A critical thing to understand about the Freight House proposal that will probably go before the Davenport City Council again next month is that it's not really about that building, or the "public market" concept that's being championed by DavenportOne.

Yes, the building has been an enigma for years, separated from the rest of downtown by River Drive and home to failed venture after failed venture. But the $2-million public-market proposal is as much about having a stable use for the structure as it is this specific project.

"None of that [the downtown area near the riverfront] can be easily redeveloped if the Freight House is out there in flux," said Dan Huber, president and CEO of DavenportOne.

"Without the Freight House transaction, we probably weren't going to do [the] Builders [building]," said Darryl High High, president of the Regency Companies of Eastern Iowa. High's company has options on both the Freight House and the Builders site directly north. Control of the Freight House is essential because of the residential components High wants to develop at Builders, he said.

The premise is that developers of residential projects would be scared away by the prospect of, say, heavy-metal concerts in the Freight House parking lot, or simply the property's uncertain future. On the other hand, a Seattle, Washington, company has a purchase agreement on the old Salvation Army adult-rehabilitation-center building on River Drive. The sale is scheduled to close in September.

The ultimate goal of the market district is to turn the western part of the downtown - the area south of Fifth Street between Warren and Harrison streets - into the "market district," a central-city neighborhood with lots of new residential development, office space, and first-floor commercial uses. DavenportOne estimates that the district could generate $58 million in increased property value over eight years.

And the public-market concept for the Freight House is a good fit, Huber said, a natural extension of the seasonal farmer's markets that use the John O'Donnell Stadium parking lot, and a complement to residential development.

In a different fiscal environment, this would probably have been a no-brainer for the City of Davenport. But when the issue came before the city council in February, it was voted down. In the midst of budget discussions that threatened to include public-safety cuts, the city council couldn't muster enough support for an economic-development project with more questions than answers.

Lou Ann Cedillo, president of the RiverCity Market Association that operates in the John O'Donnell parking lot two days a week, isn't sold on the concept. If a public-market project moves forward, she said, she fears that some of her vendors will be excluded. "I do feel our markets are in jeopardy," she said. "I don't know how I feel about it."

Supporters of the public-market concept might claim that's not a valid concern, but Cedillo's mixed feelings give ammunition to critics who say that the concept hasn't won over the existing farmer's markets, and that planning hasn't incorporated those who are already successful at a public market. The buy-in of farmer's market leaders such as Cedillo should be an essential element of the project moving forward.

There are essentially two other major concerns related to the market-district concept that's been proposed. The first is whether it's a good deal for the city, especially considering that the Levee Improvement Commission would lose significant money because of a revised lease agreement. Another main concern is that DavenportOne is pushing this concept rather than the city council or existing farmer's markets.

Alderman Keith Meyer said he is "really concerned how DavenportOne is playing this out." Beyond that, he said, "I don't really know why it's a good deal for us."

"A Few More Answers"

The Freight House project appeared dead last month, after the Davenport City Council voted down the $15,000 payment to High for a 120-day option to take over the Freight House property.

High is now paying Larry Whitty $7,000 a month for a purchase option, and Regency could pull the trigger on its option - or simply continue to pay $7,000 each month to Whitty - without city involvement. And if High walks away, the city can still develop a public-market project with Whitty or another developer. But at this point, the city is working with High, because he has the purchase option on the building.

The proposal would have given the City of Davenport 120 days to study the public-market issue with the option of entering into a 20-year Freight House lease with High. Under the lease terms, High would pay the city's Levee Improvement Commission between $22,000 and $45,000 a year to lease the land the Freight House is on, while the city would lease back an as-yet-undisclosed amount of space for the public market at a rate of $70,000 a year. The lease-option document the council turned down also included three 10-year renewal options.

An effort to reconsider the city-council vote was thwarted when five alderman walked out of a meeting.

But High is still interested in pursuing the project, he told the River Cities' Reader earlier this month.

"We could have been building this thing in June or July," High said. Now, that's unlikely, and he's targeting opening for the 2007 festival season.

High said that his company is not interested in developing the public-market concept without some sort of assistance from the city. "We need to know if they're going to participate in the public market," he said. If not, he said, his company will need to decide if it wants to try to develop a different project on the Freight House property.

DavenportOne has agreed to fund a feasibility study - up to $20,0000 - on the public market. Tara England Barney, DavenportOne's senior vice president for downtown economic development, said she has identified the New York City-based Project for Public Spaces (http://www.pps.org) as the organization she'd like to conduct the study, and she has a "working draft" of its scope.

