Developing Dilemma

The City of Davenport is no stranger to tiffs over development, but perhaps none has been as strange as this: Turn lanes and stoplights have put a stop to development of some of the hottest commercial property in the Quad Cities.

In February, THF Realty of St. Louis bought approximately 70 acres of land southwest of the intersection of 53rd Street and Elmore Avenue, across Elmore from Super Target and Best Buy, and north of the American store. THF plans to plop Barnes & Noble, Dick's Sporting Goods, and other retailers on the land, projects that would generate a lot of money for the developers and local governments.

Yet the land sits undeveloped because of vague legal language that led to a dispute over some relatively inexpensive lanes of roadway and a traffic signal. This in turn has led to a debate about city development policy and long-term road needs, with the city on the defensive even though legally it has the upper hand.

Arguing over a few hundred thousand dollars in infrastructure improvements might seem petty - and considering tens of millions of dollars at stake, it is. "In the great scheme of things, this is not a big deal," said Steve Schalk, the local attorney representing both the property's current and past owners. "It's not a $20-million" dispute.

But this is no small matter, either. As Davenport Director of Community and Economic Development Clayton Lloyd put it, "Other developers are viewing it with interest. Is a precedent being set?"

In other words, developers want to see if the city caves in to THF.

STANDING FIRM?
In many ways, Davenport has already given in to THF. The city originally stood its ground and tried to force THF to begin approximately $625,000 in improvements required by 1997 ordinances that changed the land's zoning from agricultural to "planned development district." In February of this year, the city set an April 2000 deadline for construction to begin on road improvements.

THF, which purchased the land from Davies Development Group in February, argued that the ordinances only specifically required about $400,000 in improvements, and that other developers weren't shouldering infrastructure costs. Then in April, THF President Michael Staenberg proposed a package of more than $1.7 million in infrastructure improvements.

If you're confused, that's probably intentional. THF Realty and attorney Schalk have expanded and obfuscated the issue so much that what was originally in dispute now seems irrelevant.

It's not, though. The city could - and perhaps should - cut off negotiations and give THF an ultimatum: Either develop the property with the improvements the zoning ordinances require, or abandon the project. Lloyd said that even if THF nixes its plans, it could still be forced to make the improvements.

And if THF walks away, no big deal. Another developer would likely swoop in.

But that scenario is unlikely. "Negotiations are still continuing," said city attorney Mike Meloy. Even though Meloy said the city wants to resolve the issue quickly, "there is no time deadline."

Schalk was more optimistic. "I think we're making progress," he told the River Cities' Reader last week. "I would assume it would be resolved in the next 30 to 60 days. ... Both sides have moved a lot." (In June, though, Schalk claimed that the city and THF had reached an agreement about each party's responsibility, which Davenport officials denied.)

Staenberg claims the city has not yet responded to his April proposal. "We're waiting to hear back from them."

"What do you want us to do?" Schalk echoed. "To try to get an answer is impossible. It gets frustrating."

Staenberg pledged that until all issues are settled - whether by agreement or in court - he won't proceed with any part of the development, including the $400,000 in improvements that all parties agree are required by the ordinances. "We're not doing anything until everything's resolved," he told the River Cities' Reader on Monday. "I'm not going to piecemeal this thing."

THE DISPUTE
The city and THF agree that the 1997 ordinances mandate that THF is obligated to make and pay for infrastructure improvements that will cost about $400,000 before development can begin on the site. But two provisions of the re-zoning ordinances are disputed.

The first is pretty clear - in practical terms, if not in the precision of the language. One of the zoning ordinances requires that a driveway into the retail development off 53rd Street be built (as an extension of Elmore Circle). The problem is that the ordinance doesn't say who will pay for it.

While the ordinances specifically put the costs of all the other improvements on the developer, the description of this particular construction project contains no such language and does not specify at whose expense the improvements will be built.

That's the main reason that THF has so far refused to comply with the ordinances.

Meloy argues that re-zoning ordinances always put requirements on developers, not the city, because changing land use creates a need for infrastructure upgrades. "It's clear it [the disputed improvement] was put in the ordinance as a condition," Meloy said. THF's argument that it's not responsible for the entrance "doesn't make sense" in the context of re-zoning ordinances, he said.

Furthermore, "some of the things [infrastructure improvements] came only because of the way they wanted to develop," said Dee Bruemmer, the city's director of public works. The city originally objected to allowing direct access to the shopping center from 53rd Street, but Davies insisted. THF is saying it shouldn't have to pay for something it wants to have.

Technically speaking, THF is correct in claiming that the ordinance doesn't require the developer to pay for the entrance. But it doesn't say the city will pay for it, either, and the Road Fairy has not yet appeared.

Lloyd makes a common-sense argument: The ordinance states that "the developer can't proceed until it [infrastructure improvement] happens." And if the city's unwilling - and that much is certain - the developer will have to bear the cost.

Lloyd added that writing an ordinance that spells out a condition without specifically assigning the cost to the developer is "not common, but it's not unprecedented."

The second dispute is a little trickier. One of the ordinances provides that the developer will build an extra turn lane for westbound 53rd Street traffic turning south on Elmore. That will require shifting through-traffic lanes north on both sides of the intersection. But the ordinance doesn't say from what point to what point the developer is responsible. THF says it will construct that through lane on the eastern side of the 53rd and Elmore intersection, but it doesn't think its responsibility extends farther west, to the fire station. The city disagrees. THF could possibly get this condition thrown out in court because of its vagueness. City officials claim they are confident the city would win if it took THF to court to enforce the provisions of the ordinances.

