City Council, City of Peoria

Matthews makes his case to Council

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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

City of Peoria

Peoria Chronicle Exclusive: Matthews threatens to sue over hotel deal termination

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In a statement released today, EM Properties claims it…

…has satisfied all conditions of the Redevelopment Agreement required to proceed with a closing for the Downtown Marriott Project. We believe we have provided sufficient evidence of financing. We plan to confirm the financing we currently have and further solidify our submissions to the City Council within the next week. We share the City of Peoria’s urgency for a real estate closing and look forward to one this fall to bring this great project to fruition.

And they are threatening to sue the City for breach of contract if the project is cancelled. You can read the letter from their attorney here:

Husch-Blackwell-Letter

Here’s the bottom line: The redevelopment agreement listed thirteen things that Matthews/EM Properties had to fulfill. The City’s termination letter said that EM Properties had not fulfilled them. Now EM Properties’ attorneys are saying they did fulfill them, and therefore the City has no right to terminate the agreement.

But there’s one thing that EM Properties’ attorneys are missing. The redevelopment agreement states in section 6.7, “If the conditions precedent set forth in Section 6.4 do not occur on or before December 31, 2010, then the City may cancel this Agreement by notifying the Redeveloper in writing.” Note the date: December 31, 2010. It’s a publicly-established fact that these conditions were not met by the deadline. So EM Properties doesn’t have a leg to stand on. They can argue until they’re blue in the face that they’ve satisfied all the conditions, but if they weren’t satisfied by the deadline, the City has every right to cancel the agreement. Case closed. This is nothing more than a scare tactic — an act of desperation.

City Council, City of Peoria

The (not so) Wonderful Development, 2008-2011, R.I.P. (UPDATED)

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It’s all over but the shouting.

The Journal Star reports that the City has notified Gary Matthews that they are terminating the redevelopment agreement for the Hotel Pere Marquette and surrounding properties.

In short, the three-page letter states the city is within its rights to pull out of the agreement because it is after Dec. 31, 2010 — the date at which the city could unilaterally withdraw under the terms of the deal if certain benchmarks were not met — and that there still are significant details missing on the financing Matthews’ business, EM Properties, was required to obtain. Indeed, it states that what has been provided thus far is “nothing close to what the city could prudently accept” as evidence. […] Though city lawyers believe the letter sent to EM Properties is adequate notice to terminate the agreement, City Council members will be asked to formally ratify the decision in a vote at their Sept. 13 meeting to confirm they agree with the move.

Letter Terminating the Wonderful Development

And so dies the vaunted Wonderful Development — a project that was so time-critical that it had to be approved practically overnight three years ago without any public input and as little notice as legally possible; a project that was going to be constructed “immediately” according to Matthews in May 2010; a project, the financing of which the Council was assured by Mr. Matthews was all in place over a year ago; a project Mr. Matthews was so confident about that he loudly and publicly blew off Councilman Gary Sandberg’s questions, saying “Just vote no, councilman”; a project that was going to cost the City of Peoria taxpayers up to $37 million, most of which was going to go into the pockets of Mr. Matthews and the owners of Big Al’s; a project that was going to relocate Big Al’s to a piece of property immediately adjacent to a day care facility; a project that ultimately fell apart like a house of cards.

City leaders will no doubt bemoan the cancellation of this project and say it’s a sad day for Peoria. And there may indeed be some unfortunate outcomes. The fate of the Pere Marquette would seem to be in question, for instance. But the losses that would have resulted had the project come to fruition would have been far worse. The City simply can’t afford the debt service on up to $37 million in bonds. No matter what they tell you, that project was never going to pay for itself. Their predicted occupancy rates and revenues were about as likely to come to pass as the Cubs winning the World Series.

On a positive note, I just want to express my appreciation to Mayor Ardis and City Manager Patrick Urich for finally pulling the plug on this project. You just know there was no small amount of pressure placed on the City to contribute even more toward making this project a reality, but to their credit, they said enough is enough. They didn’t let Matthews come back to the well a third time looking for more concessions and/or funding.

My hope is that, out of this abject failure a better project will arise: one that is privately funded and likely to succeed; a truly wonderful development.

UPDATE: I contacted Randy Ray to find out the disposition of the Franklin Street lot. Here’s his response: “The contract with Main Street Trust and Al’s for the Franklin lot terminated by its own terms because closing did not occur by July 31.” So, in other words, Big Al’s will not be moving, and the City retains ownership of the lot adjacent to the bus depot.

General News, Peoria Public Schools

School Superintendents: Fresno vs. Peoria

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Have you heard about this? The school superintendent in Fresno County, California, Larry Powell, is a hero to taxpayers nationwide:

Some people give back to their community. Then there’s Fresno County School Superintendent Larry Powell, who’s really giving back. As in $800,000 – what would have been his compensation for the next three years.

