The Gazette covers City Hall, now a flood-damaged icon on May's Island in the Cedar River

Alliant Energy seems a good guy in the birth, death and new life of the Osada building

In Alliant Energy, Brian Fagan, Chuck Wieneke, City Hall, Jerry McGrane, Justin Shields, Kris Gulick, Monica Vernon, Pat Shey, Tom Podzimek, Viewpoint on March 30, 2008 at 9:19 pm

Last week’s City Council meeting began with a talk about City Hall taking yet another stab at streamlining how it does business with developers and builders.

Making the presentation to the council was John Helbling, an Alliant Energy expert on a management efficiency process known as LEAN.

Once again, as in years passed, Alliant is loaning Helbling’s services to the city free of charge.

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Deeper into last week’s meeting, the subject turned to the failed low-income housing project, Osada.

Down the line on the City Council, council members – except for Chuck Wieneke — enthusiastically endorsed a rescue plan for the empty, visible, five-story building. The plan is designed to provide some local incentives that developer/builder Fred Timko says he needs to convert the 67 loft apartments in the building into 58 loft condominiums.

For Wieneke’s part, he said he didn’t like the creation of a $700,000 pool of money — which will be funded from new property taxes based on Timko’s renovation investment — so that Timko can offer breaks for those buying condominiums ranging in price from $100,000 to $200,000.

The other council members said the incentive made sense because Timko’s venture comes with no little risk to him and comes with great potential for the city if the Osada building doesn’t sit empty.

Wieneke continued on, saying that Alliant Energy should be paying to create some or all of the $700,000 pool of money, not the city. By Wieneke’s count, the city was paying too much and Alliant was making out too well.

No one on the council agreed with him.

In the two days after the council meeting, it seemed to become clear that no one is lining their pockets with profits among those who previously invested in the Osada project.

Both Mark Thompson, legal counsel for the Iowa Finance Authority, and Tom Aller, president of Interstate Light and Power Co., Alliant’s energy subsidiary in Iowa and Minnesota, both assured as much.

The road to here began back in the 1990s when Cedar Rapids community leaders wanted to create more low-income housing, and an entity existed, the MidAmerica Housing Partnership (MAHP), to manage it once it was created.

As continues to be the case today, one way to create financing for low-income housing projects is through federal tax credits. A private entity puts up money for a low-income project and recoups its money by paying less tax using tax credits.

Using that tact, what now is known as Alliant Energy Investments provided about $3 million to help pay for the renovation that turned an old empty warehouse into the Osada low-income loft apartments, explained Alliant’s Aller. Alliant then received federal tax credits to reduce its federal tax bill over time as a way to recoup what it has spent on Osada.

What is known now is that the Osada idea didn’t work out. Last fall, MAHP failed, and though some of its properties were kept alive by a new entity, the Affordable Housing Network, the Osada project did not survive. It needed to many repairs and it had too little cash flow to pay its bills.

The community’s choices for Osada were two: let it go bankrupt and let the Iowa Finance Authority get stuck with it; or figure out a way to redevelop it.

 The Timko proposal then emerged for him to buy the building for $3.1 million – it’s appraised at $3.3 million, council members said last week – and for Timko then to pay to renovate it for $3.5 million more.

But who gets the $3.1 million?

The Iowa Finance Authority’s Thompson reported last week that the authority, which holds the mortgage on the Osada building, is owed about $1.9 million on the project with another $200,000 forgivable loan also in question.

By the way, Thompson added that no deal has been inked yet to sell the Osada building to Timko, who is part of an entity called BPI -GRR LLC.

Meanwhile, Alliant’s Aller explained that the federal requirements on some of the Alliant tax credits used to pay for Osada architectural work have been satisfied. However, the strings connected to other of the tax credits involved in the low-income housing project have not been. The U.S. Internal Revenue Service will want money from Alliant now that Osada has failed, he said.

In proposed numbers used by council member Wieneke at last week’s council meeting, Wieneke said the Iowa Finance Authority will receive $1.6 million, Alliant $1.5 million and the city nothing from Timko’s $3.1-million purchase price.

The Authority’s Thompson said he hadn’t given up on getting $1.9 million and Alliant’s Aller said Alliant, at the end of the day, really doesn’t get anything.

 Aller said whatever comes Alliant’s way in the sale to Timko is headed to the IRS and elsewhere. There’s also $100,000 going to helping-service agency Four Oaks for stepping in to manage and oversee the breakup of MAHP properties; $200,000 to the city for low-income housing; and there are vendors who provided service to the property that need to be paid.

If the IRS takes less rather than more, Aller said Alliant will send the money back to the city or the community.

“And when that distribution of money is done,” he added, “there will be zero dollars left for anybody, including Alliant.”

Council member Wieneke last week focused on the investment made through City Hall in the past for the Osada project.

According to a tally rounded up by the city’s Community Development Department, the city steered just over $1 million to the Osada project. About $380,000 of that amount was federal dollars from the U.S. Department of Housing and Urban Development that passes through the city, and $225,000 was a revitalization tax exemption. A total of $350,000 was an outright grant of city tax dollars.

The Iowa Finance Authority’s Thompson noted that the authority has other outstanding debt from the former MAHP that it will have to eat along with what it won’t get in the Timko deal.

As for Aller, Alliant is a publicly-traded private company that doesn’t rush to say it might have lost money. In truth, the final tally of who lost what won’t be known for months if not a year.

