Category Archives: Peoria Civic Center

Caterpillar, City of Peoria, Peoria Civic Center

Caterpillar purchases naming rights to Civic Center-hotel connector

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One of the most prominent pieces of the hotel redevelopment will carry a corporate sponsor’s name: the Caterpillar Sky Walk.

Part of the downtown hotel project is the construction of a pedestrian bridge over Fulton connecting the renovated Pere Marquette and new Courtyard Marriott to the Peoria Civic Center. Caterpillar, Inc., purchased the naming rights to the bridge for one million dollars.

The naming rights agreement, which is only between the hotel developer and Caterpillar (not the City of Peoria or the Civic Center), allows Caterpillar to “name the Connector, including the right to display appropriate signage on the exterior and interior of the Connector,” but “not includ[ing] any other marketing, advertising, or other rights.” The agreement specifically says that Caterpillar does not have any rights to name the hotel or garage, but it also forbids the developer from granting naming rights to “any person or entity that competes with Caterpillar in any industry that is part [of] the core business of Caterpillar.”

Neither the redevelopment agreement between the City of Peoria and the hotel developer, nor the easement agreement between the Peoria Civic Center, City of Peoria, and the hotel developer, precludes the sale of naming rights. Council members contacted Monday said they were unaware that naming rights had been sold for the connector, or that there were any plans to do so.

Artist's rendering of the planned pedestrian walkway over Fulton, looking northwest

 

Peoria Civic Center

‘Expected’ Civic Center net loss a matter of interpretation

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How do you put a positive spin on a $4.33 million loss for the Civic Center? Observe:

Peoria Civic Center net loss less than expected

The Peoria Civic Center is not immune to a wicked economy.

But having budgeted for a net loss of $4,764,988 for the 2011 fiscal year that ended Aug. 31, the actual total of $4,332,368 seems less egregious.

More than $432,000 less egregious.

“I would say it’s below budget and we hope to always make budget,” said Jim Wetherington, who was promoted to Civic Center general manager on May 1 upon the retirement of Debbie Ritschel.

“Considering the market that was out there, I think staff did a phenomenal job cutting expenses.”

That’s one way to look at it. Here’s another:

When the $55 million Peoria Civic Center expansion was proposed in the early 2000s, consultants confidently stated the Civic Center would have a net operating income of $1.5 million once they reached a stabilized year of operation. That should be now, since it’s been four years since the expansion was completed in March 2007. Instead, the losses have been and still are trending downward. Rather than $1.5 million in net income, they ended FY 2011 with a $4.33 million net loss — a difference of $5.83 million.

So, the headline could just as accurately have read, “Peoria Civic Center net loss $5.83 million more than expected.” It all depends on which expectations we want to reference.свети георги

Peoria Civic Center

Civic Center continues to see losses

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One of the items on the City Council’s agenda for Tuesday is adopting the Peoria Civic Center’s FY2011 budget. This document also shows the Civic Center’s FY2010 performance.

You can see some performance graphs of FY2001 through 2009 in this previous post. The FY2010 numbers continue the downward trend. The Civic Center had 518 event days, a drop of 10% from 2009 and the lowest number since FY2006. Their operating loss before depreciation is $97,015; their total net loss is $4,768,927.

Things are looking bleaker in 2011. The Civic Center Authority expects only 491 event days in the next fiscal year, and are taking several cost-cutting measures to mitigate their anticipated losses. Of particular note, they state, “Convention center business is projected to decrease in FY11 with a further reduction in FY12.” The exhibit halls/convention space was the portion of the Civic Center that was increased the most in the recent $55 million expansion. The consultant who recommended expansion predicted large increases in convention business. Nine full-time positions have been shed through layoffs and attrition over the past two years, and the three top executives are getting no raises or bonuses again this year.

HRA tax revenue is down significantly. In FY2009, the Civic Center’s tax subsidy was $1,446,276; in FY2010 that had dropped to $990,946, a 31.5% decrease. In FY2011, they’re budgeting to receive $950,000 in HRA taxes.

