Lawmakers probe Coralville for use of tax financing funds
Coralville City Administrator Kelly Hayworth was on the hot seat
Thursday as the Iowa House probed the way the city is using tax
increment financing in its increasingly controversial Iowa River
Landing commercial development.
Retail growth in Coralville has skyrocketed since the city began
using TIF in 1998 to develop land that is now Coral Ridge Mall. The
city has borrowed over $200 million in bonds to be repaid by tax
increment financing, Hayworth told the House Government Oversight
Committee.
The city now is using TIF to finance its Iowa River Landing
commercial project, which last fall landed a Von Maur department
store as its retail anchor. The Von Maur deal, heavily subsidized
with TIF, has raised eyebrows and the ire of neighboring Iowa City,
which has a strong possibility of losing its own Von Maur
department store at Sycamore Mall.
By the time youve opened the store, you have a private
developer with about $20 million in improvements and about $10
million worth of skin in the game? asked State Rep. Clel Baudler,
R-Greenfield. So youve lessened their risk by half on that
development.
Tax Increment Financing is a mechanism under Iowa law that
cities and counties can use to finance public improvement projects
and to fund economic, housing and residential development
incentives. It is based on the theory that the improvements will
increase the local government property tax base, and that the
increment or difference between the original tax base and
post-development tax base, can be used to finance the cost of the
improvement.
Local governments must create a special district meeting
criteria for the TIF program. Local governments and schools
continue to receive property taxes based on the original property
tax valuation, while funds from the increment are set aside to pay
back bonds used to finance the improvements
TIF advocates argue that its a fair exchange for other local
taxing bodies such as schools and counties, because the additional
jobs and investment arguably wouldnt have taken place without the
TIF-financed improvements.
Speaking against Coralvilles heavy TIF reliance were a
coalition of 40 businesses that say they are concerned about the
citys TIF use to fund projects that compete with private
developers, and the superintendent of Clear Creek-Amana Community
School District.
We believe the city should be out of the bricks and mortar
business, said Kevin OBrien, a McDonalds franchisee who spoke
for the Citizens for Responsible Growth in Taxation.
A major target of the groups ire was the citys providing a
grant to its private development partner Oliver McMillan to buy the
Von Maur site for $1.4 million, with an agreement that it sell the
land to Von Maur for a token amount. An attorney for the group
argued that it violates the spirit of the states economic
development grant law.
The group said city-owned and TIF-financed Coralville Mariott
Hotel and convention center lost $3.4 million in years ended June
30, 2009 and June 30, 2010.
Coralville has $11,049 in TIF debt per person, the group argued,
and recently received a debt downgrade from the Moodys rating
service because of the significant leveraging of the citys tax
base and tax increment financing districts among other things.
Developer Hunter Parks of The Hunter Companies said a Iowa River
Landing deal to bring Backpocket Brewing is an example of the
groups concerns. He said the city is proposing to finance the
equipment and building for the microbrewery and bottling operating,
although the company has never before done bottling,.
If they dont make it and it comes back to the city, what is
the city going to do with that (building and equipment)? he asked.
Then it becomes competition, he said, for other building owners
and developers.
Clear Creek-Amana School District Superintendent Denise Schares
said she began hearing community concerns weekly about the
constraining effects of Coralvilles TIF use on district revenues
after she became superintendent about two years ago.
TIF use in Johnson County diverted $2,974 per child in property
tax revenue in the most recent year of tax collections, Schares
said. The state makes up the shortfall to 87.5 percent, she said,
but 12.5 percent to make up to 100 percent impacts our local
taxpayers.
Hayworth began the meeting with a presentation highlighting the
citys use of TIF to redevelop industrial brownfields in Iowa River
Landing, to bring over 1,000 jobs to the University of Iowas
Oakdale Research Park, and to facilitate the headquarters of
Integrated DNA Technologies, a leading manufacturer of synthetic
DNA.
The rest of Johnson County, as well as Scott County and Linn
County, continued to have retail sales growth during the citys
period of TIF-financed retail projects, Hayworth said. He described
the Coralville Mariott Hotel and Convention Center as a major
success for the community to support its hotel industry by keeping
University of Iowa-related conferences in Iowa. Since it was built,
he said, two additional hotels have been constructed and two more
are planned.
Government Oversight Committee Chair Chris Hagenow, R-Windsor
Heights, told other committee members that he isnt attempting to
drive the inquiry to any particular conclusion. He and other
members asked several pointed questions, howeer.
This (Iowa River Landing) is a a very large public project with
a very long term that isnt completely in focus, Hagenow
concluded. He said there are concerns that TIF-financed funds are
being used to compete with the sectoro and that relocating an
anchor store – these things do not occur in a vacuum.t h
Coralville Mayor Jim Fausett, who was not called on to speak,
said he believes the desire of other development interests to get
Von Maur was driving the opposition to the citys project rather
than concerns about TIF. He said two of the business opponents
present had benefitted from TIF projects themselves.
I feel in my mind that they (Von Maur) were going to leave Iowa
City anyway, Fausett said. I know they were in negotiations with
General Growth (Properties, owner of Coral Ridge Mall) and they had
communications with Iowa City.
State Rep. Dave Jacoby, D-Coralville, was skeptical after the
meeting.
Im afraid its a little dog and pony show, Jacoby said. Not
all of the facts are getting out there. Is it a discussion of TIF,
or is it a discussion of Von Maur?
The introduction of a TIF reform bill was expected by many
observers later in the week, if not Thursday.
