Americans have a penchant if not an obsession for shopping. Two-thirds of the nation’s Gross Domestic Product is attributed to retail activity.
The retail venues come in various forms, from strip malls to big box outlets to on-line sites. But for most communities, the economic engines are the big shopping Mecca’s – malls.
The problem is what happens when those engines sputter and near the end of their retail life? At that point they change from community asset to liability, threatening to spread blight. The circumstance is common to Iowa cities.
Along many major thoroughfares, it is not an uncommon site to see an empty, even boarded up, building of a once grand shopping mall. "For sale" signs – and anxious city officials -- await a developer to step forward and rehab a mall before it falls victim to a wrecking ball.
In Bettendorf, one of Iowa’s oldest malls – built in the 1960s -- was demolished in 2003. Duck Creek Mall had lost its anchor stores, and the life that once was, no longer existed.
Decker Ploehn/Bettendorf City Administrator: “I don't think any community wants to have blight occurring in their community. They want to redevelop those properties, use existing buildings, knock them down, whatever they can do to make something new happen.”
The city of Bettendorf stepped in after a developer requested help to renovate the property.
The help came in the form of Tax Increment Financing or TIF. The TIF deal froze the old value of the property before any renovations were made. Any value increase was given back to the developers in the form of a tax rebate. In the last decade, the property value more than tripled as several new stores, including Home Depot, and Schnuck’s grocery store moved in.
The grocery store was a deal maker as the city wanted to see that side of town bounce back.
The new Duck Creek, converted from an enclosed mall to a strip-style mall, has nearly every store front full. Property across the street is also ready to redevelop.
While Bettendorf used TIF money for retail development in this case, the City prefers to use TIF for industrial and commercial ventures with a better return on the investment.
Decker: “It affects your debt margin, if you're going to issue debt up front. What we would like to do now, kind of from experience, I want to issue the debt for ourselves, the sewer, the street, infrastructure that's going to benefit us. Then let the developer generate the actual tax amount that they said they were going to generate. If it doesn't, you just rebate what the tax is. So you don't have to calculate, you don't have to guess it, its real, but it's done on the backside. You know exactly what the revenue is and what it’s going to generate. So, it’s a little more succinct now than when we first started doing this.”
The city did enter into a TIF agreement with the Isle of Capri Casino to expand the complex to include a new hotel, a performing arts center and a plan to move the casino floor from river boat to land.
Coral Ridge Mall, just west of Iowa City along Interstate 80, will mark its tenth anniversary this year. The mall with many large brand name stores impacted sales and number of shoppers at existing malls in nearby Iowa City – and forced the city to act or lose businesses.
Wendy Ford, Iowa City Economic Development Coordinator: “There is the element of competition, shoppers like to go where things are new and shiny and they feel like it’s a clean and safe and brightly lit place, and usually the ones that are newest draw the more people. So the ones that are older think, gee, we need to spark this up a bit, so everything sort of regenerates.”
The aging Sycamore Mall was sold to new owners in the last decade. Those owners went after TIF to not only update the mall but to shift focus from providing ‘regional’ shopping to serve more of a ‘local and neighborhood’ need.
The city says providing TIF was the right decision. Since the Sycamore Mall was renovated, other businesses have sprung up nearby – helping the long term economic health of the Iowa City.
Wendy Ford: “You have to spend a little money to make a little money. When you look at the long range, or a 20 year time span, for instance, the property tax revenue that come back to the community even after the rebate, are exponentially higher than the property tax revenues that come in an average or run of the mill project. So, we like to use TIF to leverage greater property tax revenues in the future.”
TIF isn't the answer for every proposed mall renovation. For example, another Iowa City retail center downtown took a different approach. When the Old Capitol Mall, adjacent to the University of Iowa campus, was in decline, the entire top floor of the building was sold to the University. Nearly 700 university employees fill the office space.
At street level, retail stores still give the downtown community somewhere to shop between classes or on lunch breaks.
Old Capitol Mall now is nearly full, but it’s a mixed bag for the city. The blight is gone, but not everyone is paying for the upkeep. For example, the University doesn’t pay property tax.
Wendy Ford: “Anytime you can bring back vitality to that, there's a huge psychological benefit to the community.”