Council ponders development incentives for new office building

This rendering shows plans for a building project under way at the former Peoples Church site, 600 Third Ave. SE. (Credit: Aspect architecture:design)

CEDAR RAPIDS — Downtown developer/architect Steve Emerson is investing at least $5.4 million in an office building now going up on the former site of the Peoples Church, 600 Third Ave. SE.

Emerson is seeking economic development assistance from City Hall in exchange for his investment. It’s a common request, but this time the City Council is raising questions about just how generous it wants to be.

“There ought to be something in here for us,” council member Justin Shields said.

The incentive proposal, put together by the city’s planning staff and Emerson, calls for Cedar Rapids to return to Emerson’s company, Progression LC, 75 percent of the new property-tax revenue that will come in from the site over 10 years. The city estimates that the new investment will generate $1.366 million in new property-tax revenue over 10 years. So under the proposal, $1.024 million would go back to Emerson with the city keeping $342,000.

The new building will retain the jobs of 106 employees and result in the creation of nine more, the proposal says.

City Council member Scott Olson, a commercial Realtor who said he supported the Emerson project, nonetheless wondered why the council was being asked to approve economic incentives now with a building that is already under construction. Also, he said, officials needed to pay attention to incentives in the downtown and how they might impact owners of other buildings vying for tenants — in other words, the city needed to be careful it wasn’t simply shuffling tenants from one owner’s building to another’s.

Colleagues Monica Vernon, Chuck Swore and Shields, meanwhile, wondered why the city couldn’t make some requests of a developer as part of a development agreement in which the city is providing financial incentives. Swore and Shields said they wanted some way to know if developers seeking incentives are using local contractors and local suppliers, while Vernon wondered what design review authority the city might be allowed to have.

“We ought to have some say,” Shields said. “What do you get for a million dollars?”

Mayor Ron Corbett asked Jim Flitz, the city attorney, to provide the council with an analysis of what it may or may not ask of developers.

The council then moved the incentive package ahead for further negotiations before it votes on a final development agreement for the project later this month.

Emerson said he is not alone among developers in beginning a project before incentives have been finalized. The proposal now under review by the City Council has been in the works for some time, he said.

He said he’d needed to start construction on the building, which should be open in September, to meet the deadlines of his new tenants.

In terms of the amount of his request, Emerson said he has presented a financial plan to the city that shows the size of the property-tax help he needs in order for the project to “financially make sense.”

“If I don’t get the money, I’m still building the building,” Emerson said. “But if I lose that money out of the project, it will just prevent me from doing developments for the next eight years in downtown Cedar Rapids. Which is not my intent. I intend to keep doing developments down there.”

In answer to Olson’s comments, Emerson said his new building will not simply result in shuffling existing downtown tenants into a new building. One of the new building’s tenants had intended to leave the downtown, one is outside downtown now and one is coming back downtown after leaving in the wake of the Floods of 2008, he said.

Emerson said all of the contractors working on the project are local ones, and many of the suppliers are in the downtown already.

“I’m a downtown freak,” he said. “I will use anybody associated with downtown if I can. … I don’t have contractors or suppliers coming from out of town. That’s not at all what I’m trying to do.”

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Council ponders development incentives for new office building