About 10 of Iowa's river towns will share a $600 million pot of state money based on the belief sales tax revenue will rise higher and commercial and residential development will flourish along riverfronts, if protected from flood with sophisticated green and hard infrastructure.
Flooding in Iowa is occurring more often, making the nomenclature 100-year or 500-year flood levels meaningless. The city of Burlington had 500-year floods in 1993 and 2008, a 15-year interval.
Cedar Rapids, which sustained $6 billion of the state's $10 billion flood damage in 2008, led the way in convincing the Legislature to establish a flood mitigation fund.
Cedar Rapids Mayor Ron Corbett, in his 2011 presentation to the Legislature, said the city can absorb 1.25 inches of rain in a day, which is exceeded five times more often since 1950.
Corbett, who was Speaker of the House from 1995 until 1999 as a Republican lawmaker, argued the state should help local governments build flood mitigation infrastructure in order to help itself. Using Iowa State University data, he said the state sales tax in Linn County would grow only 2 percent over the next 20 years without flood protection compared to 3.6 percent growth with flood protections in place. The state would lose about $850 million dollars over that 20-year period, he said.
Corbett suggested the state divert up to 70 percent of the projected increase in state sales tax collected within a city's boundaries to pay for half of its flood mitigation project.
But unlike JFK's public works projects, which required no proof of resulting economic growth, Iowa cities will have to demonstrate it's occurring in two ways to keep the money flowing: Private investment will be measured and must be equal to the state's investment, and the projected state sales tax growth must be met.
In addition, the city must put up a 30 percent match from local public funds and must receive federal government funds for flood mitigation-related projects equal to a 20 percent match, according to the state law.
Although the state will pay for half of a project's cost, Corbett pointed out in his 2011 presentation, the state won't have to find additional funds. It'll just divert anticipated funds for 20 years.
Mad scramble for money
Legislation forming the flood mitigation fund passed in 2012, with first funds distributed in 2014.
The state capped the yearly disbursement at $30 million a year, which won't be distributed evenly among the likely 10 city applicants. The money will be disbursed on a first-come-first-serve basis, setting up a mad scramble to beat out competing claims for the yearly pots of money.
The state heated up the competition by limiting the application period to three years, which ends Jan. 1, 2016.
Cities may issue bonds, up to 20 years, to be paid from state sales tax revenue, therefore the state fund ends in 2035, with a potential total distribution of $600 million.
So far, eight Iowa cities have been awarded sales tax increment grants totalling $453.9 million over 20 years:
- Cedar Rapids, $263.8 million;
- Dubuque, $98.5 million;
- Iowa City, $8.5 million;
- Coralville, $9.7 million;
- Storm Lake, $4 million;
- Waverly, $5.6 million;
- Cedar Falls, $6.6 million; and
- Council Bluffs, $57 million.
From 2019 to 2030 only about $5 million a year is left in the $30 million yearly pots of state money.
The city is requesting $31.1 million from the state, the plan showing it will expend $5.8 million in 2015, $5.7 million in 2020, $7 million in 2022, $9.5 million in 2023 and $3.1 million in 2025.
The city therefore is planning to do the flood mitigation project in 10 years.
City Manager Jim Ferneau said the city plans five bond issues for each of those expenditures, each payment spread out over a 12-year period.
The expenditures are in five big clumps, but the payments will be more even, although "back-loaded" because they are based on the incremental rise in sales tax, the city getting more money in later years. Ferneau said 12-year bonds do not penalize much for back-loading payments. The interest rate does jump for 15- or 20-year schedules, he said.
There will be five bond issues because, "I don't want to commit too far ahead," Ferneau said, leaving the city room to scale back expenditures if the sales tax increase doesn't meet projections.
Burlington's application
The city was hoping to use 2014 as the sales-tax base year to capture the greatest increment, since the fertilizer plant construction in Wever will ramp up in 2015, which is boosting surrounding sales tax, Nichols said.
Although Burlington turned in its application before the first of the year, changes were requested by the state Homeland Security and Emergency Management Department, which oversees the flood mitigation funds, Nichols said.
The Flood Mitigation Board, made up of citizens appointed by the governor, will review the application in mid-February, Nichols said.
If the grant is awarded, Nichols said the sales-tax base will be calculated using the first two quarters of 2015.
Retail sales within the city are the basis of the revenue, as required by state code, Chapter 418, Flood Mitigation Program.
