The Merle Hay Road gateway into Johnston was the subject of two recent City Council votes that address present and future economic development efforts.


One vote approved tax increment financing for an expansion and new construction at the Lithia of Des Moines Inc. auto dealership at 5200 Merle Hay Road. The project will spruce up the west side of Merle Hay at the south entrance to the city. 


Lithia plans to spend $6 million on new construction and remodeling. After demolishing existing structures, Lithia plans to build a 17,650-square-foot Audi showroom, offices and a service department. Lithia also will remodel the existing Volkswagen showroom and seek U.S. Green Building Council Leadership in Energy and Environmental Design (LEED) certification, according to a city report. The project is expected to increase the valuation on the property from $2.6 million to $6 million and generate $135,615 per year in new property taxes.


As for the future of the 123-acre Merle Hay Road corridor, the council approved a contract with West Des Moines-based NAI Optimum, a commercial real estate company, to provide economic development services.


NAI Optimum President Kurt Mumm said his company will help the city develop a strategy for assembling properties and making them available for development.


"We'll look at the entire corridor, rather than a specific property," he said. "It's a very proactive way for the city to approach the development of this corridor.


The gateway area stretches from Interstate 35/80 north to Northwest 55th Avenue.


"We feel like there is great potential for commercial development and redevelopment in that area," Mumm said.


City Administrator Jim Sanders said the city is not prepared to create an in-house economic development department.


"NAI is well-versed on who's out there looking," Sanders said. "They are involved in the commercial market to advise us of what some of the possibilities are. ... We don't have anybody who's out there looking for those opportunities on behalf of the city. (The Johnston Economic Development Corp.) doesn't have the resources to do that."


NAI Optimum will be paid up to $3,500 a month for its services and will receive a commission of 5 percent of the gross sales price on any property purchased on the city's behalf. In addition to Mumm, brokers Steve Scott, Chris Thomason, Christopher Stafford and Matt Lundberg, along with support staff, will work on the city's behalf.


Johnston made a bid for designation as a state Reinvestment District, which would have resulted in a rebate of the state's portion of sales and hotel/motel tax revenues generated by new development in the gateway area.


However, at the time of its application in March, the city did not know whether the area would be developed primarily for retail or office projects, or whether it would include a hotel.


"If we end up going retail, we wouldn't be eligible," Sanders said. "On the other hand, we would be perfectly happy with a hotel project."


Cities can submit applications again in March 2015, and Sanders hopes that with NAI Optimum's involvement, the city will have a better understanding of how the gateway area will be developed.


"I'm encouraged that (the Iowa Economic Development Authority) has approved three good projects, and for the rest of us, it gives us more time to massage ours a little bit," he said.


Proposals from Des Moines, Muscatine and Waterloo scored the highest among 10 cities that presented proposals to IEDA, whose board is expected to vote next month on projects that will have to submit more formal plans for their developments. The state will make up to $100 million in rebates available for development projects that fit a range of criteria.