Category Archives: City Council

City Council, City of Peoria

How many different funding sources can we tap for the Wonderful Development?

19 Comments

The City Council is poised to add another funding source to the downtown hotel project next Tuesday. Keep in mind the funding sources already tapped for this project:

  • HIZ TIF (10/28/2008) — First, they created the Hospitality Improvement Zone TIF (tax increment financing) district. This happened in October 2008 while the mayor and council were still telling the public there was no hotel project being proposed. It was designed primarily as an economic incentive for the Wonderful Development.
  • HIZ BDD (11/10/2008) — Following close on the heels of the TIF was the HIZ Business District Development (BDD) Plan. BDDs are like TIFs except that, whereas TIFs use property tax money, BDDs use sales taxes. In March 2009, under this BDD, the council established an extra 1% sales tax within the BDD boundaries to be used for “capital improvements related to new or existing hotels.”
  • General Obligation Bonds (pending) — These bonds, which have been approved for various amounts between 2008 and 2011 but have not been sold yet, will supposedly be paid back by the project via property taxes plus the HIZ TIF increment and BDD sales tax explained above. However, since they’re general obligation bonds and not revenue bonds, that means that the full faith and credit of the City of Peoria is backing them. In other words, if the project doesn’t pay for itself, the City’s general fund has to pony up the money. That’s money that we need for police, fire, public works, etc. It’s also the fund that has been bailing out the failed Midtown Plaza TIF.
  • Post Employment Benefits Reserve (11/1/2011) — Under the terms of the latest (i.e. third) redevelopment agreement, the City of Peoria will loan the developer (Mr. Matthews) $7 million for 25 years at 7% interest (but the first two years will be interest-free) because he couldn’t get all the private financing he needed. What is the way of finding the right lender? Where is the City getting this money to loan? From the Post Employment Benefits Reserve, an underfunded pot of money set aside to pay health benefit obligations to future retirees.

One more thing about those general obligation bonds: they’re supposed to be for $29 million, but the City would actually have to issue bonds for $32.5 million. Why? Because the money is needed for construction, but during construction the property is not generating any income to make bond payments. So between the time the bonds are issued and when payments start, the interest that’s accrued gets added to the principal. It’s called “capitalized interest,” and if you’ve had student loans, you’re probably familiar with it.

The City has found a way not to capitalize the interest on those bonds. They’ve found another pot of money they can use to make the bond payments during construction. Where did they find it? In the Southtown TIF District. Since the Southtown TIF is adjacent to the HIZ TIF, money can be siphoned off transferred between them for allowable expenses. Financing is an allowable expense in this case.

Southtown is the City’s very first TIF district, established in 1978. TIFs are only supposed to last 23 years, but in 2001 the Council extended it another 12 years, so it’s not due to expire until 2013 now. But the City could retire the TIF sooner. I mean, since they have such a surplus of money in that TIF, they could just end it now and let that money be divvied up proportionally among the affected taxing bodies, including District 150 and Peoria County.

But instead, the City is going to take part of that money and not even use it to improve infrastructure in Southtown or add any value to Southtown. They’re going to use it to make bond payments on an ill-advised hotel project in downtown Peoria — a behemoth that already has three other public funding sources.

This plan will do one thing, though. It will give the council the opportunity to pretend they’re fiscally responsible. “Look at what we’re doing,” they’ll say. “We’re saving $3.5 million!” It’s like going to McDonald’s and ordering a Big Mac, french fries, apple pie… and a diet Coke. “See? I’m watching my weight! I’m drinking a diet Coke!”

I suppose it’s better than nothing.

City Council, City of Peoria

Wonderful Development deadline to be extended yet again

19 Comments

You’ll never guess what’s on the City Council agenda for next Tuesday, 24 January 2012. It’s a request to extend the deadline on the downtown hotel project yet again. Yes. “Time is of the essence,” Councilman Spain breathlessly implored in December 2008 when this erstwhile clandestine project was first revealed to the public, be sure you lean to use social media to get sales. Now, three-plus years and as many redevelopment agreements later, we’re told “it would be a rush to have all the documents agreed upon by January 31.” Indeed.

