and two alleys.