Tax rebates offered through an urban renewal district could factor into whether Marsh Inc. will relocate its expansive West Des Moines operations center to Urbandale. The insurance broker’s 1,100-member workforce is currently housed in two leased office buildings in the West Lakes Parkway office park.

Urbandale City Manager Bob Layton said the five-year partial tax rebate Urbandale offers for office development doesn’t violate a “fair-play” agreement it has with several other Greater Des Moines cities because, as part of an urban renewal plan, any business moving into its TIF district would be entitled to it.

Nevertheless, West Des Moines officials aren’t happy about it.

“It’s extremely negative for the entire metropolitan area when cities incentivize businesses to relocate to another community,” said West Des Moines City Manager Jeff Pomeranz. However, he said he agrees that the rebate isn’t a violation of the fair-play agreement that West Des Moines, Des Moines and Clive have also signed.

Urbandale offers a five-year partial property tax abatement for new office development that provides a 75 percent reduction in the first year, which is reduced 15 percentage points in each of the following four years. The abatement would apply to an office park planned at the Meredith Drive interchange off Interstate 80, where Marsh is reportedly considering relocating.

“By going to Urbandale, they get a tax rebate that West Des Moines doesn’t have,” said Gerry Neugent, president and chief operating officer of Knapp Properties Inc., which is Marsh’s current landlord. “It does factor into a decision, that’s for sure.”

Using tax increment financing, cities establish an urban renewal district in which the incremental gain in tax revenues from development is used to fund infrastructure improvements such as the extension of roads, water and sewer lines. Through TIF, cities can pay for infrastructure improvements by issuing bonds that are repaid with the portion of tax revenues gained from the improvements made when the property is developed.

In some cases, rather than issuing debt, cities have used TIF revenues to reimburse developers on a project-by-project basis for putting in infrastructure they otherwise wouldn’t have extended as quickly.

“It accelerates the development and the tax base incredibly,” said Neugent, who said the extension of Mills Civic Parkway and Jordan Creek Parkway was the “first time I had seen a city get way out in front of development, to be able to do it on a scale not typical of developer-driven projects.”

For the city of Urbandale, “probably the main benefit of TIF has been to extend rebates to office and business park developers,” said Paul Dekker, the city’s community development director. Those tax abatements, which are available in a district that encompasses nearly the entire city, otherwise couldn’t be offered to non-industrial projects, he said.

Among the TIF projects that have worked well for Urbandale was the redevelopment of the intersection of 70th Street and Douglas Avenue, which also provided developers some tax rebates for new construction, Dekker said. The city’s newest TIF district, its fourth, was established in late 2004 to spur new development along Hickman Road on the city’s southern border, where Kmart is the only remaining large retailer.

From a developer’s perspective, Neugent said he wouldn’t want to see every city in Greater Des Moines offer rebates. “At some point, if everyone does everything the same, it becomes a zero-sum game,” he said. “It can create some disadvantages for one city over another, but maybe they can provide other advantages or incentives.”

Pomeranz said West Des Moines has had a lot of success without offering tax rebates.

“It’s unfortunate when companies leave our community, and there are impacts on our community,” he said. “However, we haven’t gotten to the point where we’re going to start abating taxes. We take that position because we have such an incredibly attractive community for businesses.”