Council approves Merle Hay Mall IRA amendment to support arena, volleyball and pickleball plan

The Urbandale City Council on April 15 approved an amendment to the Merle Hay Mall Iowa Reinvestment Act (IRA) plan so the project can shift scope and pursue upfront municipal financing backed by future sales and lodging tax rebates.

Aaron DeYoung, Urbandale's economic development director, told the council the original IRA award (approved in February 2022) allocated $26.5 million in future sales-tax and lodging-tax rebates for redevelopment of the Merle Hay Mall campus. Under the amendment the mall's previously proposed four-sheet ice facility will be reworked: the Yonkers space would host an arena, the north parcel would host a volleyball training and competition facility, and the former Coles location is already operating as a pickleball facility.

DeYoung said the amendment requests two principal changes: (1) authorization to use a future municipal bond (paid from the IRA's future sales and lodging tax rebate stream) to pull construction dollars forward in a single financing rather than waiting for incremental rebate flows, with a notional bond range in the application of $16 million to $20 million; and (2) removal of a hard condition requiring a developer on the central Merle Hay Tower parcel by the end of 2026, a target staff now regards as unlikely to be met.

DeYoung told the council the 28E entity that administers the award (a joint body including Urbandale, Des Moines and Polk County) planned to forward the amendment to the Iowa Economic Development Authority (IEDA) board; Des Moines had approved the change the prior week. He said the IEDA is expected to acknowledge receipt and consider the amendment at its May or June meeting.

DeYoung emphasized that approval of the IRA amendment would not bind the city to issue bonds; the amendment instead allows the project team to seek IEDA permission to pledge future rebate receipts as the source for a municipal bond. He said the city will complete further due diligence on construction cost, future sales performance and financing structure before any subsequent council decision on a municipal bond or TIF commitments. He also said Urbandale staff have discussed possible shortfall assistance with Des Moines and Polk County should actual rebate receipts fall short of bond debt service.

Council discussion and next steps

Council members asked about likely users and tenants; DeYoung said Drake Hockey and college- or club-level hockey groups were among likely arena users and that a professional volleyball organization had expressed interest in using the volleyball facility for training and ticketed events. Members asked whether mall ownership had shared financials; DeYoung said the mall had not yet provided full financing documents and that those would be part of the city's due diligence.

DeYoung summarized due-diligence tasks the city will undertake if IEDA approves the amendment: updated redevelopment plans from mall ownership, private equity and loan commitments, a commissioned sales-performance study, confirmation of retailer/tenant commitments, and drafting of a development agreement and TIF structure. He also said the 28E entity planned to meet the Thursday following the council meeting to formalize its approval before submitting to IEDA.

Vote

The council recorded a motion and roll-call approval of the council letter associated with the IRA amendment request (Council Letter 8,150 as shown in the meeting packet), and the motion passed on the council floor.

Why it matters

If the IEDA approves the amendment and Urbandale's subsequent due diligence supports the financing plan, the city could accelerate construction by issuing a municipal bond backed by future IRA rebate receipts rather than waiting for rebate flows to accrue. That approach shifts financing risk and will require further council decisions on agreements, bond structure and potential intergovernmental shortfall assistance.