Krause, city eyeing hotel-motel tax revenue for downtown soccer stadium project

The Des Moines City Council on Monday will consider incentives for a half-billion dollars of developments plannned by Krause+ and partners. (Drone photo courtesy of city of Des Moines)

Krause Group and the city of Des Moines have discussed asking the state to approve the use of added hotel-motel tax receipts to help pay for a downtown soccer stadium and entertainment district. 

City Manager Scott Sanders said he supports the application, pending City Council approval.

Krause, whose holdings include Kum & Go convenience stores, wants to bring a USL Championship franchise to a new stadium. The location is on a Superfund site that once housed DICO, south of the main part of downtown and along Martin Luther King Parkway. The stadium would host other sports events and soccer, with room for festivals and river accesses in the area. 

The Dico Superfund site on the southwest edge of Des Moines’ downtown area. (Map courtesy of city of Des Moines)

The site borders the Raccoon River, which is part of a planned $100 million-plus regional water trails network.

Backers of the project are expected to unveil the latest plans for the site at a City Council workshop Monday, spokeswoman Megan Garrett said. She declined to make details of the development plan or a cost estimate public before that meeting.

The council plans to consider a proposed economic development package for the site Monday, according to city officials.

In draft documents circulated to area business and government officials, Krause officials said they want the city to seek hotel-motel taxes for the project through the Iowa Reinvestment Act. Under that law, the Iowa Economic Development Authority approves reinvestment district proposals eligible for part of a $100 million fund to be used for large-scale projects. Plans have to be approved by July 1, 2025.

The money comes from the growth in tax receipts in a developing area. The city would be the official applicant to IDEA, by law.

The state last year increased the size of districts from the original 25 acres maximum to 75 acres. The Des Moines district is proposed for 65 acres. The reinvestment districts remain in place for 20 years.

The amount of tax support sought wasn’t mentioned in the draft documents, but early discussions included ranges as high as $40 million to $45 million. 

The city’s hotel-motel tax support for the project is likely to be far less than that. “We are still working on the final amount, but it will be much less than $45 million,” Deputy City Manager Matt Anderson said in an interview. 

Anderson said the city staff supports the use of added hotel-motel taxes in the district for the project, pending City Council approval. Because the stadium development would be owned by a nonprofit, it would not generate property taxes that could be used in a tax-increment financing plan.

Last year, Anderson hailed the project as a chance to enliven an area that long had been dominated by vacant, polluted buildings. The broader area to the east of DICO has boomed with townhouse, apartment, and retail development and will have single-family houses.

The reinvestment district would include developments by Krause+, the real estate development arm of Krause Group, and Sherman Associates, which already has developments in the area. 

Pro Iowa, the campaign behind the development, has raised $13.7 million for the project, according to the draft release. 

“We are beyond excited about the potential this project, and others, are creating for our city,” said Kyle Krause, CEO of Krause Group, said in the release. “Des Moines is full of energy, inspiration and enthusiasm. The ability we have to transform the DICO Superfund site as part of this larger development is an opportunity to transform many unused portions of our downtown into inclusive, multi-use spaces for our growing global community.”