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TIF not the right economic tool for building the Hieronymus tower

Editorial

Iowa City Press-Citizen

September 22, 2006

The issue
Hieronymus Square Associates has requested tax incremental financing to help it construct a 13-story residential/retail tower on the southeast corner of Burlington and Clinton streets.

We suggest
Although we support the goal of the project -- to increase the number and variety of people living downtown -- a TIF seems the wrong tool for ensuring that happens.

What do you think?
What else can the city do to ensure that this tower is built in a way the benefits the downtown as a whole?

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It's one thing to rezone to allow a 13-story tower on downtown property that has opened up because of damage caused by the April 13 tornado. It's another thing to propose that the project have its taxes rebated in order to be financially feasible.

We've long held that the market and legitimate safety concerns should dictate whether or not a building gets constructed in the Iowa City downtown. As such, we've been generally supportive of Hieronymus Square Associates' plan to build a $40 million, 13-story retail and residential tower on the southeast corner of Clinton and Burlington streets. A five-story Hieronymus building has long been proposed for the site, but that rather mundane plan took a more dramatic turn when the Hieronymus family recently began partnering with Hodge Construction. When the new development group asked for the property to be rezoned to allow for a building larger than 75 feet, we praised the Iowa City Planning and Zoning Commission for recognizing the unique opportunity even as the commission placed some understandable restrictions on the project.

But now developers for Hieronymus Square Associates are asking that the building be included in a TIF district. Tax incremental financing districts involve establishing a zone in which the taxable value of a designated area is frozen. The main reason to grant a TIF would be to spur commercial development and renovation. The price, of course, is that until the costs are paid, other taxing bodies -- schools, the county, townships, the state -- can't collect taxes at the property's full value.

The Hieronymus developers want a 13-year or $16.4 million rebate plan in which the taxes from the project -- about $1.3 million a year -- would be rebated to the developers. They claim, in fact, that the project would not be able to operate in the black without the rebate.

Suddenly, the debate has become more complicated. Although we don't view TIFs automatically as a four-letter word of economic development, we also don't want to see them used indiscriminately. In the past, Iowa City has used TIFs successfully for the improvements to the Sycamore Mall, the former Plamor Lanes and the 14-story Plaza Towers. But those projects were easily seen as part of a larger purpose -- as a key component of past urban renewal revisions or as a means of revitalizing neighborhoods. The Hieronymus project, as a primarily residential tower with some retail, can't be tied directly to such a vision. There will be indirect benefits, of course, but the city simply doesn't needa 13-story tower downtown.

There are those who say that granting a TIF would allow the city to have more say over the project. When the City Council's Economic Development Committee agreed unanimously to recommend to the City Council up to $16.4 million in tax incremental financing for the project, for example, it also required Hieronymus Square Associates' "best efforts" to reserve space for a 40-unit hotel on the fourth through sixth floors of the building ("Committee recommends TIF break for high-rise," Sept. 12). But there is no guarantee that the increased commercial space would counter the loss of any residential property tax. And, if the hotel fails, then the rooms can be converted into condominiums rather than the type of mixed housing options we're trying to encourage.

Although we would like to see the Hieronymus project succeed and the mix of residents in the downtown area increase, tax incremental financing seems the wrong economic tool for the task at hand.