Council member Pat Shey, a bank officer who recused himself from debate and voting on the Timko proposal because his bank is providing financing to Timko, said late last week he’s sure Alliant isn’t profiting. The last thing Alliant needs is a headline saying it made money off the failed Osada project, Shey said.

Council member Brian Fagan was quick to step in last week to disagree when Wieneke suggested that Alliant wasn’t doing enough.

Fagan said the city didn’t want to send any signal that might discourage the use of federal tax credits in the future to help increase the low-income housing stock in the city.

Council member Monica Vernon said it was important to leave an accurate perception about Alliant, which she said has done much good as a “major player in this community.”

The city has new projects on the horizon, she added, and private-sector support from the likes of Alliant is going to matter.

Both Vernon and Justin Shields both applauded the Timko redevelopment plan for the Osada building, both wondering who would have done it if not him.

“A lot of people had the chance to line up,” Shields said, adding the city even could have bought the property. “Mr. Timko put up his money.”

Council member Jerry McGrane called the coming Bottleworks condominiums “a great opportunity to rebuild that neighborhood.”

Council member Kris Gulick said the city incentives will allow Timko to make a reasonable return on investment for a risky venture.

Council member Tom Podzimek called the condominium project a testament to the “smart growth” that the council is promoting. City snow plows must travel more than a mile to pass 58 households in a typical city neighborhood; here those 58 households will be in one place, he said as he imagined the inexpensive cost to deliver that the plowing service.

Don’t get Alliant’s Aller wrong: He said the company’s initial role in the Osada project wasn’t an outright gift of money. The company expected to cover its upfront payment over time with tax credits.

“But this project would never have happened unless the old IES Co. (now a part of Alliant) hadn’t put up the $3 million to begin with,” Aller said. “And at the time, we were trying to be a good citizen. Everybody wanted to do the project. The vice president (Al Gore) was there as I recall.

“But the point is sometimes projects don’t work.”

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  1. I thank Council member Weineke for attempting to protect the taxpayers. One thing is certain, the City of Cedar Rapids has shown it can not be counted on to support low income housing. I hope the Federal Government will keep the Osada Mess in mind when thinking about giving Cedar Rapids any more low income housing money. Many people still wonder why the City sat by for years knowing that Osada had problems but did nothing to help save the Project.

  2. I find it all very comforting that all the players that still exisit can make nice over a terribly flawed project. Wienke’s being skeptical of where the money went is at least comforting, because there are lots of questions that need to be answered. The failure of the former housing project is but one, has anyone looked to see why, with low income folks doubling up all over town and privately held Section 8 housing filled to the rafters why or how they managed to have a 70% occupancy rate? Did any of those people who were in charge have their feet held to the fire for this failure? It isn’t so much that Timko is getting the building after the fact, it is more it shouldn’t be available in the first place. That housing is still needed for low income people and it isn’t being replaced. What is happening is similar to other inner city neighborhoods in other large metropolitan areas, poor people who have established themselves and the way they could get along in the inner city are now being pushed to the outside edge of town or at least further away from the center of town where they could make the available transportation systems and assistance agencies work for them. Where they have lived in squaller for years because the cities they reside in have pretty much written off these parts of the citiy as ghetto’s and only provided the very least in city services. Now the ugly head of energy shortages is raising its head, and smart people want to be closer to where they work so the process to re-establish the inner city as a silk stocking district is upon us, so shovel out the poor and make nioe for the rich and powerful who want to spend big bucks for condos. So we see all the back slapping, and hand shaking taking place about how the good ole city fathers have rescued OSADA from the trash heap they created by not watching what MAHP was doing with the money they were getting and how the rates of occupancy had gone to 70%. Lets not forget, while this bankruptcy process was going on, people were still trying to live in a building where all the maintenance crews pulled out and finally the trash dumpsters were taken away months before the resettlement took place. The television news casts were suppose to prove just how bad the building was and leaving the public to conclude the people who lived in these places were closer to animals than human beings for letting things go like this. The reality was quite the opposite. Where would you go with your trash if the dumpsters had been pulled months before and you had no transportation or way to move it elsewhere? How can you expect things to be in tip top shape if the management wasn’t keeping up on the maintenance well before the organization folded. Had some whistle blower not discovered the organization was mis-appropriating federal money and gone in to repair that damage, the whole lot of that board of directors would probably be hearing from the court system. The city is also responsible since this organization was a pass through conduit for money from the Federal government that came to the city. I think Chuck deserves two thumbs up for not rolling over on this one, even if it wasn’t much, it did give some pause to what has happened.

  3. It looks like the citizens of Cedar Rapids have at least one Councilperson who will stand up for what they want.It’s about time that the rest of the Council did the same.
    The way I see it,Cedar Rapids really isn’t going to make anything off of this deal.
    When we were petitioning for a new form of city government,I envisioned one that would work for the people,not against them.If I had known it was going to be the same old thing,I would have never gotten involved with the Chamber of Commerce on the petition drive.Again,all the city is taking care of are the rich and famous.Oh well,what can we expect when we have an ex-Mayor heading the Chamber and telling the Council what to do.Maybe we should start with Mr.Prosser and get rid of the whole bunch except for Chuck Wieneke.He’s the only one who is using common sense and is looking out for the people.

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