In May-June 2007, the City of Peoria and Peoria County pledged a combined total of $6.6 million as a guarantee for a loan from National City Bank to Firefly Energy, the darling Caterpillar spin-off and “poster child” of PeoriaNext. The source of the funds breaks down to $3.3 million in utility tax revenues from the City, $1 million in Keystone revenue and $2.3 million in Personal Property Replacement Tax Revenue from the County.
Today, WEEK-TV reports that Firefly is closing down its operations and filing for Chapter 7 bankruptcy. That’s not like Chapters 11 or 13 where they reorganize. Chapter 7 means they’re kaput and they will be liquidating their assets, and that means taxpayers are on the hook.
[Firefly’s CEO Ed] Williams said, “After 15 months of unsuccessful attempts to raise $20 million in equity capital, in the midst of this world-wide financial crisis, funds that would have enabled the Company’s transition to full production and commercial sales, the Firefly Energy Board has decided to cease operations and voluntarily file for Chapter 7 bankruptcy.”
So, what happens to the taxpayers? The City and County released the following joint statement:
In May 2007, following the significant investment of the private sector and the state and federal governments, the City and County of Peoria unanimously joined in a community partnership to guarantee a $6 million loan to Firefly Energy, Inc. by PNC National City Bank. Unfortunately, after 3 years of extensive efforts to make a commercially-viable alternative to the traditional lead-acid battery, Firefly has not been successful. Along with our state and federal partners, the City and County did everything we could to help Firefly succeed and bring technology-centered, specialized manufacturing jobs to Peoria. It has long been a goal of both private sector and government in the Peoria area to take ideas spun off from Caterpillar to create jobs and commerce in the Peoria area.
As guarantors, the City and County are determined to exercise their full legal rights to protect their interests. In the worst case, the City and County might lose their $6 million guarantee. In the likely case, the governments will pursue by legal means the pledged collateral, the physical and intellectual assets of Firefly Energy, Inc., to reduce any investment losses that may be realized by the City and County. We believe that the value of these assets is considerable and will reduce any amounts that may need to be paid by the City and County as guarantors. Furthermore, we expect that the lender PNC National City will fulfill its legal obligation under the loan agreement to protect the interests of the guarantors and maximize the value of the collateral. Again, the City and County intend to exercise their full legal rights to protect the interest of the tax payers of the City and County of Peoria.
Not to be nit-picky, but the guarantee was for $6.6 million — $6 million for the loan, and $600,000 to cover accrued interest. Regardless, the bottom line is that it’s going to cost taxpayers. Four million dollars of the loan was to be used for equipment, and the rest for working capital. So it looks like we will be on the hook for a sizable chunk.
I love how they are saying they intend to “protect the interest of the tax payers.” You know what would have really protected us? Not guaranteeing a $6 million loan for a risky start-up business in the first place.
Not quoted anywhere is Rep. David Leitch, the former VP at National City who is credited with orchestrating the public-private partnership. He was quoted in the Journal Star back in 2007 as saying this deal was “the most exciting thing Peoria had done since building the Civic Center.” But my favorite quote was what he said after the City approved its half of the guarantee: “This will be a moment we can all look back on and say, ‘Wow.'”
Well, he was right about that. $6.6 million potentially down the drain. Wow.
What?! that place was suppose to be the cat’s meow!
And in other news from PJStar, Rep. Leitch is given award from the Mental Health Assoc.
“PEORIA, IL – October 1, 2009 – Firefly Energy announced today that it has signed a $3.3 million contract extension for continuing enhancement of its first two advanced battery technology designs. This funding comes in addition to more than $7 million the company has received to date under its original contract to adapt the company’s next generation microcell foam battery technologies for military applications.”
…from their website
So, what did they do with all that money? That was only 5 months ago.
DAMN!
That was 6.6 million that could have gone to the museum!
Hey, I have a great idea. Let’s invest more public money in other risky projects and see what kind of return they generate. I think a developer is looking for $40 million for a hotel. While all of his information has not been made public, we have been told this will operate well above the average area capacity, will generate room rates welll above area norms and will do significant amounts of food and beverage business. I hope the same City employees that reviewed Firefly reviewed the hotel – that way we know this is a sound investment.