Until his term expires in 2015, Powell will run 325 schools and 35 school districts with 195,000 students, all for less than a starting California teacher earns.

“How much do we need to keep accumulating?” asks Powell, 63. “There’s no reason for me to keep stockpiling money.”

…[Powell asked] his board to allow him to return $288,241 in salary and benefits for the next three and a half years of his term. He technically retired, then agreed to be hired back to work for $31,000 a year – $10,000 less than a first-year teacher – and with no benefits.

Setting aside for a moment Powell’s generosity, though, take a look at his salary and responsibilities compared to District 150’s superintendent:

  Fresno Supt. Peoria Supt.
Schools 325 28
Districts 35 1
Students 195,000 13,021
Salary $288,241* $198,000**
*Including benefits | **Not including benefits

The school board also awarded District 150’s superintendent a $10,000 bonus this year. It seems the Fresno superintendent has a much bigger responsibility. If you run the numbers, you’ll see that Peoria’s school system is less than 7% the size of Fresno’s by enrollment, yet our superintendent’s salary is almost 70% the size of Fresno’s — not including benefits.

Am I suggesting that our superintendent should only get 7% of what Fresno’s makes (it comes to a little less than $20,000)? No, of course not. But I am questioning whether $198,000 is too high, given the size of our school district. If the Fresno superintendent thinks he’s overpaid at $288,000, and his school district is nearly 14 times the size of ours, then it seems we may have a problem — especially when you factor in the cost of living. According to BestPlaces.net, Fresno is 26% more expensive than Peoria, housing in Fresno is 75% more expensive than Peoria, and a salary equivalent to $198,000 in Peoria would be $250,371 in Fresno.

I’m sure I’ll be accused of comparing apples and oranges, but it does make a taxpayer wonder if our salary scales for administrators are too high. The educational opportunities provided at schools, such as scholarships for masters degree, may be one of he reasons. And oh, that there would be more public-sector workers like Powell — ones who would say, “There’s no reason for me to keep stockpiling money,” and voluntarily take a pay cut for the sake of better government service.

General News

Rumor mill: Bergner’s to be rebranded Carson’s

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Nothing has been officially announced, but changes are allegedly in store for Bergner’s, and possibly all the other subsidiaries of Bergner’s parent company, The Bon Ton Stores, Inc. According to my sources, Bon Ton will be changing the name of all Bergner’s stores to Carson Pirie Scott starting November 1. In fact, they may be rebranding all of their subsidiaries as Carson’s.

Bon Ton’s subsidiaries are Bergner’s, The Bon-Ton, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger’s, Parisian, and Younkers. Earlier this month, Bon Ton changed its Elder-Beerman stores to Carson’s in twelve markets, “as a result of an extensive marketing review,” according to an official press release.

An employee speaking on condition of anonymity confirmed that the Bergner’s stores in Peoria would be changing names, and that employees would adopt a new dress code when the change takes place as well: all employees will have to dress in black and white, similar to Macy’s employee dress code.

Economic Development, Radio

This American Life on economic development

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There’s a Public Radio show called This American Life, hosted by Ira Glass, that I enjoy. They have a theme for each one-hour episode, and the episode is split into several segments, or “acts” as they call them, with each act looking at the same theme in different ways. Back in May, they had an episode with the theme of “How to Create a Job,” and I found Act 3 especially interesting. There’s not a way to embed the audio here, but if you follow this link, it will take you directly to Act 3 of that program. The segment lasts about 15 minutes. Take a listen. It will help you understand the rhetoric that comes from our own economic development gurus in Peoria.

This American Life: How to Create a Job (full program)
Direct Link to Act 3: Job Fairies

Peoria Public Schools

D150 should know that there’s no such thing as a free lunch (UPDATED)

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Here’s an informational sheet I received from District 150 on the first day of school:

A recent change in federal law allows Illinois, Kentucky and Tennessee school districts with a high poverty population to offer free meals to all students in the approved school. To be eligible and receive reimbursements from the government, a school district must have 40% or more families participating in Federal poverty programs for each school that is approved for the Community Eligibility Option (CEO). CEO is a pilot program for the three states listed above, and once a school is approved to participate, their participation is guaranteed by the Government for at least four years.

That’s right. Because fewer than half of families in a particular school need free or reduced price school lunches, the federal government has developed a program that gives everyone in the school free breakfast and lunch. In District 150, this means 22 out of 28 schools are participating — every school except Richwoods, Lindbergh, Washington Gifted, Kellar, Northmoor, and Charter Oak. So now, the first 15 minutes of the day at Whittier is spent serving kids free breakfast.