The Civic Center is often cited as an example of success in municipal investment. Civic leaders will refer to current large projects as the “Civic Center project of our day,” sometimes adding, “Can you imagine downtown without the Civic Center?” The implication is that the Civic Center has been wonderfully successful in some way, but I have yet to figure out how. In its 30-year history, it has never been able to make a profit without HRA tax subsidy. It also has not spurred any peripheral development that has been able to sustain itself. The Grille on Fulton, despite its perfect location for capturing Civic Center traffic, could not stay in business, nor could any other restaurant that tried to locate there. Other properties surrounding the Civic Center are vacant; several nearby buildings were razed a few years back to expand parking.

Nevertheless, the City has poured $55 million more into the Civic Center, and is now spending more millions to get an attached hotel built across the street. They keep pursuing the pot of gold at the end of the rainbow that’s promised by our little leprechaun consultants, but only consultants and developers are actually getting the gold. Meanwhile, the City is looking at laying off even more police officers and firefighters, and wondering why they can’t attract more people to move here.

City of Peoria, Peoria Civic Center

Is the Civic Center expansion meeting consultant’s predictions?

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In 2005, the Peoria Civic Center broke ground on a $55 million expansion project. The project was completed on March 1, 2007. The project was approved in part because of a study done by Charles H. Johnson Consulting, Inc., in 2002 which predicted a positive economic impact for the expansion. Peoria would be able to attract more conventions, bringing more people to Peoria, which would lead to higher sales tax revenues.

I thought it might be helpful to look at the predictions and compare them to the newly-expanded Civic Center’s actual performance. Let’s look at these three indicators: Event Days, Attendance, and Net Operating Income.

First, to be fair, I should point out that the Johnson report’s predictions are for “a stabilized year of operation after facility improvements are completed.” What constitutes a “stabilized year of operation” is open to some debate. It could be as early as the third year of operation after completion, or as late as the fifth or sixth. We only have numbers up through FY2009, since FY2010 won’t be complete until the end of August. So, while it’s been three years since March 2007 by the calendar, we only have numbers up through August 2009, or roughly two years after completion of the project.

Nevertheless, it’s worth looking at the trends even this early for two reasons: (1) the time leading up to a “stabilized year” is called the “ramp up” time, and one would expect to see the numbers trending upward even if they haven’t yet reached the predicted levels, and (2) the success of the Civic Center is cited as one of the biggest reasons (if not the only one) for approving the Wonderful Development (i.e., downtown Marriott hotel deal).

Event Days

The Johnson study predicted that the number of Event Days would rise from 510 (the total for FY2001) to 632 — a 24% increase — after expansion. Actual Event Days from 2001 to 2009 did trend upward to a peak of 607 in FY2008, but then dipped significantly in FY2009 to 575. Here’s the breakdown by facility (Theater, Arena, Convention Center), with the total shown in green:

When you look at the Event Days by facility, the Arena and Convention Center actually met or slightly exceeded predictions, whereas the Theater fell short in FY2008. However, increasing Event Days does not necessarily translate into higher attendance or more net income, as we shall next.

Attendance

The Johnson study predicted that Attendance would increase from 849,885 (FY2001 total) to 1,071,500 (26% increase) after expansion. Actual Attendance has indisputably trended downwards. Peak attendance was way back in 2002 when it reached 913,335. Since then, it has fallen every year except for 2008 when it bumped up slightly to 832,121.

It’s interesting that, even though Event Days trended upwards, attendance trended downwards. It’s attendance that we’re really after with the Civic Center, since it’s people who eat at restaurants, stay at hotels, and go shopping in Peoria, thus adding to our sales tax base. If attendance is going down, we’re losing money on the expansion. We would expect that to be reflected in the Civic Center’s Net Operating Income, and it is.

Net Operating Income

The Johnson study said the FY2001 Net Operating Income was $212,000. I’m not sure where they got that number. According to the Civic Center’s financial statements, there was a Net Operating Loss in FY2001 of $1,732,500. Even Operating Income Before Depreciation is only $78,333, although it’s at least on the positive side. I could find no reference to a $212,000 profit anywhere in the financial statement. It’s possible the amount was a preliminary figure that was revised subsequent to the report being published.