Is anyone else skeptical of, “…in the midst of this world-wide financial crisis…”
20 million is chump change for any manufacturer that is going to use a Firefly component in their end product. In Holland Michigan a new battery manufacturing facility was announced yesterday. Elkhart, Indiana is getting the (Sweedish or Norwegian) THINK Electric Auto manufacturing facility.
Further, with all of the Green Energy & Green Manufacturing money that was thrown out in the recent stimulus bill, the Chinese Housing Market and public works project boom….I smell a rat.
Watch closely, the bankruptcy filings and if anyone is really fighting over the intellectual property/patents. Has there been a formal challenge to any of the patents, or is there a similar product out there in development and no favorable prospects for Firefly to contend infringement? Also watch and see what the Firefly principals do in the next year or two. Who are they working for? What sort of projects are they working on? Anything similar? What sort of interests do they have in that company?
This is the problem with the public, politicians and any region getting involved in business – they get emotional about it. Once they have this emotional desire for something that will….improve their regional/collective self esteem….the hard realities of the finances go out the window and they are going to pledge the productivity of the current and future tax base on a flashy gamble, ergo hotels, museums and new technology, when what has proven time and time again to improve the competitiveness and ultimately the prosperity of a region – an efficient, stable tax rate and similarly efficient [minimal] bureaucracy.
This is another matter that must be considered – with all of Illinois’ financial problems, Venture Capital and conventional business financing may have been available to Firefly had Firefly been located in a state or country where the operating and costs against profit were lower….Indiana or Indonesia ???
Feedback please…..
Free Tax Money for Gary Matthews too!
Come on now, people. What else is tax money for but to support a failing economic system by subsidizing corporations?
Anyone else notice the statement from the city/county and news broke on a Friday and during March Madness. People trying to spin bad news always wait till late Friday.
Again, the City and County intend to exercise their full legal rights to protect the interest of the tax payers of the City and County of Peoria.
Intentions?! “Good intentions are like crying children, they should be carried out!” attributed to Brigham Young
Basic services! Basic Services! Basic Services!
If the banks will not loan the money nor if the private venture capitalists will not loan the money …. government should not be loaning the money either!
Regrettably, there will probably be more bad financial news to come! 🙁
Regrettably, there will probably be more bad financial news to come!
Globe Energy? There’s a real estate sign on the property on which they intended to expand their factory.
Let’s see, the City gave Globe Energy a $150,000 business development loan in May 2007 — right about the same time as they guaranteed Firefly’s loan. Just last month, the City agreed to forbear the loan for 90 days.
Even if their physical and intellectual capital is worth $6,599,999 (putting us on the hook for $1), this was a bad idea from the get-go.
Is it still “better here”?
Chase – I agree. Something does not add up.
Just saw an interesting piece on CNN. The report was on Montgomery, Alabama’s riverfront development projects. Wow! Montgomery city/county govt. seemed to have hit the nail on the head…. Below a little quip from the report.
“Despite all the problems in the economy, it seems as if the local government folks, the Chamber of Commerce crowd, and developers have actually worked out a way to make things crank a bit downtown. They have built up a series of blocks around the minor league baseball stadium where the Biscuits play. (Yes, the Biscuits! One of the best names in all of baseball!) Now they have restaurants, hotels, a Hank Williams museum, and more. Enough that if I were a visiting business type I’d be pretty happy to go to my convention, maybe take in a ballgame, and then top it off with some excellent barbecue. Btw, don’t forget the banana pudding which my producer, Katie, mysteriously refused to even sample. Go figure.”
– The project called for the renovation of a great many empty and run-down buildings all along the riverfront. This was done mostly using TIFs and other incentives. Almost all of the buildings now house businesses of every type, including the Hank Williams museum! The Montgomery Riverfront is thriving like never before.
Question; Is it really that smart of us Peorians to slam $140 million of the tax payer’s money into one [museum] project? What if Peoria spread a little of that ‘good cheer’ [money] around?
I remember one of the selling points of the museum was that it would attract droves of young-professional types to Peoria area. Bring in the big business……… Now, Firefly is gone….oh well.
You could always get a job in hotel/museum security….