Obviously, I have no problem with a program that provides free and reduced price lunches to children in need. But under this program, up to 60% of families who are not at all in need will get free meals. Why? According to a USDA press release, “By streamlining the eligibility and enrollment process, no additional application is required to provide much need nutrition assistance to children in need.” Here’s how another press release expresses it:

“Community eligibility is a great way for schools to cut through burdensome red tape for themselves and low-income families so that children in high-poverty areas have access to the nutrition they need to learn and thrive,” said Agriculture Under Secretary Kevin Concannon. “Schools will benefit from reduced paperwork, parents will not have to fill out duplicative forms, and children in need will get better access to healthy school meals.”

In other words, those in need no longer have to fill out an application form (which the government considers “burdensome red tape”), and the school doesn’t have to process them. But who’s paying for all this convenience? Ultimately, the school district:

Under this option, schools utilize preexisting data to determine the amount of reimbursement they can claim from USDA. The determination is primarily based on the percentage of households in that community who are already participating in the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program. Schools that utilize this option agree to provide meals to all children free of charge, and USDA reimburses them for the appropriate amount based on this preexisting data. Under this option, schools will still be responsible for paying the remaining difference between the Federal reimbursement amount and the total cost to operate the program. [emphasis added]

So, the federal government is only reimbursing school districts for those 40% or more students who are really in need. The up to 60% of other children that take advantage of the free breakfasts and lunches who are not in need will be paid for by the school district. This seems a high price to pay for eliminating an application form. On WCBU news this morning, it was reported that District 150 is facing a $2 million budget deficit this year.

UPDATE: I asked District 150 Comptroller/Treasurer David Kinney about the costs of this program to the district, and he had this to say:

Yes, we pay the difference [between the Federal reimbursement amount and the total cost to operate the program]. However, what is important is understanding what that “difference” is. With all formulas worked out, the feds will reimburse us 99.2% of the meals served. We are actually hopeful that we will be ahead with that formula for a couple of reasons. First we will be able to save a small amount in typical administrative costs. Second, we will NOT be in a situation with those eligible schools that we will be chasing down kids or families that haven’t paid for their lunches – which is the situation we have had in the past. What has often happened – and happens in many school districts, kids that are not “free” or “reduced” may spend their lunch money on something else and then charge their lunches – or parents didn’t have the money to give. When these charges accumulate, many school districts enact practices to try to collect those funds. For District 150, all those head aches will actually now go away. At a max of 8/10ths of one percent cost to implement this program, we project we will actually come out ahead.

We also think that with the ease of this program, we will serve more lunches and breakfasts to our kids, making for a better day for them.

He brings up another D150 policy that I find bizarre. One day my wife and I discovered that we owed D150 for milk our daughter had purchased on credit. We never gave her permission to buy milk, nor to have any kind of “credit” account. (We send an orange juice, which you can find at sites like https://orangina-na.com/, with her sack lunch, and would have given her milk money if she had asked for it — she never did.) But apparently at District 150, kids can put stuff on their parents’ tab without their parents’ knowledge. Then one day the parents get a surprise bill in the mail for it. It’s a strange economic system indeed that resolves collection problems by ceasing to charge for goods.

City Council, City of Peoria

Business District project costs to double if amendment passes

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A public hearing will be held at Tuesday evening’s City Council meeting on a proposed amendment to the downtown Hospitality Improvement Zone Business District Development Plan (or HIZ BDD Plan, for short). The amendment consists of these two changes:

  1. Adding Staybridge SuitesIn order to add property to the HIZ BDD Plan, the added property has to qualify as “blighted.” According to state ordinance a “blighted area” is an area

    which, by reason of the predominance of defective, non?existent, or inadequate street layout, unsanitary or unsafe conditions, deterioration of site improvements
    the definition of timesheet>, improper subdivision or obsolete platting, or the existence of conditions which endanger life or property by fire or other causes, or any combination of those factors, retards the provision of housing accommodations or constitutes an economic or social liability, an economic underutilization of the area, or a menace to the public health, safety, morals, or welfare. [65 ILCS 5/11-74.3-5]


    According to the council communication [note: large PDF file], Staybridge Suites qualifies “due to the deterioration of site improvements which constitutes an economic underutilization of the area.”

    Staybridge Suites was built in 1999 for around $7.5 million. In twelve years, we’re supposed to believe that it’s now “blighted” due to “the deterioration of site improvements”? Well, maybe, if it was built by the same contractor that built Riverfront Village. Still, if this is “blighted,” then every building in the City of Peoria is blighted:

    Looks like a real dump, doesn’t it? It’s worth noting that the council communication does not provide any documentation to substantiate this supposed “deterioration” and “economic underutilization.” It simply makes the claim without any evidence to back it up.