A LARGER ISSUE
THF's argument all along has been that the obligations put upon them by the zoning ordinances aren't fair, and are more than what other developers have been required to do. "The real problem that THF has is that other guys - Target - got away without doing anything," Schalk said. (In dealing with the City of Davenport, the company that built Target, Minnesota-based Ryan Construction, was also represented by Schalk.) The attorney added that some improvements aren't even necessary yet: "These extra lanes were for full development. We need these lanes in 10 to 20 years."

(The premise of Staenberg's $1.7 million proposal, however, is that the improvements mandated by the ordinances won't even fully fix existing problems at the intersection, which he claimed "fails" now. City officials say he's wrong.)

Fair or not fair doesn't change the basic fact of this situation: THF is legally obligated under the ordinances to make certain improvements. However, THF has done its best to sidestep the legal issue by asking important questions: Who should be responsible for infrastructure improvements necessitated by new development? Does the city have a clear, consistently applied policy assigning those costs? By raising these issues, THF hopes to offset - at least in part - its current obligations.

THF's questions deal with fairness, and the city has simple answers.

"The developer should be responsible for projected impacts," Lloyd said. If a retailer is expected to increase traffic, the developer will be responsible for making enough improvements to roadways and traffic signals so they can handle the extra burden without significantly increasing delays.

"The principle is they keep the intersection at the same level of service," Bruemmer said. "Your development will not impact traffic" delays. The city feels it has applied this policy consistently, noting that, contrary to what Schalk has regularly claimed, Target was required to build an additional lane on its side of Elmore Avenue for cars to decelerate. Target didn't have to make as many improvements because "there was nothing out there," said City Traffic Engineer Jon Krieg.

(Schalk also complains that the Village Inn restaurant was not required to make any improvements. City attorney Meloy said the two aren't comparable situations, because the restaurant sits on only an acre of land and doesn't generate nearly as much traffic.) But it's difficult to gauge how evenly this development policy has been used because each case is unique and takes into account many factors. Certainly, some developers have gotten off easier than others, just by the nature of the inexact process. That doesn't make it fundamentally unfair.

THE $1.3 MILLION QUESTION
This would still be a dispute about a mere $225,000 except for an audacious public-relations move THF President Staenberg made on April 27, 2000.

"To isolate and argue over the ordinances neglects the actual problem," wrote Staenberg in a proposal to the Davenport City Council. In other words, screw the ordinances. Let's do something bigger. "The ordinances do not address and do not readily resolve the problems of the 53rd Street corridor," Staenberg wrote.

Instead of abiding by the ordinances, Staenberg proposed that THF would make about $1.725 million in improvements. THF would eat $400,000 of that cost (representing what it claims are its obligations under the ordinances), but the City of Davenport would pay for the rest over 5 years, with an interest rate two percentage points above the prime lending rate. Staenberg claimed that the city could save $1 million by doing all these improvements at once, instead of on an as-needed basis.

(The proposal also included provisions to revert the property's assessment from commercial to agricultural - saving THF and former owner Davies Development "a couple hundred thousand dollars" in property taxes, Schalk said - but that has since been taken off the table because it's a county rather than a city matter. Davies filed a lawsuit, and Staenberg said that issue "has been resolved." Davies and THF claimed that the property's value should not have been reassessed as commercial because development was not and is not complete.)

"We believe this proposal allows the gateway of development in Davenport to proceed, correcting the ills of previous administrations," Staenberg concluded in his proposal, "and allows the city to proceed in a conscious effort to ameliorate the problems confronted by the 53rd Street corridor, both now and in the future."

The proposal raises another important question: Shouldn't the city make infrastructure improvements to address long-term needs, rather than spending more money with a piecemeal approach? Governments have long favored quick fixes that are cheaper in the short run, but more expensive over time. Staenberg's proposal gave the city the opportunity to appear forward-looking.

But the proposal might actually be a bad idea. One difficulty in assessing the situation is that the City of Davenport hasn't run through its simulators the traffic that the 53rd and Elmore corridor will be generating in the future. Traffic engineers have only modeled the traffic they expect from stores that are already planned, not those that might be there in five or 10 years. "The rest of that traffic has never been modeled" by the city, Bruemmer said. (THF paid for its own traffic study, projecting future traffic patterns.)

Basically, city officials are studying whether THF's proposal will meet what the city sees as future traffic needs. Bruemmer seemed skeptical. "They say they've fixed this for all time," she said. "Look how much land there is to be developed."

THF's claim that its proposal solves the problem in the long run is "far from the truth," Krieg said. "They're only focused on their developments."

A more important issue is why the city would even consider the proposal in the first place. Unless 53rd Street becomes more of a throughway - a road people use to get from point A to point B without stopping - all additional traffic will be going to and from future commercial developments. And according to city practice, any necessary improvements would therefore be paid for by the developers.

THF in fact, would get a free pass on its Super Wal-Mart development northeast of the 53rd and Elmore intersection under its plan. THF's proposal even labels one map "Improvements Needed for Development of Wal-Mart Center."

So the city would be spending a lot of money for things that developers - including THF for its Wal-Mart project - would pay for under normal circumstances. And it would lose negotiating power with developers because it didn't hold THF to the provisions of its ordinances.

THF has thrown out various ideas for the city to pay for its plan - including using property taxes from the area or special assessments (the most likely option, which would funnel money from retailers through the city and back to the developer). But they merely avoid the issue: Why should taxpayers fund what city policy says should be footed by developers?

And how would THF fare under its proposal? It gets off spending $400,000 - which is the least it's going to be out under any circumstances - gets out of paying for any improvements necessitated by Wal-Mart, and then makes a profit on its road-construction loan to the city. Not a bad deal. For THF, anyway.