The Project for Public Spaces did one study looking at the success and failure of public markets in low-income communities (http://www.pps.org/info/projectexp/ford_market_research). While its results might not be directly applicable to Davenport, the organization "defined a successful market ... as one that succeeds in both its economic and social aspects and can sustain both over the long term."

The Project for Public Spaces also identified three major barriers to economic success, including "unnecessarily high operating costs by having funding for a more elaborate and expensive-to-operate facility than it can support over the long term," "over-dependence on unreliable volunteers," and "poor location."

Some preliminary findings of the Davenport study are expected mid-April, Barney said. After that, the issue will likely go to the Davenport city council. The study won't be complete, but the aim is to "try to get a few more answers on the table," Huber said - such as the nature of the public market, how much it would cost to build it, how much it would cost to operate, and how much it might generate in revenue. Those were key issues that nobody could answer when the vote came up in February.

High said he'd like the issue of city involvement resolved by mid-May. "I don't think we have a drop-dead date," he said. "But if we can't get it [the deal with the city] done in 60 days, then we probably can't get it done."

"I believe it's still possible," City Administrator Craig Malin said on March 13.

Huber stressed that what exists now is the concept of a public market, not a concrete proposal. It will be "molded and scaled to whatever might be feasible in the Quad Cities," he said. "It works conceptually. The question is: Will it really work?"

A Better-Than-Break-Even Deal?

The biggest questions that couldn't be answered in February were: How much would the public market cost, and who would pay for it?

The answers are still not clear, but there are estimates.

Malin told the River Cities' Reader that a public market is not a foregone conclusion, but the city has included $600,000 in its capital-improvement budget for the project in its upcoming fiscal year, and anticipates a total expense of $2 million. The city has also requested $600,000 from the State of Iowa through its Community Attraction & Tourism (CAT) grant program and is also seeking federal funds. The source of the remainder of the construction/development funds has not been identified, Malin said.

Operational expenses will be a function of the project's scope, if it happens. The basic business model is that High will hold a new lease for the Freight House property with the city and will lease a portion of that - the one-story part of the complex and a covered outdoor area - to the city for the public market. The remainder of the property - the two-story portion - would remain under High's control and might be used for something such as a restaurant.

The city plans to have a private entity operate the public market, and the costs of the project would be covered by the market's income along with increased property values in the market district stemming from new growth. According to Malin, the goal would be that those operational and increased-property-tax revenues would even cover the cost of leasing the public-market space back from High. The costs incurred by the city would be defrayed by "lease revenue from the vendors, intergovernmental support (be it county, state, or federal funding), and new revenue increment generated within the downtown (IOC [Isle of Capri] increment, some portion of market-district increment, etc.)," Malin wrote in an e-mail. "No property taxes paid by current residents were/are expected to pay for the project over the long term."

Yet the city's track record with projects outside the normal scope of basic city services - such as the RiverCenter and the Davenport Museum of Art - suggests that it's ill-equipped to manage a project normally taken on by the private sector. Further, the city's history of projecting revenues and costs - for instance, with its poor-performing parking ramps - doesn't inspire confidence. And when a private firm takes over a municipal operation - such as the RiverCenter - the results have not been much more encouraging.

Beyond that, the terms of the proposed real-estate transaction between Regency and the city would lock in more than $2 million in costs over 20 years, both in actual expenditures and lost income.

Under the proposed lease negotiated by the city, Regency Companies would pay the city's Levee Improvement Commission $22,015 annually in the first decade, $31,340 in years 11 through 15, and $44,666 in years 16 through 20. In lease terms alone, the Levee Improvement Commission stands to lose nearly $760,000 over 20 years in this proposal compared to the property's current lease held by Larry Whitty.

High said that considering the property is in a flood plain, the lease between Whitty and the Levee Improvement Commission is "laughable." Whitty currently pays $68,000 a year for the Freight House property, but that comes after paying annual rent of $2,500 for five years and nothing for the five years before that. A developer who assumes the lease at this point doesn't get the benefit Whitty had for a decade, and therefore would actually be overpaying for the property, High said. But this reasoning ignores the substantial capital improvements that Whitty and the city put into the property. Neither Whitty nor High returned messages left for them on Tuesday.

The city would not just lose money in terms of less lease revenue. The city would pay $70,015 annually for the public-market portion of the lease, bringing the total cost to more than $2.16 million over 20 years.

The combination of Regency's and the city's lease payments mean that High will actually end up making between $25,000 and $48,000 a year on the Freight House in its transactions with the city.