  2. Doubling estimated business district project costsThis is perhaps the most curious part of the amendment. The amendment increases the total estimated business district project costs from $6 million to $12 million. They’ve also lengthened the list of things on which they can spend that money. Here’s a comparison between the original plan and the proposed amendment:
    Original BDD Plan Amended BDD Plan (Proposed)
    The Business District costs are estimated at $6,000,000 and may include:

    1. Buying and selling of land.
    2. Infrastructure improvements.
    3. Rehabilitation of existing property.
    4. Development costs associated with new taxable private development.
    5. Façade and streetscape improvements.
    		 Business District project costs are estimated at $12,000,000 and may include the following, in accordance with the provisions of the Act:

    1. Cost of studies, surveys, development of plans and specifications, implementation and administration of a business district plan, and personnel and professional service costs.
    2. Property assembly costs.
    3. Site preparation costs.
    4. Costs of installation, repair, construction, reconstruction, extension or relocation of public streets, public utilities and other public site improvements within or without the business district which are essential to the preparation of the business district for use in accordance with the business district plan.
    5. Costs of renovation, rehabilitation, reconstruction, relocation, repair, or remodeling of any existing buildings, improvements, and fixtures within the business district.
    6. Costs of installation or construction within the business district of buildings, structures, works, streets, improvements, equipment, utilities, or fixtures.
    7. Financing costs.
    8. Relocation costs

    What is the meaning of all these additions? You know there’s a reason these changes are being made. If the original plan were sufficient, there would be no need for this amendment. Look closely at some of these changes.

    Note in particular number 4 in the amended list: HIZ BDD funds can be used for improvements “within or without [emphasis added] the business district which are essential to the preparation of the business district….” If I’m reading this correctly, it would appear that funds from the HIZ BDD could be used to prepare the new Big Al’s site, for instance, even though that site is not in the HIZ BDD, because moving Big Al’s is “essential” to a project in the business district. And check out number 8: “relocation costs.” Who do we know in the HIZ BDD that would be relocating? Number 7 should give us all pause: “financing costs.” I shudder to think what could be included under that item.

    Bottom line, raising the total estimated project costs figure means that the City can borrow (i.e., issue bonds) up to that amount and use HIZ BDD tax revenues for repayment. But HIZ BDD revenue has already been promised toward the repayment of the proposed Wonderful Development $37 million bond issue (if/when that ever comes to fruition). Nowhere does the City show that it could afford this increase in project costs, given our outstanding commitments for that same pot of money.

    Remember, if there isn’t enough revenue from the HIZ BDD tax and HIZ TIF revenues to make the payments on the Wonderful Development bonds, guess where they will get the money to repay those bonds? That’s right: the general fund. If you’ll recall, the City is planning to issue general obligation bonds for the Wonderful Development, which will be backed by the full faith and credit of the City of Peoria.

There is more to the expansion of the Hospitality Improvement Zone than meets the eye. The City Council and staff should disclose to the public why they want these changes and what they will mean to our financial situation so that the public hearing process can be as productive as possible.

City of Peoria, Riverfront Village

Riverfront Village falling apart

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In June 2010, the City Council voted to replace the steps up to the Riverfront Village platform because they were all rusted out. That was blamed on the salt used to melt ice on the steps in the winter, and the basic design of the steps which apparently had insufficient drainage. Now it’s the concrete platform itself that’s falling apart — literally:

Concrete fell from underneath the Riverfront Village platform onto the parking lot below
Close-up of exposed rebar where concrete has fallen away

Hard to blame this on ice-melt, since, to my knowledge, the City isn’t salting the underside of the platform in the winter. This week’s Issues Update gives some more detail:

A portion of concrete fell from the ceiling of the parking deck about two weeks ago onto a car causing minor damage to the vehicle. National Garages was contacted and advised staff of this incident. In response, staff decided to check the other areas of the garage and have determined there were sections of loose concrete that could potentially separate from the structure and could fall. Currently, staff is removing loose concrete to avoid future incidents. As these areas are exposed, we will engage a structural engineer to review the work. We will also be working to remove some of the rust from the steel and repaint. Sealing these areas with new concrete is not yet planned as we need to determine the full scope and find a contractor to perform this work. We will most likely need to bring this forward to City Council as the costs will exceed $10,000.

Riverfront Village is twelve years old. Twelve years old and already falling apart. This has to be an embarrassment to the contractor/sub-contractor responsible for building this platform. It should be, anyway. Hopefully the City will take the time to look up who did the work originally and at least make sure they don’t hire the same company to fix it.

Best-case scenario: the structural engineer finds that the whole structure is unsound and must be razed. No offense to the tax-paying businesses on the platform; I’d like to see them stay in business downtown. But the platform never should have been built, and the riverfront would be better off without it. There are plenty of places nearby for the restaurants to relocate . . . like the retail space promised on Water Street by the new museum. If you find your home having damage like this and need help with claims, talk to experts like LMR Public Adjusters and get help.