Nichols' projection of sales tax growth is based on historic growth from 2003 to 2014. Annually, retail sales have gone from nearly $262 million in 2003 to more than $303 million in 2014, with dips in 2005, 2010 and 2013 and big rises in 2007 and 2012. The dips and rises average out to a 1.29 percent increase in sales tax revenue per year.
The city may be eligible this year for a $130,000 increment draw and by 2034 a $3.1 million increment draw, according to Nichols' estimate.
The financing, since it is based on retail sales, is dependent on retaining and increasing economic development.
The city, not the state, however, is taking on the risk.
The law states non-public funds, that is, money invested by the private sector in Burlington, will total $31.1 million, equal to the state's investment. The city must offer a report five years into the project and again at 10 years into the project.
If private investment is not up to snuff, "the board shall reduce the governmental entity's amount of sales tax increment revenues eligible to be remitted during the remaining period of time for receiving remittances by an amount equal to the shortfall in nonpublic investment," states the law.
Grant guidelines state the city must put up a 30 percent match, or $9.33 million over 20 years. The city estimates it will spend almost $28 million on sewer separation projects by 2025, which are considered flood mitigation projects by the state.
Of the $28 million, about $21 million is from city coffers.
The 20 percent federal government match, which is $6.22 million, is met by the $7 million to $14 million the city expects to get from the State Revolving Fund, also for sewer-separation projects over the next 10 years.
The SRF mostly is made up of funding from the federal Environmental Protection Agency, according to SRF coordinator Lori Beary.
The federal match can go back to 2008 and up to 2035. Beary said the city got a $4 million SRF loan in 2008 and a $1 million loan in 2013, so only a gap of $1.3 million remains to fill the federal match.
Letters of support
The most nebulous but important match must come from the private sector, which must equal the state's $31.1 million investment.
The grant application includes several letters of support that testify to current and future growth, including those from businesses and the economic development arms of the Greater Burlington Partnership, the Chamber of Commerce, Downtown Partners and the Convention & Visitors Bureau.
"We are seeing unprecedented interest in downtown redevelopment, with nearly $20 million in private investment in the past 12 months and another $15 million underway right now," said Steve Frevert, Downtown Partners executive director.
"Providing flood protection will allow CVB to better promote the riverfront," Convention & Visitors Bureau Executive Director Chelsea Tolle said. "This will, in turn, lead to an increase of visitors attracted to the community and an increase to the $125 million tourism industry in greater Burlington."
The strongest statement came from Commerce & Community Consultants of Moline, Ill., which has developments in the Quad City area.
Principal James Bowman said his development team "is keenly interested in pursuing developments primarily in the Mississippi Riverfront Downtown area and is focusing on market rate residential projects that also will be supported by mixed-use commercial uses. We anticipate investing approximately $15 million in capital that most likely will involve multiple properties."
Flood protection is "critical to the continued growth and development of the community," Bowman said.
"These improvements are essential to our investment decisions," Bowman said, "since they will lessen much of the risk we must prepare for as we undertake both the physical and financial considerations."
Other letters in support but without mention of future financial investment are from Amtrak, BNSF Railway and Burlington Junction Railway.
The city hired Stanley Consultants to write the grant, which performs the service as part of its architectural and engineering business. The company is doing part of Cedar Rapids' flood mitigation project.
Grant writer Melissa Edsill Tiedemann said Cedar Rapids recently landed an 11-story project from a private trucking company, CRST, one year into its flood mitigation plan.
She believes Burlington will have no problem proving private investment.
"Just reading the support letters gave me goosebumps because you know it's going to happen," she said. "You see the potential, given the protection level."
As evident with its portion of the Iowa fund, Cedar Rapids is being aggressive in its approach.
"Cedar Rapids has moved faster in flood recovery than any city in the nation," Cedar Rapids project engineer Sandy Pumphrey said. "It's a big public works project - $570.5 million is the total - and there has been a burst of activity."
The CRST building, Pumphrey said, will integrate a flood wall and pump station into the building.
In addition, an industrial area by the Cedar River received a large Community Development Block Grant, which means more private and public investment, he said.
"The tone has been very positive so far. People were very affected by the 2008 event, and they don't want it to happen again." Pumphrey said.
The city has not begun to address the land acquisition for the railroad closings necessary during big floods, Pumphrey said, "But I expect we'll see some challenges then."
The pacing of construction is dependent not only on funding from the sales tax increment, Pumphrey said, "It's also a balance of not designing too early so plans don't sit on the shelf too long, becoming obsolete, yet making sure they are shovel ready and that we also have enough bidable work but not too much work."
©2015 The Hawk Eye (Burlington, Iowa). Distributed by Tribune Content Agency, LLC.
