OTTUMWA — The proposed Bonita Avenue housing development took one step closer to happening.

However, it's not quite there yet.

In taking another run at trying to see the development off the ground, the Ottumwa City Council on Tuesday approved an ordinance that would create a TIF district for the Bonita Avenue Urban Renewal Area, the second step of the process. The final step will come Dec. 7, when a public hearing is held to approve a revised development agreement for the project.

There appears to be momentum for the project this time around. The revised agreement calls for a 20-year TIF rebate to Huegerich Construction, but only a 50% rebate rather than 100%. The half the city would receive would allow it to fund street repairs, planning costs, or any other debts in the urban renewal area as a result of construction.

Also, the development's scope wouldn't necessarily change. The developer has committed to at least one 36-unit building regardless of city incentives, though the plan is for three of them. Many of the units would be rented to JBS employees who are in need of housing.

"No matter what, there's going to be heavy equipment used and there's going to be more traffic on that road," city director of community development Zach Simonson said. "And so I think we'd want to at least improve this for the street repair regardless of whether we approve a development agreement."

Not long after the last meeting, Simonson asked for ideas on an agreement that was more palatable to the council members, many of whom felt blindsided when a previous city employee created an agreement years ago without their input.

"I didn't feel at the last meeting that it was in the best interest in the council to consider something we didn't have a voice in," councilman Marc Roe said. "I said last time if we use TIF that there has to be a win for everybody, and I think there is a potential win for everybody this time."

Simonson said two options for a revised agreement are on the table — the 20-year, 50% rebate agreement, or a 10-year, 100% rebate agreement. The difference matters because the 50% agreement will allow the city to capture more in financing over a longer period, as well as earn revenue in the first year.

"Over a 20-year period, we'd lock in a longer minimum assessment agreement, which means the assessed value that we collect taxes on would be at least the $8 million in the agreement," Simonson said. "A 10-year agreement would reset the assessed value after 10 years, and then the value will likely go down to the appraised value, which is about $6 million.

"So overall, there's more over the 20-year period. More revenue for the city and more value for us."

Council member Sandra Pope asked if property taxes in the area would increase as a result of the development, and Simonson believed that wouldn't happen.

"We wouldn't expect that because there would be added revenues for other things," he said. "There'd be the 50%, including the increment, that would go to school and physical plant levies and other levies. I don't believe this will create pressure that will increase taxes."

Along those lines, council member Holly Berg asked city finance director Kala Mulder how any repairs would be paid for if the agreement wasn't approved.

"We'd either have to use our road use tax funds, which we're trying to get other projects in with, or we'd have to do a capital improvement project and borrow money to pay for it," Mulder said.

Property taxes would go up if the city had to borrow money, Mulder said, which is why she stressed the agreement would capture that tax increment to certify any debt and fund those repairs.

"I think we're in a lot better position with this (revised proposed agreement)," council member Matt Dalbey said. "I've never been opposed to TIF, but it's important we use it for the right things. We need to cover our costs, and that was my whole issue with the 100% rebate."

Mayor Tom Lazio cited that "well over two-thirds of Iowa's cities and over half of the counties used TIF routinely for economic development."

"It's one of the few tools that are left the Iowa Legislature has given us the authority to use," he said. "If you don't do an increment, you don't get any growth. We keep talking about lowering taxes, but you have to have growth to lower your taxes.

"I think it's in the long-term interest of the city to see this through."

— Chad Drury can be reached at cdrury@ottumwacourier.com, and on Twitter @ChadDrury

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