Nevertheless, Johnson predicted Net Operating Income of $1,519,000 after improvements. The actual picture of the Civic Center’s finances is not so rosy. From FY2001 to FY2009, the Civic Center suffered Net Operating Losses every year, and those losses are trending downward. FY2009 saw an all-time low loss of $4,273,556.

Much of this is a result of depreciation. If we look at Operating Income Before Depreciation, the trend from FY2006 to FY2009 is reversed, but still in the red.

At the current rate of increase, it will take somewhere in the neighborhood of fifteen years for Operating Income Before Depreciation to reach Johnson’s predicted levels.

Conclusion

While Event Days were close to reaching predictions before the downturn in business in FY2009, neither Attendance nor Net Operating Income show any signs of reaching their predicted levels.

Afterword

There’s one other prediction not related to the Johnson report that’s worth noting. That was the prediction in a March 24, 2006, memo from the Civic Center Authority to the Peoria City Council that stated:

The Peoria Civic Center Authority is not now and has not previously requested public funding for a hotel. We have always hoped that a private development would be interested by the Peoria Civic Center expansion and upgrade to come forward with a proposal. We hope that the community will enable such a development.

The Peoria Civic Center Authority is committed and continues to be committed to the success of the expanded facilities. We believe it can be successful without an attached hotel but more and larger regional opportunities will be possible if more and better downtown hotel rooms are available.

Six months after that was written, the Civic Center Authority started pushing for an attached hotel. So now, after $55 million in investment that we were promised would be successful without a publicly-supported, attached hotel, taxpayers are being asked to back another $37 million in public investment for not one, but two headquarters hotels — a Pere Marquette Marriott and a Courtyard by Marriott. To bolster hotel supporters’ predictions that these hotels will be successful and realize 68%+ occupancy rates, another study has been completed, this time by HVS International.

All indications are that the Civic Center expansion is failing and the predictions by Johnson Consulting were, to put it charitably, optimistic. Yet we’re going to follow the same process of relying on rosy predictions from consultants and promises of success from the Civic Center (and Convention and Visitors Bureau) to give $37 million toward a headquarters hotel.

Why should we believe all these predictions of success? What empirical evidence is there that this project will pay off for the taxpayers? There is none.

See also:
Journal Star editorial 5/23/2010
Wonderful Development agreement raises questions

City of Peoria, Peoria Area CVB, Peoria Civic Center

Civic Center loses wrestling tournament to Springfield

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The Illinois Kids Wrestling Federation’s annual Jon Davis IKWF Kids Open will be moving to Springfield for 2011 and 2012. The Peoria Civic Center has hosted the event for more than a decade. The contest is held every January and has brought in anywhere from 1,300 to 2,100 wrestlers annually. It was held at Redbird Arena until 1995 when the group left to protest ISU’s decision to drop wrestling as a varsity sport.

In e-mails forwarded to The Peoria Chronicle by a source who wishes to remain anonymous, Sports Sales Manager Chad Mentzer of the Peoria Area Convention and Visitors Bureau wrote, “After talking with Mike Urwin with IKWF, there are two reasons why we lost this piece of business…. #1 Hotels. Average cost [in Springfield] is approximately $20 cheaper per night. #2 Facility rental fees. Projected fees in Springfield are, based upon expenses from 2009, considerably less than the Peoria Civic Center.” The group sought a block of 400 room nights for the one-day event.

Joel Green, Director of Sales and Marketing at the Hotel Pere Marquette responded to Mentzer’s e-mail by saying that his hotel had “lowered our rates considerably for 2011… after holding our rates for 2009 and 2010.” January rates are historically low to begin with in the Peoria hospitality industry. Regarding the venue, Debbie Ritschel, General Manager of the Peoria Civic Center, added, “In this particular case the fact that they [Springfield] will not have to cover ice in their arena may have also been a factor.”

In April, Holiday Inn City Centre General Manager Sami Qureshi stated that the top reason conventions skip Peoria is due to the Civic Center’s rate structure. This recent convention loss and the reasons cited by the IKWF appear to support that contention.