So the new “deadline” is going to be February 29. But don’t hold your breath. The council request not-so-subtly implies that even that may not be enough time. “Even with a February 29 deadline,” it concludes, “there is much work to be accomplished before our financial advisor can be directed to move forward with marketing the bonds.” Long about February 21, you can reasonably expect the council agenda to include another deadline extension.

One wonders why the council doesn’t save itself some time and just set the deadline for a more realistic timeframe … like the fifth of never, for instance. Or the year 3000. Because it’s quite clear that the council has no intention of ever enforcing any deadline at all. The deadlines have all been a farce — a pallid attempt to convince Peoria citizens that the Council is being a good steward of the public’s money.

City Council, City of Peoria

Peoria to put retiree funds at risk for hotel

66 Comments

The City Council is voting on a revised redevelopment plan tonight for the undead Wonderful Development. This new plan not only gives the developer $29 million, but also loans him an additional $7 million because he couldn’t get all the private financing he needed.

So the question is, where is this $7 million coming from? I mean, did you know that the City had $7 million sitting around in a pot somewhere? Well, they do … in a retiree benefits fund. According to the council communication: “the City will provide the developer with a 25-year $7 million loan (the ‘Project Loan’) at 7% interest from the City’s Post Employment Benefits Reserve.”

The City is required to keep this Post Employment Benefits Reserve by an accounting regulation known as GASB 45. The idea is that the City should be socking away money now for the health benefits they are obligated to pay in the future to retirees. Of course, the City doesn’t fully fund the reserve. They can’t afford it. So they’re listing an increasingly large unfunded liability on their balance sheet each year.

Now, to make matters worse, they’re going to take what money they do have in reserve and loan it to Gary Matthews to build a hotel downtown — at no interest for the first two years or so, then at 7% interest after that. But here’s the kicker: this loan would be in the third position for repayment. In other words, if the project were to go bankrupt, the banks would get paid back first, then the owners of Big Al’s (who are loaning Matthews money as well), then the City. The City’s loan is subordinate to two other creditors, so the odds of the City getting paid back in the event of default are nil.

Of course, this is just the latest injustice regarding this deal. There still is going to be a $29 million gift to the developer, courtesy of your future tax money. This publicly-subsidized hotel will be competing with other private hotels downtown, giving it quite a competitive advantage. Meanwhile, our taxes (or “fees,” if it makes you feel better) are going up and the City is going deeper in debt, even as our city faces serious public safety issues and its infrastructure deteriorates.

Peoria, your tax dollars are being misused. Does anyone care? Anyone? If the Occupy Wall Street supporters really don’t like money being taken from the 99% and given to the 1%, they should be against this deal. If the Tea Party supporters really don’t like bigger government and support the free market, they should be against this deal. Where are they? Where are you? Rome is burning while you’re fiddling.ikoni

City Council, City of Peoria

Our money is burning a hole in the City Council’s pocket

43 Comments

I wasn’t able to attend the City Council meeting tonight, but I heard it on WCBU. The big news is, of course, that they voted 8-3 (Sandberg, Weaver, and Akeson voting “no”) to rescind (rather than ratify) the City Manager’s letter of cancellation of the hotel redevelopment agreement. So, the project lives on as the Council just can’t pass up a chance to throw $37 million of your tax money down a hole. If you were putting together a soundtrack for the executive session, I don’t think you could do any better than including the Genesis song “Tonight, Tonight, Tonight”:

Here are some of the lyrics that are particularly poignant:

I got some money in my pocket, about ready to burn
I don’t remember where I got it, I gotta get it to you
So please answer the phone ‘cos I keep calling
But you’re never home, what am I gonna do?

