There is a lot to be proud of in Coralville.

Beginning in 1997 Coralville used a financial tool called “Tax Increment Financing” (TIF) to accomplish an amazing transformation at Oakdale Research Park.  The city also used TIF to improve the area around the Coral Ridge Mall, attracting this regional retail outlet and encouraging surrounding development. 

These two positive projects used the Iowa TIF program as it was intended to be used. The projects were accomplished in broad daylight with cooperation between government bodies and plenty of public input. As a result, the use of TIF spurred surrounding development, helping to create new jobs and a prosperous community. When the projects were completed, the investments were paid off on schedule and the area was improved as a result.

So, what’s the problem?

Somewhere along the line, instead of governing the development process, Coralville began operating as a private developer. Plans and decisions were made in secret, with little or no public input. Instead of open and public meetings, staff communicated with elected officials through one-on-one discussions with no quorum present. (Walking Quorum vs. Open Government) This closed-door process allowed the city to move quickly into high-risk projects heavily dependent on debt financing. The same TIF program that provided the earlier successful projects was used to create an enormous burden of debt related to the Iowa River Landing Project.

Like the Oakdale project, certain aspects of the IRL development fall within the appropriate role of municipal government.  For example, in addition to building the typical infrastructure necessary for private development, the city has used EPA money for soil-testing and removing contaminates (April 27 Press-Citizen story). Unfortunately, instead of selling the improved lots to the private sector, Coralville has assumed the role and the risks of a private commercial developer, along with the position of landlord.

Not a single city-owned commercial project operates at a profit. According to Coralville audit reports, the Marriott Hotel alone loses more than one million dollars per year. And now, in addition to the hotel and office space, the city is planning to OWN an enormous retail space (Apr 24 Press-Citizen story). Incredibly, the total debt for the City of Coralville has already reached $277,394,000! (Apr 28 Press-Citizen story).  With a population of 18,900, the debt equals $14,677 per person, ten times as high as the average city in Iowa. Paying off this debt is dependent on the success of multiple risky ventures, and even if every gamble is successful, the payback period is several decades.

Coralville’s visible progress is parallel to an irresponsible optimist who upgrades to the biggest house in town and parks a large Winnebago in the driveway, all on borrowed money. The relatives are happily impressed until the bankruptcy curtain suddenly drops. As a result of Coralville's high-risk gambles, Moody's Investors Service has already twice downgraded the city's bond ratings. A downgrade in October, 2011, was followed in April 2012 by an additional downgrade due to "underperformance of the city-owned hotel, which has not met its original cash flow projections."  (See Moody's April 2012 Downgrade)  Just as with a personal credit rating, the downgrades will generate higher interest costs and make it more difficult to service the out-of-control debt. (Apr 14, 2012 Press-Citizen story)  (Moody's Rating System-2 pg summary)  Although the City has acknowledged "concern" about the Moody's downgrades, there is as yet no willingness to stop engaging in the high-risk behaviors that led to the downgrades. (Apr 28 Press-Citizen story)