The loss of this event also highlights the competitive nature of hotel room pricing. If the Pere Marquette lowered its room rates below 2009 levels and Springfield was still able to offer rates $20 per night lower, one wonders how a four- or five-star Marriott hotel will be able to offer competitive rates that are high enough to pay off the debt service on a $37 million bond taken out by the City of Peoria.

City of Peoria, General News, Peoria Area CVB, Peoria Civic Center

Civic Center rates the No. 1 reason conventions skip Peoria

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Why do organizations skip Peoria and choose other cities to host their conventions?

The reasons were revealed by Sami Qureshi on WTVP’s public affairs program “At Issue” Thursday night. He should know. He’s the Holiday Inn City Centre’s General Manager, President of the Heart of Illinois Hospitality Association, and Secretary/Treasurer of the Peoria Area Convention and Visitors Bureau. He’s talked to convention organizers and read the PACVB’s lost business surveys.

Based on those primary sources, Qureshi says the number one reason Peoria is bypassed is because of the Peoria Civic Center’s rate structure. The number two reason is limited air service. The main reason is not, he says, due to a lack of quality hotel rooms.

Gary Matthews, the hotel developer who hopes to turn the Pere Marquette into a Marriott and connect it to the Civic Center with the help of $37 million in municipal (i.e., taxpayer-backed) bonds, disagreed with Qureshi. Matthews said that Marriott officials told him the Peoria Civic Center’s rates are perfectly fine. Qureshi countered that he wasn’t stating his opinion, but is just repeating what actual organizers who actually said “no” to Peoria had told him.

Qureshi and Matthews were on “At Issue” along with Peoria Mayor Jim Ardis and Holiday Inn City Centre owner Bruce Kinseth to talk about the “Wonderful Development” and its ramifications. There was also a prerecorded clip of Mark Twain Hotel owner and former Peoria mayor Lowell “Bud” Grieves explaining his alternative proposal. The episode will be replayed Sunday at 4:30 p.m. on WTVP, channel 47.

General News, Peoria Civic Center, Peoria Mayor, State of Illinois

Civic leaders line up to tout Wonderful Development

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I regret that I couldn’t make it to the Illinois Finance Authority’s public hearing on Tuesday regarding the Wonderful Development (i.e., the proposed downtown Marriott hotel project). It looks like I would have been the only dissenting voice. The Journal Star reports that “Every person who publicly spoke before the authority was in favor of it. No one spoke in opposition.” Those who publicly spoke included Mayor Jim Ardis, Civic Center General Manager Debbie Ritschel, Peoria Area Convention and Visitors Bureau President/CEO Bob Marx, and “various trade groups.”

Mayor Jim Ardis defended the city’s position that it has done the appropriate due diligence on a project that is backed by nearly $40 million in public bonds.

If they really did “the appropriate due diligence,” it was all done in secret. No vetting was done in public, nor was there any public hearing before the city council decided to commit $40 million to the project.

He also defended the use of a tax bond for the project, saying that without public assistance, major Downtown projects would languish. He cited the “10 to 15 years” without development within the museum block as an example of the lack of the private industry moving forward with a project.

The City purchased the downtown Sears property in 1998 when Sears announced it would be moving to Northwoods Mall. Following that, they acquired the rest of the block. Ever since then, they’ve owned the whole block. They spent a few years haggling over what to do with it, then ultimately decided to give it to the museum. And that’s why there was a “lack of the private industry moving forward with a project.” They couldn’t. John Q. Hammons expressed interest in building a hotel on the block and the Mayor wouldn’t even return his calls. Furthermore, the museum group has had public assistance (lots of it!) for almost a full year and they still can’t get anything built down there.

“I would ask any . . . critics to name for me projects of this importance to the city that will have a private investor come before us and shoulder all of the burden,” Ardis said. “It doesn’t happen anymore.”