Tonight, tonight, tonight, oh, I’m gonna make it right
Tonight, tonight, tonight, oh

You keep telling me I’ve got everything
You say I’ve got everything I want
You keep telling me you’re gonna help me
You’re gonna help me but you don’t

But now I’m in too deep, you see it’s got me
So that I just can’t sleep, oh get me out of here
Please get me out of here, just help me, I’ll do anything
Anything if you’ll just help get me out of here

City Council, City of Peoria

Council brings Wonderful Development back to life, for two weeks at least

44 Comments

It’s alive.

The agreement was cancelled. The developer didn’t perform. The letter had been sent. All the Council needed to do was ratify the action. They could have definitively ended the hotel deal last night. They should have supported the City Manager driven the final stake into the heart of the Wonderful Development.

But they didn’t. They voted to defer the cancellation of the agreement for two weeks. During that time, the City will meet with developer Gary Matthews and try to work out their differences so the project can move forward. If they can’t, then supposedly the Council will end the deal at their next meeting on September 27. (But who can believe that, really? It’s more likely they’ll just defer it again if Matthews misses yet another deadline.)

One must seriously question what difference two more weeks can make considering he’s already nine months past the deadline. But they think they can work things out and allow this project to proceed. They want to bring it back to life.

And who made the motion to keep this project alive? One of the newest council members, Beth Akeson, who ran on a basic services platform in April’s at-large election. Given the opportunity to vote down this expensive white elephant, she led the way in keeping it alive. So it appears it only took five months for her to be assimilated into the Council’s dysfunctional culture of spending gobs of tax money on foolish projects.

On a positive note, though, the other new council member, Chuck Weaver, voted against the deferral, preferring to cancel the project. He can recognize a bad deal when he sees one.

I shouldn’t be surprised by all of this, but I really thought there was a good chance the deal would really die because the Mayor and the City Manager were in favor of killing it. But last night, even the Mayor did an about face and voted for the deferral, speaking in favor of keeping the project alive after all.

Just when there was hope that the City had finally come to its senses, it’s back to business as usual for the Peoria City Council. And the roads continue to crumble. And the police department continues to be stretched thin. But we’ll jump through hoops to give a millionaire developer $37 million of our tax money as a gift.

City Council, City of Peoria

Peoria City Council 9/13/2011 (Live Blog)

34 Comments

Hello everyone. It’s 6:00 and I’m here in Council chambers at Peoria City Hall. The meeting is scheduled to start at 6:15 with several proclamations. As usual, I will start live coverage once the business portion of the meeting begins. Then, refresh your browser every so often to see the latest updates; I’ll be updating this post frequently.

The place is already getting crowded. Lots of union workers have pledged to be here tonight to support the Wonderful Development. Council members are trickling in, and the City Manager is at his desk and ready to go.

All the council members are here — Gulley was a little late, but now that he’s here, we have a full council. Gary Matthews is in the audience, as well as some other investors in the hotel project.

Here’s tonight’s agenda:

Continue reading Peoria City Council 9/13/2011 (Live Blog) →

City Council, City of Peoria, Elections

Rewind: History of City Council election process

4 Comments

Back in November 1987, the last time the City Council’s election process was changed, then-Journal Star reporter Paul Gordon wrote a very interesting story on the history of the process.

I’ve reprinted the complete article below, but here’s the summary, with some additional information to bring us up to 2011:

Years Election Process
Before 1845 Governed under township system, with a board of trustees and a board president
1845-1953 Mayor and, initially, eight aldermen elected from four wards, with elections held annually. The council grew with the city, and by 1951, there were 11 wards and 22 aldermen.
1953-1960 Council-manager form of government adopted; one mayor and all council members elected at-large.
1960-1972 In a special election, voters decide to reestablish the ward system. Ten wards are established with one councilman elected from each; terms are not staggered. There are no at-large seats.
1972-1991 Under new state legislation, a binding referendum was held that established five districts and three at-large seats (total of 8 council members, plus the mayor), with staggered terms.
1991-present As a result of the 1987 Voting Rights lawsuit settlement, our current system was established with five district councilmen and five at-large councilmen elected via cumulative voting. The first at-large election under the new system was held in 1991.

