Some downtown business owners and city officials said renovating a former bar space and turning it into a retail spot is a step toward diversifying downtown Iowa City. And they’re willing to use public money to help fund the investment.

The former location of Vito’s, 118 E. College St., is set to be gutted, revamped, and offered as an option for national retailers and office space.

Members of the Iowa City Economic Development Committee voted 3-0 in favor of the project Tuesday; local business owner Marc Moen recently purchased the property to take on the project.

Moen said the 9,000-square-foot space is in poor condition, and he expects to fully rehabilitate the space, including putting on a new roof and supplying specific needs for whatever business sets up shop.

The project is expected to cost roughly $2 million, and city officials have agreed to provide the venture with $250,000 in tax-increment financing.

Councilors will only provide the funds if Moen agrees to not place a restaurant or bar in the space. The city grant will cover roughly 12.5 percent of the total cost.

The city estimated the building will generate roughly $31,250 more annually in property taxes under Moen than the space does currently.

Mayor Matt Hayek said the building is in need of repair, and the city’s good working history with Moen made officials comfortable with the plans.

"The city wants to capitalize on any opportunity to strengthen the office and retail landscape," Hayek said. "I think it will substantially improve [the downtown]."

Vito’s previous owner, Mike Porter, was unable to be reached for comment. The bar, along with several others, closed in the wake of the 21-ordinance, which banned underage patrons from the establishments after 10 p.m. City code also limits where bars can open — keeping them 500 feet from existing ones.

When voting to implement the 21-ordinance, city councilors cited health and safety as key reasons. But they’ve also explored diversifying downtown for years.

A 2007 analysis indicated downtown Iowa City needed more diversity, noting an "oversupply" of bars. Officials said they hoped that the 21-ordinance could bring in non-alcohol-driven venues, like the one Moen is proposing.

After that report, city officials contracted with the University of Northern Iowa Regional Business Center for a $45,000 feasibility study to determine which businesses would succeed downtown.

"I think the hope — my hope — and I think the city’s hope is that this will be a ripple effect, and rather than bars and restaurants and student housing, we can show there’s a market for retail and Class A office space," Moen said.

He said he anticipates bringing in a national-brand store, though he could not clarify any specific stores he was looking into.

Several of the retail options left downtown when the Coral Ridge Mall opened in 1998. Between then and 2005, the number of venues serving alcohol downtown increased from 27 to 43, according to data former UI Provost Peter Nathan compiled in a study of alcohol accessibility near campus.

Other business owners have approached the city about further developments, Hayek said.

"We are certainly hoping Mr. Moen’s [venture] jump-starts similar interests," said Jeff Davidson, the city director of planning and community development. "We’d certainly like to see that."

Other local business owners said the project mirrors the ideas of business owners downtown.

"I think that there is a desire to bring in things that are more diverse than what currently exists," said M.C. Ginsberg, the owner of M.C. Ginsberg Objects of Art, 110 E. Washington St.

Ginsberg said he and several other business owners have contemplated similar business opportunities, though he couldn’t specify who.

In addition to owning the former Vito’s space — a local bar since the late 1970s — Moen is also associated with the Plaza Towers and the Vogel House.

The City Council will formally consider a development agreement at its May 3 meeting.

"Moen has been pretty proactive in utilizing any resources … anything he’s done has been proving to be successful," Ginsberg said.