First of all, I take issue with his characterization of this project as one of “importance.” It’s not important to Peoria. All it will do is give us an overbuilt hotel to go along with our overbuilt Civic Center. Secondly, the reason a private investor won’t come before us and shoulder all of the burden is because they know it won’t be profitable. That’s why banks won’t loan the money, either. Why should we build an unprofitable hotel? Peoria has money to burn, apparently.

Ritschel and … Marx defended the hotel project as something that will make the Civic Center a more attractive destination for larger conventions and events.

Marx said at least 10 groups representing more than 17,000 room nights have approached the city about wanting to have an event at the Civic Center only if there was an attached hotel.

“They won’t event talk to us until we have this project come to fruition,” Marx said.

If it were that important to the Civic Center, then why didn’t they include a hotel in their $55 million expansion plan? Why did they say they could be successful without an attached hotel?

And what about those 17,000 room nights? Suppose they got $120 per room night for those (keep in mind that it will probably be less because they’ll give lower rates to big groups like that), how much would that amount to? $2,040,000. That’s not enough to make one bond payment. 17,000 room nights out of 178,850 annual room nights available (proposed 490 total rooms times 365 nights per year) accounts for 10.5% occupancy. Considering the current Pere Marquette (which has only 287 guest rooms) is barely getting 50% occupancy, I’d say we’re looking at some serious losses on this project.

But there’s no reason why Peoria residents should have to go to the IFA to complain about it. We should have had an opportunity to voice our concerns before our own local elected leaders. It’s too bad the IFA has provided more opportunity for input than our own City Council.

Peoria Civic Center

Civic Center will “think about” freezing wages

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The Journal Star reports that “The Civic Center Authority on Thursday approved an approximately $8 million 2010 fiscal year budget that calls for across-the-board 2 percent wage increases” (emphasis added).

So, let me see if I have this straight: The fire fighters won’t get a raise. And the library staff won’t get a raise. And exempt city staff won’t get raises. And the city is asking the police department to give up their raises. But the Civic Center, which didn’t even pass a balanced budget (“The budget’s approval includes a $115,000 operating budget deficit”) is going to give raises to their workers?

But wait — it gets better:

At-large City Councilman Ryan Spain informed authority members that governmental bargaining unions throughout the city are being asked to forgo pay raises next year in order to help deficit-laden organizations patch their budgets…. Commissioners requested the Civic Center’s management firm, SMG Corp., consult with the finance committee about reviewing the possibility [emphasis added] of freezing the wage increases. Commissioner Ken Goldin requested the review be taken after Spain made his comments.

“We are not saying the raises are not coming,” Goldin said. “We want to think about it and review them.”

A couple of things bother me about this. First of all, they don’t know about the city’s budget issues until Ryan Spain tells them? These guys are really on top of things. I wonder if they’ve heard yet that Michael Jackson is dead.

Secondly, they’re going to think about freezing wages? You know, back on August 11, the city council had a motion on the floor to renegotiate the city’s intergovernmental agreement with the Civic Center — that is, to redirect part of the HRA tax revenue from the Civic Center to the City’s general fund. Ryan Spain made a substitute motion “to engage Civic Center Authority in further discussion over the next four weeks” as the council’s liaison. My guess is, if Spain is unsuccessful in getting concessions from the Civic Center Authority through the softball approach, the original motion may make a reappearance at a future council meeting.

Also, as an aside:

“This is the only area I see a concern in the budget,” said Spain, the City Council’s liaison to the Civic Center Authority.

Really? The $115,000 operating budget deficit wasn’t an area of concern? You’d think after 27 years, there might be some concern over the fact that the Civic Center is still losing money.

Museum Block, Peoria Civic Center, Peoria County, Taxes

Ritschel not seeing all the benefits of higher taxes

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Here’s an intriguing story from the Journal Star. It’s in regard to a request from City staff to raise sales taxes downtown to help repay general obligation bonds that will be used to build a new Mariott hotel:

Civic Center officials believe an extra 1 percent sales tax on concessions and catering could put the Downtown sports and recreations center at a competitive disadvantage compared to other nearby facilities . . . .

Ritschel said the 1 percent tax would generate approximately $30,000 a year for the Civic Center, which is less money than they anticipate losing to East Peoria and elsewhere because of the extra tax.

