Grayfield tax credit: a boost for urban renewal
It’s becoming all too common.
Driving through towns nationwide, what do you see? Most include the familiar sites: the bustling main street, the quiet residential neighborhoods, and the occasional flash of unexpected charm. However, it’s the vacant properties that usually stand out the most, their empty shells portray a vast contrast to the vibrant life that once existed. These are forgotten spaces, scattered like puzzle pieces across our communities, and they have untapped potential just waiting to be unlocked.
Aging infrastructure and urban sprawl have increased the need for a transformation of these urban spaces to begin. As cities expand outward, older, inner-city areas often face neglect, resulting in deteriorating infrastructure and declining property values. Additionally, the strain on existing infrastructure due to increased populations, especially in larger metro markets, has expedited the need to repurpose vacant and abandoned spaces.
The good news is that redeveloping underutilized urban spaces into mixed-use developments with a focus on transit-oriented design can help reverse these trends and create more sustainable communities! One way that communities can begin to move in this direction is by using grayfield tax credits.
Specific to the state of Iowa, grayfield tax credits have emerged as a critical tool for revitalizing communities and transforming blighted urban areas into thriving hubs of economic activity. By incentivizing the redevelopment of abandoned or underutilized industrial and commercial sites, these tax breaks have spurred job creation, increased property values, and improved quality of life in cities across the state of Iowa.
What are Grayfield Tax Credits?
Grayfield tax credits are government financial incentives offered to encourage the redevelopment of abandoned, underutilized, or polluted industrial or commercial sites. These “grayfield” sites can blight communities and hinder economic growth. By providing tax breaks, governments aim to stimulate investment in these areas, transforming them into vibrant, productive spaces. The benefits of these tax credits, include:
- Economic Growth: Creation of jobs, boost local economies, and increase property values.
- Environmental Improvement: By cleaning up contaminated sites and restoring green spaces, grayfield projects contribute to improved air and water quality.
- Community Revitalization: Transforming blighted areas into mixed-use developments can enhance quality of life for residents and attract new businesses.
- Infrastructure Development: Redevelopment of sites often requires upgrades to transportation, utilities, and other public infrastructure.
Grayfield tax credits typically work by reducing the amount of income tax a developer or property owner owes on a project. The amount of the credit depends on factors such as the size of the project, the level of environmental contamination, and the creation of jobs.
While the specific terms and conditions of grayfield tax credits vary by jurisdiction, they generally provide a significant financial incentive for developers to undertake challenging redevelopment projects.
By incentivizing the cleanup and revitalization of these underutilized sites, grayfield tax credits play a crucial role in shaping the future of our cities and towns.
Not Without Challenges
While grayfield tax credits can be a valuable tool for redevelopment, securing them often presents numerous challenges, including:
- Complex Eligibility Criteria: Meeting all the requirements for property age, vacancy, and redevelopment can be intricate and time-consuming.
- Limited Funding: Competition for grayfield tax credits can be fierce, as many developers seek to revitalize underutilized properties.
- Environmental Remediation Costs: If the site is contaminated, the cost of environmental cleanup can significantly impact project feasibility.
- Economic Feasibility: Even with tax credits, redevelopment projects can require substantial upfront investment, making them challenging for some developers.
- Regulatory Hurdles: Navigating local, state, and federal regulations can be complex and time-consuming.
- Market Conditions: Economic downturns or changes in market demand can affect the viability of redevelopment projects.
Grayfield in Action
The Quad Cities region has been actively engaged in revitalization efforts for decades. A key tool has been the utilization of grayfield tax credits, especially on the former Jumer’s Castle Lodge site located at 900 Spruce Hills Drive in Bettendorf, Iowa.
The revitalization of the “Gateway to Bettendorf” has been a long road, starting in 2016 when Russell purchased the dilapidated property through a tax sale. Fast forward to 2024, Russell has helped to revitalize the area through the development of several on-site properties using gray-field tax credits, including:
- Home2Suites – Bettendorf, IA
63,500 s.f. four-story, all-suite, extended stay hotel featuring 107 rooms with an open lobby area and approximately 4,200 s.f. of community space called the “Oasis”. The Oasis includes communal and individual work zones. - Utica Ridge Retail – Bettendorf, IA
Redevelopment of the former 7-Elevent gas station at Spruce Hills and Utica Ridge Rd to a retail center. Scope included 7,500 s.f. new single-story building and site design. The facility includes four tenant spaces and a concrete parking lot. - KwikStar – Bettendorf, IA
In 2019, Russell worked directly with Kwik Trip to sell 2.37 acres of land to develop a new Kwik Star convenience store at the corner of Utica Ridge and Spruce Hills Drive. Kwik Trip develops and constructs their own facilities, which was completed in 2020. - Courtyard Marriott – Bettendorf, IA
67,263 s.f. new four-story hotel with 113 rooms, a bistro that offers meals, drinks, a full menu, outdoor patio space, indoor swimming pool, fitness room, open lobby area, and meeting room to seat 100 people. This hotel is in the last lot of Russell’s re-development of the 900 Spruce Hills Bettendorf property.
Russell’s team of development professionals diligently worked with the Iowa Economic Development Authority to apply for and receive $700,000 in grayfield tax credits to revitalize the former Lodge site.
The savings received were related specifically to the development of the Courtyard Marriott project, which was originally awarded in 2019. However, due to the COVID-19 global pandemic, Russell was granted an extension on the use timeline for the credits. Once the Courtyard Marriott project was completed in 2024, Russell received the $700,000 tax credit – which was an instrumental funding source for the project to make it happen.
The completion of the the Courtyard Marriott project officially wrapped up the redevelopment of the “Gateway to Bettendorf.”
Ready to Learn More?
Contact Erron to learn how Russell’s full-service team of development professionals can help you revitalize your site!
