Documents shed more light on University of Iowa, Coralville tax deal

CORALVILLE - As questions were being raised over a lucrative tax deal with Coralville, the University of Iowa's head financial officer said the school was caught up in a local dispute and wondered about the 'equity of Coralville's dealings,” according to documents provided to The Gazette.

Meanwhile, the city manager in Iowa City said that he believed politics were at play in the UI-Coralville agreement, which officials in his town have criticized.

'As one who studies these issues locally I believe it was a very specific political process,” City Manager Tom Markus wrote in an April 21 email to Iowa City Council member Rick Dobyns.

He was referring to the payment in lieu of taxes, or PILOT, for a UI Health Care medical clinic that opened in 2012 in Coralville's Iowa River Landing District.

The Gazette reported in March that the tax-exempt UI pays Coralville more than $1 million a year in place of taxes and that the amount is high for the size of the 150,000-square-foot clinic when compared with other PILOTs nationally.

Several hundred emails provided by the UI and the two cities this month in response to open records requests provide more insight into what representatives from those organizations thought of the deal, which was reached in 2010 but did not draw attention until this year. (Read some of the emails by clicking the tabs atop the photographs above.)

The emails also indicate members of the Board of Regents, which oversees Iowa's public universities, have begun asking questions.

They also again bring attention to Coralville's use of financial incentives in 2011 to bring a Von Maur department store to Iowa River Landing.

Four days before the March 16 PILOT story, The Gazette reported that Coralville would have to pay more than half of Von Maur's property taxes as part of its agreement with the company.

On the morning of March 16, UI Senior Vice President and Treasurer Doug True emailed Ken Fisher, associate vice president for finance of UI Health Care, and said, 'I must say that after reading about the van maur deal a few days ago, it makes me wonder about the overall equity of coralville's dealings with assessments of various properties.” (Spelling in all the emails has not been changed for this story.)

Von Maur received $9.5 million from Coralville to build its store, paid $10 for the property and has its property tax payments capped at $150,000 a year plus inflationary adjustments.

The UI paid the city $2 million for the clinic property and each year pays the $1 million PILOT.

In an interview this week, True said he did not recall what he meant in his email but was not saying Von Maur got a better deal than the UI.

'The absolute truth is that's none of my business” he said of Coralville's dealings with others.

Coralville City Administrator Kelly Hayworth said he did not know what True meant in his email.

'We've been very clear in how the valuations were set in the Iowa River Landing,” Hayworth said.

In a March 17 email, after Fisher seemingly favorably compared the value of the PILOT to Von Maur's deal, True replied that is 'true enough ...

but all of this bad feeling about Coralville puts us in the internal, local fight over tif and the diversion of tax support from the schools and county to the city of Coralville. Not our issue, but we are entangled nonetheless.”

TIF refers to tax increment financing, an economic development tool that allows tax breaks for projects. Coralville's use of TIF with Von Maur drew criticism statewide.

Also, the UI-Coralville payment is calculated using the full tax rate for the taxing district, which includes levies for the city and Johnson County and the Iowa City Community School District, but Coralville keeps the full $1 million.

Following The Gazette story on the PILOT agreement, Iowa City Council members asked for more information from Markus, the city manager. On April 24 he released a 52-page report that raised many questions about the deal.

A conference call between several UI and Board of Regents staffers on the matter was scheduled for April 29, according to emails.

'We discussed this last week, however, several Regents have now requested additional information regarding the PILOT program, as the Iowa City administration has been very vocal in directly blaming the Board of Regents for failure to have a consistent policy on PILOTs,” regents Executive Director Robert Donley emailed Mark Braun, UI President Sally Mason's chief of staff, on April 28.

Donley declined an interview request this week, saying he wanted to speak with Iowa City officials before commenting publicly.

Iowa City Mayor Matt Hayek said a meeting with Donley is tentatively scheduled for the second week of June.

In an interview, Markus said that when he referenced 'politics” in his email to council member Dobyns, he meant that he believes Coralville set the parameters for the PILOT agreement.

'I guess the perception I have is Coralville has a very defined direction of where they're going (with Iowa River Landing), and I think they're very driven to develop it ...

and that includes a whole gamut of people there that are committed to developing it,” he said.

Hayworth denied that.

'I don't think there were any politics involved in the process whatsoever, and we dealt with each particular project in and of itself, ...

and I think everyone was treated equally and equitably,” he said.

Dobyns, a physician at UI Hospitals and Clinics, said in an interview he sees the value of the Iowa River Landing clinic to the hospital and its patients, but not the PILOT agreement.

UI officials have defended it by saying the payment in lieu of taxes is consistent with their philosophy to pay taxes on clinics away from the main hospital campus, just as non-profit hospitals must.

Most medical clinics must pay property taxes, even those run by non-profits whose main hospitals are exempt from taxes, according to the state. But UI clinics do not because they are part of state government.

Dobyns said the Iowa River Landing facility is becoming a 'mini-hospital” and is not comparable to the UI's other off-campus clinics, which are for family and walk-in care and are in rented properties.

Regent Bob Downer, an Iowa City lawyer, disagreed and said he viewed Iowa River Landing as more like clinics run by non-profit hospitals.

Iowa City officials have said they would like to see the regents consider a policy to bring consistency to PILOT agreements.

The Board of Regents office has said the only existing PILOTs are with Coralville, although there are service agreements in Iowa City, Ames and Cedar Falls, particularly for on-campus fire service provided by cities, that experts consider the same in nature.

Downer said he would not support a policy because he believes each situation needs to be considered individually.

'And as I've indicated before, I think Iowa River Landing was unique because of the hospitals' need for the facility to be constructed there, Coralville's control over the real estate, and I think the agreement in respect to the payment in lieu of taxes was important to that negotiation,” he said.

The emails between UI officials indicate another PILOT is possible for a potential second clinic in Iowa River Landing.

'Feelings are running pretty deep. This will certainly impact whatever arrangements are made with II when that time comes,” True, referring to a second clinic, said in a March 16 email to UI general counsel Carroll Reasoner and business manager David Kieft.