Peoria and East Peoria tax similarly when it comes to hotels, food and beverage sales, Ritschel said, so the extra 1 percent would make the Civic Center “more uncompetitive.”

Perhaps someone from the museum group can explain to Ms. Ritschel and the rest of the Civic Center officials the big benefits of higher sales taxes. They spur economic growth; they don’t hurt it. The new Marriott downtown will bring jobs and be like our own little stimulus package. And besides, it’s so cheap — only $1 for every $100 spent. How much does the average person spend on concessions downtown? $25? It’s only going to add an extra quarter to your purchase! Pocket change, dude. They must just be naysayers who don’t want to see progress in Peoria.

Obviously, I’m poking fun at the arguments given for the museum sales tax. But all sarcasm aside, I actually agree with Ritschel on this issue. The same thing that Ritschel fears will happen with a 1% sales tax increase will also happen if voters approve a .25% sales tax increase in Peoria County to pay for the proposed downtown museum. It will make us less competitive and drive more business across the river and elsewhere. Did you catch the phrase she used? She said a tax increase would make the Civic Center “more uncompetitive.” In other words, there’s already a tax disparity, and adding to it is just going to exacerbate the problem.

Did the Bradley professors take the cross-border effect of tax disparity into account when they did their economic analysis of the museum project? I’ve added that to my list of questions to ask when we meet. I expect a call soon to set up a meeting date/time.

Peoria Civic Center

Peoria Civic Center cuts jobs, benefits

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The following announcement was made by the Peoria Civic Center yesterday:

At the direction of the Peoria Civic Center Authority, I am attaching a recent memo regarding the adjustments that SMG management is making for the rest of the seven months of our fiscal year.

We felt it would be prudent moving forward to budget very conservatively due to a very uncertain immediate future. While we are not far off budget through December, 2008, we do not currently see a clear line of sight to August 31, 2009 as compared to our budget, created in May 2008.

Our goals are to preserve cash flow as well as monitor revenues and expenditures very closely in times that could very well see a downturn of activity.

The Peoria Civic Center Authority and SMG and Centerplate take our stewardship of the Peoria Civic Center and all its assets very seriously. Our hope is that we will be able to improve upon our conservative budget estimates in the months to come.

Councilman Manning may be able to answer questions you have or please don’t hesitate to call others or myself.

Thank you,

Debbie [Ritschel]

Here’s the text of the memo:

Fiscal 2009 Budget Cuts Outlook
January 2009

As we have been discussing for several months at the PCCA meetings, in the current economic uncertainty it is prudent to be conservative in projections of revenues and work toward significant budget cuts to balance a probable loss of revenues.

After the first four months of our fiscal year, we are between $150,000 and $200,000 behind budget. While we have said that this is not unusual for this early in the fiscal year, the current softening of touring concert ticket sales and fewer corporate meetings will make the recovery of these dollars more difficult. We therefore are making fiscal assumptions that our year end revenues beyond expenses will not meet the $109,000 loss that was budgeted. Trying to quantify what that year end number will be is far more difficult this year with so many uncertainties in the national marketplace which affects our local consumer confidence. It is this consumer confidence that encourages people to buy tickets to so many of events or allows show promoters to book shows of all types at PCC.

The SMG staff in communication with SMG Corporate and Finance Committee members has initiated the following budget adjustments totaling about $300,000-$350,000 in expenditure reductions by August 2009:

Executive pay reductions
Elimination of five full time positions
Hiring freeze for positions vacated by attrition
401 K match temporarily suspended
Travel and other regular department line items cut
Favorable business and health insurance renewals

The Capital Committee has agreed to freeze all further capital expenditures unless it meets a life safety or emergency repair threshold. This will result in an additional $300,000 positive cash flow. Combined with the above expenditure reductions, the improvement to cash flow will be $600,000-$650,000.

We are encouraged by the staff attitude of finding ways to economize and increase sales. We have a talented group of dedicated professionals who are ready to meet the economic challenge head on. We will continue to keep the Commission informed on our progress.