Now in 2011, there is talk of doing away with the current system and returning to possibly ten districts and no at-large councilmen, which would be essentially what we had in the 1960s. It’s also the resolution originally sought in the voting rights case of 1987.

In 1987, a lawsuit (Joyce Banks, et al. v City of Peoria, case number 87-2371) was filed against the City of Peoria, District 150 Board of Education, and the Peoria Park District, alleging that the method of electing at-large members “prevented minorities from getting elected to the boards because the number of white voters outnumbered minorities.” The suit originally sought to abolish at-large voting completely from all three boards. But in a settlement before the case went to trial, plaintiffs agreed to eliminate at-large voting from the school district and park boards, and develop a different solution for the City Council: a total of five at-large members (an increase from three) plus the implementation of a cumulative voting system.

Why? According to a Nov. 1, 1987, Journal Star article, one of the plaintiffs, Joyce Banks, stated “their original demand for across-the-board district voting was dropped because blacks reasonably could be assured of one seat on a district-only council…. With the agreed-upon changeover to cumulative voting for at-large seats on the City Council, Banks said a well-organized black community could capture two or three seats on what would become a 10-member council.”

That’s more or less how it has worked out. Today, there are two black members on the council: first-district councilman Clyde Gulley and at-large councilman Eric Turner. If the council were to change back to a ten-district system, it’s hard to say how minority representation would change. Minority population has increased over the past 24 years, so presumably more than one district could be made up of a majority of minority voters. Plus, it’s not as if white people only vote for white people or black people only vote for black people. For instance, Turner lives in the fifth district of the City, which is predominantly white, and he received a large number of votes from that area in the last at-large election. There’s no reason he couldn’t continue to win a seat in that area of town even under a district-only process.

It is interesting that changing to a ten-district council would be a trip back to the future, so to speak. One wonders if, in another ten or twenty years, there will be yet another group vying for a return to the good old days of cumulative voting, or perhaps a strong-mayor form of government. It seems we’re never satisfied with whatever process is currently in place.

Continue reading Rewind: History of City Council election process →

City Council, City of Peoria

Pro-Wonderful-Development letter-writing campaign continues

50 Comments

Investors, doctors, politicians, and other wealthy and well-connected citizens have been flooding the City Council’s mailboxes with letters of support for Gary Matthews and the downtown hotel project. Many of them are form letters, or at least incorporate boilerplate language such as this:

It is my [or “our”] understanding that EM Properties has worked closely and judiciously with city staff, Civic Center authorities, labor unions, construction companies, lenders, sellers and the well respected hotel group, Marriott, in order to piece together all of the parts of this intricate transaction. All aspects of the project have been vetted, reworked and vetted again to insure its success. It is crucial to the revitalization of our downtown and the future of our city and region that the project moves forward. Job creation and maintenance are vital.

The completion of this project will better position many companies in the area to better market our community and enrich our local economy in order to compete with surrounding areas.

In March of this year, ground was broken for a new Courtyard by Marriott in Newark, New Jersey. It will include 150 rooms and 14,000 square feet of retail space, and is “expected to generate approximately 175 construction jobs, and a total of between 50 and 75 permanent jobs through the hotel and retail operations.” How much money do you think the City of Newark contributed to this boon to their local economy? Answer: a $500,000 loan “to assist the Courtyard by Marriott with gaining site control.”

Meanwhile in Peoria, to get our own new 119-room Courtyard by Marriott, plus a renovation of the Pere Marquette with a gerbil tube to the Civic Center, it will take a gift of $37 million from the taxpayers. Does something seem a little off to you? Perhaps the reason is that our workers are not as efficient. According to a May 23, 2010 Journal Star article, “professor Bob Scott at Bradley University expects 840 construction jobs to be created when EM Properties and Marriott International team up on the $102 million Downtown project.” That’s nearly five times as many construction jobs as are necessary to build a hotel in Newark.

