Before Bettendorf aldermen approve another round of taxpayer subsidies for downtown redevelopment, they should take a drive along 53rd Avenue and ask themselves: why are businesses paying top dollar to build along the busy corridor without a nickel from city coffers?
If asked, they will hear why commercial businesses flock to 53rd Avenue and avoid downtown Bettendorf: a location with easy access to residents with moderate to high disposal incomes.
Every downtown Bettendorf redevelopment effort over the past 25 years has involved the same uneconomic script: buy existing buildings at a premium, use tax dollars to tear down the buildings, give (or sell below market value) to a developer, then hand out 10-year or longer Tax Increment Financing (TIF) rebates.
When the redevelopment bandwagon arrived in town in 2003, the city bought up several properties along State Street east of 17th Street.
The old Glynn's Tavern (then O'Meara's Pub) was a popular bar and burger business on the south side of State Street. To the east of it was a brick building which housed Shutter's Dance Studio and six second floor apartments. Also along the south side of the street was a dry cleaners.
The city purchased O'Meara's Pub for $160,000, Shutter's Dance Studio for $500,000 and the cleaners for $67,000, and paid an unknown amount to tear them down.
The property was then sold to a local developer for $100,000 and the property subdivided into three parcels. On one parcel, a two-story office building was built at 1805 State St., seven retail/commercial condominiums were built at 1725, 1727, 1729, 1733, 1737, 1741 and 1749 State St., and a three-story mixed-use building was constructed at 1717 State St.
All were given city Tax Increment Financing, rebating of the "incremental taxes" on the properties to the developer for a period of 10 years. The last of those TIF rebates will end in 2017, and will total $1.42 million.
So how did all that work out for the city taxpayers? Assuming demolition costs of $300,000, subtracting $100,000 from sale of the land to the developer, city taxpayers "invested" about $900,000 in the State Street redevelopment.
The two-story office building currently has an assessed value of $2.46 million, the seven retail/commercial condos have a combined value of $2.68 million and the three-story mixed used building is assessed at $1.49 million. That higher property value creates $142,000 in annual "incremental" taxes, and once the 10-year allocation to the developer ends, the city, county and school district will begin getting that money each year.
Dividing the $900,000 investment amount by the annual return (incremental taxes), it will take the city approximately six to seven years, until 2021 or 2022, just to break even on the deal.
Should the assessed value on those properties increase, the payback will take less time. If the values decline before then, the breakeven will take longer.
This rough cost-benefit calculation assumes the city would not have received ANY property tax dollars over the past 10 to 12 years from those existing buildings/businesses which were displaced by State Street redevelopment. And, as your accountant will tell you, the value of one dollar today is worth far more than one dollar 10 years hence.
So, in the case of the State Street redevelopment TIF, the jury is still out until 2022 whether taxpayers achieved a gain.
The latest "Town Square" redevelopment plan involves the same tired formula. This time, the two proposals received from developers also hinge on them obtaining another taxpayer subsidy – tax credits from the Iowa Finance Authority for senior- or low-income housing.
There are sound reasons developers aren't buying up property in downtown Bettendorf and building new commercial/retail stores on their own dime. Repeating the same script for the latest Town Square redevelopment isn't likely to produce any better payback than the 2003 iteration.
The arrival of riverboat gambling, the construction of two hotels and the downtown events center haven't led to a commercial resurgence in the downtown. The arrival of a new six-lane bridge spanning the Mississippi River also isn't likely to change the demographics of the city's old commercial corridor.
When Charleston, S.C. Mayor Joe Riley spoke here at a conference about his city's successful waterfront revival, his message was very simple: make the waterfront an attractive place for people to want to visit and businesses will follow. No incentives needed.
Isn't it time for a new script for downtown redevelopment? One that recognizes the reality of downtown demographics and one that makes use of the the city's greatest asset, the riverfront.