DavenportOne argues that the lease money the city would be paying is an investment that will be repaid through increased property taxes throughout the entire market district.

A document prepared for the organization by Vandewalle & Associates projects that the larger market-district project - encompassing 24 blocks - would generate increased property values of $58 million over eight years, nearly all of it coming from new construction rather than rehabilitation. The document does not break down how that number was arrived at, but an accompanying map identifies 36 properties in the "market district" area for redevelopment or rehabilitation. Barney said the projection includes a net gain of 670 residential units and 156,500 square feet of office and commercial space.

Malin said the city has made conservative estimates showing that the city would receive at least $164,000 a year in additional property taxes from new development in the market district. He said the city has calculated that if market-district property values increase $27 million over eight years (instead of the DavenportOne estimate of $58 million), that would result in an increase in gross property taxes of just over $1 million annually. Roughly 60 percent is projected to pay for allowed expenses in a Tax Increment Financing district, while 40 percent would be distributed to taxing bodies. The city's portion would be $164,000 year.

Tax Increment Financing is expected to be a key incentive for residential development in the area. "It's very unlikely much if anything is going to happen without it," Huber said.

Using the city's methodology (of $27 million in increased property values after eight years generating $164,000) and assuming that property values remain steady after the eighth year, the city's total increase in property-tax income would be $2.8 million over 20 years.

In other words, over 20 years, the overall market-district concept would essentially make the city nearly $700,000 in the trade-off between increased property-tax revenue and the combination of lost lease revenue and new lease costs, assuming that property values in the area increase roughly half of DavenportOne's projections.

If DavenportOne's projections hold true, the city would net nearly $4 million in that equation over 20 years.

But while the lease costs are concrete and fixed, those additional revenues are speculative, based on the assumption that the public market will spark new development in the area, reversing a decades-long trend of empty buildings. As Malin said, the city council is "going to have to be comfortable with risk."

A Done Deal?

Another major question about the Freight House public market is its impact on existing markets.

The RiverCity Market Association's Cedillo has mixed feelings. If fees and rent are reasonable, she said, some small vendors and crafters would probably welcome the indoor market. "I think it could be a good thing," she said. "Some of my vendors need to be inside."

Cedillo's organization presently has roughly 100 vendors in the John O'Donnell Stadium parking lot Wednesdays and Saturdays from April through October.

One concern is that some vendors are too large to be a vendor in the Freight House. "I have five stalls at the farmer's market," she said. "There's no way I could get my produce indoors."

Furthermore, she said, some smaller vendors might not be able to afford the rent.

"That's way too premature," Huber said.

Malin said it's too early to be asking operational questions. "It's unfortunate that people are forming opinions on operational matters," he said. The goal of the project is not to hurt the existing markets but to help them. "We wanted to support the farmer's market," he said. "This is to build on the success of and build on the farmer's market."

Barney acknowledged that the two farmer's market organizations that operate in the John O'Donnell parking lot have questions and concerns. She added that DavenportOne has had discussions with those organizations and their vendors over the 18 months of planning for the market district. "We hope they're impacted nothing but favorably," she said.

Cedillo said that she was invited to a meeting with DavenportOne about a year and a half ago but didn't like that the concept seemed limited to local growers and didn't specifically include brokered produce from other areas. "I got up and left that meeting, and everyone knows I did," she said.

And with the CAT grant applied for and money allocated in the city's capital-improvement budget, it's not surprising that some people think that the public market is as good as done. "They know what they're going to do," Cedillo said.

Furthermore, Cedillo said, the city has some leverage over the two farmer's markets that already operate out of the John O'Donnell parking lot. The markets have sought long-term leases from the city/Levee Improvement Commission, but the current leases only run through 2006. "They don't have to renew our leases," Cedillo said.

Malin has recommended that the Levee Improvement Commission extend the farmer's market leases by five years.

Huber said that CAT grants are awarded on first-come, first-served basis, and that the city wanted to apply for the grant even though it hadn't worked out all the details. Furthermore, he said, the city often designates money in its capital-improvement budget for projects that are never completed. "We're a little flattered that people think that because it's proposed, it'll be implemented," Huber said.

At this point, Cedillo said, she feels that input from the existing farmer's markets hasn't been implemented. Meyer agreed, saying that those organizations "never felt that they'd been included in the de facto plans."

But Malin and Huber stressed that the city can and will abandon the public-market concept if the city council doesn't think it will work. "If it's not going to be successful, we're going to walk away from it," Malin said.

And Huber said that while he thinks the city needs to invest more into its downtown, "that doesn't mean people shouldn't challenge the details."

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