CEDAR RAPIDS — Renovating the Guaranty Bank Building and World Theater, paired with new construction, to create two hotels would be one of the biggest private investments ever downtown and would spur new development, several city officials said Tuesday.

“If you don’t invest in the core of your city and your downtown, your city dies,” council member Dale Todd said. “While these projects historically might have made a council shudder somewhat, they are the kind of projects cities and councils have to do if we expect to compete with East Village and Coralville and all of the other communities out there that would in a heartbeat take the existing businesses we have in the core of our community.”

The City Council voted 8-0 to negotiate public incentives with Heart of America Group for the project on the block at Third Avenue and Third Street SE. Member Scott Olson was absent.

“Once you start projects like this and continue to build upon them, wonderful things continue to happen and they build upon each other,” council member Ann Poe said. “The momentum this is going to provide our community is just so exciting.”

The proposed terms call for the $50.8 million project to receive $3 million upon completion of construction by July 2021 and $10.6 million over 20 years in tax rebates. The tax increment financing district that will support the incentives was created to address blight, so there is no sunset. Iowa law limits economic development-oriented TIF districts to 20 years.

Heart of America Group’s plan would redevelop the six-story Guaranty Bank Building into a 76-room boutique hotel likely under the Courtyard Marriott brand, and a Johnny’s Italian Steakhouse would open in the former first floor bank location. The front of the World Theater building would be incorporated as the lobby of a nine-story modern hotel with 126 rooms under the AC Hotels by Marriott brand. The rooftop would feature a lounge called The Republic.

City leaders noted that despite the size of the public investment, the city gains. The structure of the deal with $3 million coming upon completion is not unprecedented, but not typical.

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“It is a large investment the city is making and a large incentive, but I think it is well supported in this particular project,” council member Tyler Olson said. “These are the kinds of projects that add to the vibrancy that attracts people.”

Among the community benefits justifying the incentive, according to the city:

l Protects the long-term viability of two historic buildings. This includes the 1896-built Guaranty Bank Building and an 1897-built structure that most recently housed Hazzard County Saloon and may be best known for when it housed the Dragon restaurant. The Hazzard County building would be cleaned out and protected under the plan, but redevelopment would come later.

l Creates a unique experience for the downtown and enhances nearby properties making them more enticing for private investment.

l Addresses the need for more downtown guest rooms to draw larger conventions and events to the U.S. Cellular Center.

l Brings additional revenues not typical with retail projects, including $16 million in additional revenue through the hotel-motel tax, property tax base and business district tax.

“The incentive is large but the project is really large and important, too,” Cedar Rapids Mayor Brad Hart said. “It is going to save and repurpose historic buildings in downtown that I’m afraid otherwise would continue to deteriorate and their values would go down and the property tax paid on them would go down.”

Hart credited the 40-year track record of the business behind the plans, noting it is one of only a few developers that could take on a project of this size.

Heart of America Group was founded by president Mike Whalen, a former Iowa congressional candidate who started the Machine Shed restaurant, which has grown to six locations. The company, which has offices in Des Moines and Moline, Ill., has 16 hotels and more than 20 restaurants in the Midwest.

“This project will be classically signatured, blending the classic historic architecture with the new — the World Theater with the Guaranty Bank Building with the new build. And I think it will stand out among hospitality projects in the country,” Whalen said.

l Comments: (319) 398-8310; brian.morelli@thegazette.com