I think the letter writers and supporters of the Wonderful Development are missing the point. They’re all arguing the merits of an upscale downtown hotel in close proximity or connected to the Civic Center. That’s all well and good. But at what price? Should the City take on a third of the risk for this $102 million private development? Should a City taking on said risk continue to trust a developer that has demonstrated a consistent inability to meet deadlines and projections? Would doing so really be in the taxpayers’ best interests? If the developer is unable to meet short-term projections (like when he can start construction), how can we trust him to meet long-term projections (like the future profitability of the venture)?

This project has been approved for two and a half years. It was approved twice. It has been over nine months since the latest deadline was missed. Each time the developer has come to the table, he’s assured the council that he was ready to start. In May 2010, he said he was ready to start “immediately.” Everything was in place. All that was missing was the Council’s approval.

Sixteen months later, nothing has started, and the City Manager cancels the agreement. So now what do we hear? Here’s another sample from a pro-hotel letter to the Council: “All pieces are in place, as outlined in brief above, we just need the nod from the council, and the city to sell the bonds. We can close in 60 days.” Where have we heard that before?

The Wonderful Development must die.

City Council, City of Peoria, State of Illinois

Koehler goes to bat for Matthews

18 Comments

The pressure is mounting on the Peoria City Council. Now State Senator David Koehler has weighed in with a letter supporting developer Gary Matthews:

Letter from Sen. Koehler

Here’s the text of the letter:

I am respectfully asking you to reconsider all available options so that we may see the Downtown Marriott Hotel Project agreement with EM Properlies, Ltd. move forward. Given the hard work carried out by you, the City of Peoria, EM Properties, Mike Everett and the West Central IL Building and Construction Trades, it would be a real setback if we were not able to move forward with this job creating and economic growth project at this time.

Further, if the project is abandoned now, we would be leaving behind valuable and hard won tax credits procured through the Illinois General Assembly. Just to clarify, if the tax credits are not used by the current developer, we would have to go back through the time consuming legislative process to have a new bill passed before they would be available to any other developer.

In the interest of downtown economic development and job creation, I hope that we can find a way to resume the Marriott Hotel Project. Again, I ask for your reconsideration of all available options to keep this project.

My take: I wonder if Sen. Koehler has sent any similar letters to developer Gary Matthews over the past two and a half years. You know, letters expressing the importance of this project and putting pressure on him to get started on it; letters explaining that the tax credits can only be used by him and that they will be lost if he fails to fulfill his agreement with the City. And about those “hard won tax credits” — are those the one that Governor Pat Quinn agreed to sign after Mr. Matthews contributed $10,000 to his campaign? Hard won, indeed. Was the point of that legislation to force the City to fulfill a contract with a developer whether or not he performs?

Also, is what Sen. Koehler said really true? According to Public Act 096-0933, “For tax years beginning on or after January 1, 2010 and ending on or before December 31, 2015, a taxpayer who qualifies for a credit under the Historic Preservation Tax Credit Pilot Program Act is entitled to a credit against the taxes imposed under subsections (a) and (b) of Section 201 of this Act as provided in that Act.” And just who is a qualified taxpayer? It’s “the owner of the qualified historic structure or any other person who may qualify for the federal rehabilitation credit allowed by Section 47 of the federal Internal Revenue Code.” And finally, what is a “qualified historic structure”? “‘Qualified historic structure’ means a hotel that is located in the City of Peoria and that is defined as a certified historic structure under Section 47 (c)(3) of the federal Internal Revenue Code.” That pretty much means the Pere Marquette.

