City amends TIF deal with Mohrfeld

FORT MADISON – The Fort Madison City Council voted to amend a development agreement with a local developer Tuesday resulting in an upfront loan payment that will come from the city’s Highway 61 fund.
Michael Mohrfeld, president of MM Real Estate, asked the city to amend an original Tax Increment Finance development agreement from 2014 for public infrastructure as part of the company’s Innsbrook Addition just south of Bluff Road, between Crescent Lane and 33rd Street.
The project has about $469,000 left in it and Mohrfeld asked  the for about half  of the remaining project up front with the remainder of the project paid out through the end of 2035 in refunds on the increased or “Incremental” tax achieved with the development of the property.
TIF projects are set up for the development of typically blighted property. A base value is set for the property prior to development and then the developer gets to keep the incremental property tax for a period of years to encourage infrastructure development within a governmental jurisdiction. The city claims the taxes on the improvements and then, typically pays the developer back for work on public roads, storm sewers, and the like.
Mohrfeld said this is the second phase of the original agreement and about half of the infrastructure work is already done, but they never triggered the second half of the agreement. He said this frees up some capital for additional infrastructure work.
The city approved the measure 5-1 with Councilman Matt Emmett voting against it, saying the city is taking an enhanced risk loaning the money against the work. Councilman Rusty Andrews abstained due to his employment relationship with Mohrfeld.
The amendment extends the completion date and repayment to December 31, 2035. It also gives Mohrfeld until Oct. 31, 2026 to complete and dedicate all the public infrastructure of phase 2 of the project to the city, along with a certificate of occupancy of one home in the project.
If Mohrfeld completes the above criteria, then by November 30, 2026, the city will pay the company an advance equal to the lesser of either 50% of the certified costs of the infrastructure project, or $234,388. 
Mohrfeld would also have until Dec. 31, 2031 to complete a total of six homes, according to the amendment. Anything less than that would halt city TIF grant payments back to the company until the loan, or advance, is paid back.
City Manager Laura Liegois said the amendment isn’t uncommon, and is allowable under Iowa Code Section 403.19. But it does carry regular risk that is present in most TIF developments. The city made upfront payments under a TIF district with the former Boulders Inn and Suites and that project came in as scheduled.
“He has an agreement right now that was approved back in 2014 and he wants to finish his project, plus he has another project he's working on that we'll be bringing another kind of development agreement forward in the future,” Liegois said.
“He would need to finish all of this project first and have one house built before we issue payment.”
Liegois said some cities are okay with fronting part of the project to developers and some don’t like to.
“We have done this historically in the city before and it is a risk when we do things like this because we hope that it does turn out and things follow through. We’ve been very fortunate in our projects of things coming to completion.”
She said Mohrfeld has many projects in the city that have added to the housing inventory.
“In all his developments he's creating homes. He's creating houses for people and creating opportunities for people. He’s also creating a wide variety of housing from really nice apartments, to people who want the condo, to those people who want a single family home. I mean, he has a very big gamut of things he's doing.”
In other action, the council:
• set a public hearing for Oct. 21 at 5:30 p.m. for an amendment to city code to restrict parking on 24th Street from Avenue H to Avenue L.
• approved the appointment of Jim Plate to the city’s Historic Preservation Commission.