A first of its kind development agreement to build a parking garage along Fifth Avenue in downtown Des Moines has sprouted another unique feature as the project itself grows along with its price tag.

In 2016, the Des Moines City Council signed off on a development agreement with Mandelbaum Properties in which the city would underwrite operating losses for a parking garage that is part of a development that includes a high-rise apartment building at Fifth and Walnut Street and a commercial building at Fifth and Court Avenue.

The agreement contained tax abatement and tax increment financing provisions that are typical of many downtown development deals. Where it “broke the mold” was in the parking component, Deputy City Manager Matt Anderson said at the time.

On Sept. 10, the City Council approved an amendment to the agreement, and, again, it breaks the mold, creating a facilities fee that will generate at least $1 million for other projects in the strapping Metro Center Urban Renewal Area, in which the Mandelbaum development is located.

Justin Mandelbaum has had some time to tinker with his massive project, called the Fifth, and he has put that time to use, adding parking spaces to the ramp and floors to the high-rise, signing an agreement with a boutique hotel operator that will occupy several floors of the high-rise, and adding to the height of the commercial building.

And during that time, costs have gone up. The agreement the City Council approved in 2016 placed an estimated value of $32 million on a loan that would cover revenue shortfalls at the ramp for 21 years. It is an estimate that could range upward from zero dollars, depending on parking revenues. Few people believe it will turn a profit in its early years. Covering those losses was crucial to securing bank financing for the ramp. Bankers Trust Co. is the lender for the ramp.

That figure could reach $48 million, the new stipulated price tag on the parking ramp that has grown from 564 stalls in the original plan to 751 under the current iteration. Not difficult to imagine when you factor in a cost of $46,547 per stall, and those are two-year-old prices. 

Few people argue about the need for parking along Fifth. Occasionally there is a rumble from Court Avenue merchants about a lack of parking, what with the old Fifth and Walnut garage long demolished and hauled away and the Hy-Vee at Fourth and Court occupying former surface parking lots.

Parking demand also could grow if another high-rise apartment is built, as planned, kitty-corner from the Fifth. The development agreement with Mandelbaum Properties has a clause that says residents of competing apartment buildings can’t be denied parking at the Fifth ramp.

In time, the ramp could spill over with paying customers. For now, the city is taking measures to recoup parking revenues before the first payment is made on the shortfall loan.

Another first is found in the most recent version of the development agreement with Mandelbaum Properties. It calls for the first $1 million in net parking revenues to be paid to the facilities fee created by the city for use on other projects that fall within the Metro Center urban renewal area. Typically, the city would have to issue bonds to pay for those projects.

Additionally, the second $1 million in net parking revenues will go to Mandelbaum Properties to cover extraordinary development costs, provided that Mandelbaum has started construction of the commercial building to the south and the residential tower to the north of the parking garage.

Payback of the shortfall loan is to begin in the 21st year that the parking garage is in operation. Under the revised development agreement, two more payments could be made to the city during that period, with both going into the facilities fee. The first is a $1 million payment that is to be made in the 21st year if certain parking metrics are not met. The second is a $250,000 payment in the 26th year that will be made if those metrics are not met. Both payments would be separate from loan payments.

The agreement also calls for 100 percent of tax increment finance revenues from commercial spaces in the garage to go toward the residential tower rather than to pay down on the shortfall loan.

The city will forgive nearly $6.8 million of the shortfall loan if a certificate of completion has been issued for the residential tower. If the certificate has not been issued, the city will forgive nearly $3.7 million of the loan.

Also under the agreement, the start date for construction of the parking garage has been moved to Oct. 16, with the completion date extended to Aug. 16, 2020. The commercial building south of the garage and the residential tower are to be under construction Oct. 31, 2019, with the commercial building completed Oct. 31, 2021, and the tower Sept. 1, 2022.

Currently, the project calls for the 751-stall garage, a three-floor theater building and a 39-story high-rise that will have a boutique, art-oriented hotel that will be branded and managed by 21c Museum Hotels.