Iowa regents signal support for CYTown development progress

Iowa Board of Regents meets June 12, 2024. (Photo by Brooklyn Draisey/Iowa Capital Dispatch)

Despite a state lawmaker’s call for caution, members of the Iowa Board of Regents signaled their support Wednesday for Iowa State University’s pursuit of the proposed CYTown development.

The board’s Property and Facilities Committee recommended approval Wednesday for ISU to enter into a lease agreement with an “anchor tenant” and sign a memorandum of understanding with the City of Ames for CYTown.

Plans call for a completed CYTown to feature multi-use district housing, a health care center, retail businesses, office spaces, residential units, a restaurant, an amphitheater and a hotel. The university began planning parking and infrastructure improvements in the 40-acre development area after board approval was given in June 2022.

The first phase of construction, which involve improving parking, installing utilities and raising building pads five feet above the flood stage, is to be completed this fall.

If approved by the full board, ISU will lease 30,000 square feet of CYTown space to McFarland Clinic, a multi-specialty health care clinic with locations in Ames and other communities across Iowa. McFarland would construct a multi-level clinic offering primary, specialty and urgent care to both the ISU community and the public, covering all construction costs as well as utilities charges and certain maintenance fees.

Its lease would stretch 30 years, with rent starting at $50,000 per year and increasing by $5,000 each year. The clinic would pay ISU a $3 million security deposit, which would be returned if the lease is not extended after 30 years.

Once open, student athletes will be able to access imaging services through the clinic, which ISU General Counsel and Chief Risk Officer Michael Norton said isn’t currently available, and orthopedic services. The clinic will also offer after-hours and weekend services to students.

ISU is also working to enter into a memorandum of understanding with the City of Ames to establish payments in lieu of taxes, in which the university will charge CYTown tenants an amount similar to the property taxes they’d pay for private property.

One-third of those dollars would go into a capital improvement fund for rehabilitating the Iowa State Center, which includes Stephens Auditorium, Fisher Theater, Hilton Coliseum and the Scheman Building. The rest would go to an operations fund for CYTown development, and after 20 years a portion of funds would be remitted to the city for its general use.

“So, the CYTown development is built on university property, as you know, and the structure of the development is that the university will remain the owner, of course, of the land and also the buildings that are constructed in the CYTown area,” Norton said in the meeting. “Under current state law, this means that the development as a whole will be exempt from property taxes because it will be continually owned by the university, and like other university property, is not subject to property tax.”

The city will provide water, sewage and electricity services to CYTown, and the city and university will share responsibility for infrastructure improvements around the development area. The agreement will last 35 years, Norton said, from the occupation of the first building in the second phase of the project. Ames agreed to the memorandum in May.

Sen. Herman Quirmbach, D-Ames, sent the board a letter asking them to delay approval of the latest CYTown development efforts. He cited concerns that the project violates state laws that prohibit state enterprises from competing with private enterprises and that, once finished, CYTown could cause other entities to lose business and result in a loss of property tax revenue.

Story County would lose $1 million and the Ames Community School District would lose $2.5 million in property taxes with the construction of CYTown, based on tax rates and valuations of the project, Quirmbach said.

“Under the (memorandum of understanding), ISU will collect — and keep — the share of the payment in lieu of taxes attributable to the school district’s property tax levy but withheld from payment to the school district,” Quirmbach said in his letter. “These amounts will have to be made up by other taxpayers.”

CYTown would also not be successful in funding repair and restoration of the Iowa State Center, which will cost around $110 million, Quirmbach said, citing an estimate from ISU Professor of Accounting Emeritus Sue Ravenscroft that puts revenue over the 35 years of the memorandum of understanding at 40% of the estimated repair costs. Inflation will likely make costs to revitalize the center go up, as well, Quirmbach warned.

In addition to competing with Ames businesses, Quirmbach said CYTown could “undermine the success of the Linc,” a proposed commercial development in downtown Ames.

“I urge you at minimum to pause the further development of the CYTown project until additional legal and economic analysis can be done by independent experts,” Quirmbach said in his letter.

Regent David Barker disagreed with many of Quirmbach’s points, though he said he always appreciates hearing thoughts from legislators. He said he thinks Quirmbach is looking at CYTown as a zero-sum situation, rather than the positive-sum situation Barker sees it as, and he feels comfortable where the project is right now.

“I see CYTown as a unique project. There’s nothing else this close to the stadium in this kind of location, and … has generated national interest,” Barker said. “I think that’s a very different sort of tenant, very different sort of opportunity than being in the Linc, for example, in Ames.”

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