The construction of a sports pavilion at Corridor Plaza is advancing despite some challenges in securing financing.

Those challenges will result in the city government owning the pavilion for a couple of years until the developer’s financing is secure. However, that will not cause a property tax increase, according to City Manager David Fierke.

“Our intention is that the taxpayers aren’t going to pay a thing for it,” he said.

The City Council voted Jan. 13 to borrow up to $9.5 million to help pay for the pavilion, which is under construction on the South 25th Street side of Corridor Plaza. Fierke said that debt will be paid off by the developer, M & M LLC, of Ankeny.

With a projected total cost of $10.7 million, the project is set to create basketball and pickleball courts, a restaurant and an additional sports-related business.

The pavilion’s financing structure includes a $7.6 million bank loan, which will be supplemented by a $2.6 million forgivable loan from the city and equity from the project’s general partners.

To support cash flow management, the city has also committed to providing $275,000 annually from 2026 through 2031.

Though some financial institutions have expressed concerns about the reliability of projected revenue streams, primarily from court rentals and related activities, the developers remain confident in the facility’s earning potential, according to Fierke.

“When we learned that it was difficult to finance, we thought what else does the city have to do to make this work?” he said.

He said the pavilion, with its expected sports tournaments, will drive traffic to all the other businesses in Corridor Plaza.

“It’s a key element,” Fierke said. “This is the cornerstone piece to Corridor Plaza so it has to get done.”

To ensure that it gets done, the City Council will buy the completed building from Jensen Builders Ltd., of Fort Dodge, the general contractor now constructing it. The purchase agreement would include a $2.6 million down payment from cash designated for the facility from a 2024 tax increment financing bond. Fierke said the sale will be completed in February or March.

The city would then immediately lease the pavilion to M & M LLC. The rent collected from the developer would pay off the city’s debt. The developer would also pay all utilities and operate the pavilion.

The building will be transferred to the developers once their private financing is secure, which is expected to be two years from the date of the agreement. The city will retain the right of first refusal on any property sales in the future.

Fierke said the city is assuming a strategic role in the financing, placing its general obligation behind the borrowing to reduce interest rates.

A legal notice the city placed in The Messenger regarding the borrowing included an estimated property tax increase of $43.97 for residential properties. Fierke said reporting any potential property tax increase is required by state law. He said rent paid by the developer and possibly sales tax revenue collected at Corridor Plaza will pay off the debt, averting a need for a property tax increase.

While the likelihood of relying on the tax levy to make debt service payments is said to be slim, the city’s financial position is supported by various revenue sources: operational income from the pavilion, contributions from the general partners, TIF district revenues, and reinvestment district sales tax revenues.

The pavilion is expected to open this spring, according to Fierke.