The city of Cedar Rapids’ use of a “community benefit” standard to justify providing tax breaks beyond its standard incentives to an array of development projects has sparked a community conversation.
The latest is an Indianapolis developer’s $32 million plan for the long dormant “Banjo block” at the corner of Fifth Street SE and Fourth Avenue SE, next door to the downtown library and Greene Square. The large development is set to include dozens of housing units, recreational amenities and retail space.
Making the project financially feasible means providing an estimated 20-year, 100 percent property tax break for the project, with an estimated value of $5.2 million. That’s well beyond the city’s standard tax incentive, which provides a 50 percent tax break for 10 years.
Because of the project’s potential for injecting new life into a stagnant but strategic block, and for its addition of housing and a parking garage that will serve other properties, the city found the project’s “community benefit” justified a larger incentive.
That’s caused some heartburn. City Council member Scott Olson, who supported the project, warned that using the less-than-precise community benefit standard could open a “Pandora’s box” of projects claiming similar benefits while seeking larger and larger incentives. He also worries how such incentives will affect existing developments.
We agree with city leaders who contend they need flexibility when it comes to landing unique projects that push the financial feasibility envelope and need additional incentives. A good example is the plan to transform the former Guaranty Bank and World Theater into a pair of hotels, an ambitious project that couldn’t happen without the community benefit option.
And the truth is, an estimated 20-year break may be shortened if a development’s value rises more quickly.
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At the same time, we take Olson’s points to heart. Although the city insists community benefit projects have been relatively rare, we can see how they easily could become a trend and not an exception.
We’d like the city to fill in some of the gray areas of its community benefit threshold with clarifying criteria that helps the public better understand why projects are receiving larger incentives, while still sustaining a measure of flexibility for city leaders. Clarifying the benefit standard would also provide an explanation to developers who don’t make the community benefit cut. We’d also like to see more checkpoints within these agreements, where the city can provide a periodic public update on a project’s performance and the council is given a chance to re-evaluate incentives. Openness compliments the city’s open-for-business image.
City staff and council members should not let the allure of impressive projects cloud the reality that standard city incentives already are generous, and community benefit projects should remain rare. Prudent restraint can also yield community benefits.
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