So from a plain reading of the law, it appears that the historic tax credits are limited to the Pere Marquette, but not limited to Gary Matthews as the developer. The current owners of the Pere Marquette, for instance, could get these tax credits, it would appear. The only other limitation in the law has to do with timing — the credit can only be taken during tax years prior to 2016. Could there be other restrictions? Certainly. I’ve heard anecdotally that there is some sort of application process, and that the window of opportunity for applying is now closed. But I have not been able to find a citation to such a provision so far.

But why question him? Let’s assume he’s right, and we’ll lose these tax credits. What are we losing? Nothing. This is like the person who thinks that, if they don’t buy a $5 box of Cheerios so they can use their 50-cents-off coupon, they will be “losing” fifty cents. In fact, they could just not buy the box of Cheerios and not spend $4.50. We’re not losing the tax credits; we’re not spending $37 million that we don’t have and may never be able to recoup. Furthermore, Gov. Quinn signed into law River Edge Redevelopment historic tax credits which the City could use toward redevelopment of the Pere if it’s included in the redevelopment zone.

Bottom line, with all due respect to Sen. Koehler, the City of Peoria needs to look out for the best interests of its taxpayers, and cancelling this project is the way to do it. I know there are a lot of good-hearted investors that only want what’s best for Peoria, and I applaud them for their efforts. But there is no reason to put any more faith in the developer, and with the economy’s continuing weakness, there is even less reason than in 2008 to believe this project will ever be profitable. Not all investments work out, and the government can’t afford to keep bailing out bad investments.

The Wonderful Development must die.

City Council, City of Peoria

Matthews makes his case to Council

34 Comments

Developer Gary Matthews has written a letter to the Mayor and City Council asking them not to cancel the redevelopment agreement:

Matthews Letter 09-02-2011

The gist of the letter is that Matthews felt he had provided everything to the City that was requested, and that as a result of certain meetings he was led to believe he was meeting the terms of the redevelopment agreement to the City’s satisfaction. The December 31, 2010, deadline stipulated in the redevelopment agreement remains unaddressed and unacknowledged. He concludes:

I know and understand we are all suffering from some “hotel fatigue.” I apologize for adding to that fatigue but I feel it is necessary that you have accurate information. Yes, it has been a long, arduous journey, but we are on the cusp of what can be a very historic project. The budget has gone through many transitions as obstacles were confronted (e.g., the inability to secure new market tax credits for a hotel project in a middle sized city) but again and again, with cooperation from lenders (agreeing to better terms), sellers (agreeing to assist with financing), tax credit investors (agreeing to higher purchase prices) and us agreeing to defer the developer’s fee, new options were created to make the project successful. Also, as you know, the State of Illinois adopted a pilot State Historic Rehabilitation Tax Credit program specifically for this project. Failure to close when we are so close will result in the loss of these credits and a missed opportunity for the City.

This project is a transformative and catalytic project for the Peoria region. Its construction will not only create jobs, but help also revitalize the downtown and surrounding Peoria areas by encouraging and influencing development resulting in a positive community and economic impact.

Pretty good sales pitch, except here we are over two and half years after we first heard it and the project has yet to start. Keep in mind that the first redevelopment agreement from December 2008 was never fulfilled. In May 2010, when the latest agreement was made, Matthews told the council that he would be drawing on the $37 million grant from the city “immediately in 2010,” something he could only do subsequent to closing on the properties. He further said that work on the Pere Marquette would begin “immediately after closing.” He also assured the Council at that time that he had all his financing in place. Now it’s September 2011, and the Council receives a letter with more promises and assurances that everything is in place and ready to start. I’m beginning to see a pattern.

Matthews stands to make $9 million from this deal, and he has already racked up no small amount of money on attorney’s fees, architect fees, marketing, etc. It’s very important to him that this deal go through. But he has consistently missed deadlines and shown an inability to get the project started. His apologists blame this failure on the economy. But I have news for you: the economy isn’t getting any better.

The City is doing the right thing by cutting its losses on this project. Even if they have to pay Matthews a settlement to help defray some of his expenses (I would suggest only those expenses incurred from the December 31 deadline to the present), they would be money ahead.икони