Iowa City approves $2.5 million loan for high-rise building

IOWA CITY - Iowa City will put $2.5 million into a new downtown high-rise building.

The City Council voted 6-0 Tuesday night to approve a $2.5 million tax increment financing agreement with developer Marc Moen for a 14-story structure he plans to build on the Pedestrian Mall.

The $10.7 million building, at 114 S. Dubuque St., is to have retail space on the first two floors, three floors of offices, and condominiums and apartments above.

It's the type of project city officials have been pushing for, and staff and the council's Economic Development Committee recommended the council approve the agreement.

“In the short term, it seems like a risk, but in the long term, it's a real benefit for the city,” council member Connie Champion said.

The $2.5 million will be given as a forgivable loan at the start of the project. The city will sell bonds to cover the cost, which Finance Director Kevin O'Malley estimated at closer to $3.8 million when interest is included. It will take an estimated 18 years to repay the debt.

Under a TIF arrangement, new property taxes generated by a development go into a fund that's often used for the project.

Tax-collecting bodies like the city, county and school district do not get the increment during the term of the agreement, which has led to opposition of TIFs from some people and organizations. Critics also argue a TIF is often unnecessary for a project to move forward - and if it is needed, then the project is not viable on its own.

Council member Jim Throgmorton asked Moen and city staff several questions about whether the TIF was justifiable in this instance. Moen has said the project would not happen without the financial assistance, and an analysis done for the city confirmed a $2.5 million gap in funding.

City staff estimates the value of the property, now home to a Wells Fargo branch, would increase from $569,520 to an estimated $9.8 million with the high-rise.

In exchange for the money, Moen must include in the building housing that is affordable to young professionals and three floors of high-quality office space, both priorities for city officials.

The agreement also requires the property and Plaza Towers, an existing 14-story building by Moen, to have minimum assessed values of $5.76 million and $1.27 million, respectively.

Moen wants to start construction this summer to have the building finished by August 2013.