There were a couple of hotel-related news items over the weekend:
- Gov. Quinn approved tax credits for the Wonderful Development. Incidentally, the Journal Star reported the bill number as SB2535, but it’s actually SB2534. The gist of Quinn’s comments was that these tax credits will help provide jobs for union workers, and that will spur economic growth that will actually generate more revenue for the state. “You put more people to work,” Quinn is quoted as saying. “They pay income taxes and other taxes. The key thing is more economic growth.” Koehler chimed in: “People say, ‘Doesn’t that drain money out of the state budget?’ No, it doesn’t. By the time you pay all those jobs and you are creating extra real estate value, the community and state are going to replenish all of that.”
Are we supposed to believe these guys have suddenly converted to Reaganomics? Wasn’t it Gov. Quinn who proposed raising personal income taxes from 3 to 4.5% last year? And after he changed his proposed new rate to 4%, wasn’t it Dave Koehler who lamented, “From everything I’ve heard around the Capitol, there will not be any appetite for the income tax (increase) before the election. That’s too bad. I don’t agree with it, but it’s the decision I hear.” What? Why raise personal income taxes? Why not just cut corporate income taxes so the state can reap millions and millions of dollars from all the new jobs that would be created as a result? Or does supply-side economics only work on union-worker-built hotel projects at Main and Madison in Peoria?
The paper also stated:
The proposal potentially could reduce the project’s costs by $8 million, savings that are split between developer EM Properties and the city of Peoria. The City Council last month voted 7-4 in favor of a $37 million bond to assist in the hotel project. The tax credit could potentially drop that obligation to $33 million.
Looking at it one way, this is good — the City’s obligation could be 12% or so less than originally planned. On the other hand, it’s actually a net increase of $4 million in taxpayer incentives, if one looks at tax incentives from all sources equally.
- The Grand Hotel will be converted to a senior living center. Why? The hotel’s sales manager, Stan Marshall, explained: “[T]hose capacity needs [groups who come to Peoria for meetings or sports events] just aren’t frequent enough. There are a lot of holes in the calendar. We need a steady source of revenue.” Given that the Radisson (formerly Jumer’s Castle Lodge) closed last year, and now the City’s third-largest hotel is getting out of the hotel business, one would be tempted to think that there’s overcapacity of hotel rooms in Peoria. But I’m sure downtown hotel proponents will pooh-pooh such an obvious conclusion. After all, the whole rationale behind the Wonderful Development is this belief that Peoria’s hotel problem is undercapacity.
Actually, I don’t think the hotel proponents have said the AREA has an undercapacity of rooms. I think they say that downtown–specifically near/attached to the PCC–has an undercapacity of the number of QUALITY hotel rooms. The PCC feels so, the local EDC feels so, Caterpiller feels so and many in the medical community have said so. I think this has been pretty clearly stated and the noise about hotels outside of downtown is just that–noise, as it relates to the Marriott project downtown.
One other point, if you notice something about the local failing hotels–they are hotels that are old and not in good repair. That includes the Pere–before renovations.
If the rooms were so needed then why hasn’t private capital/investors stepped in to fill the need? Look out at Grand Prairie – new hotels being built without public funding because a need was found in the market.
The rooms are needed by the PCC but the revenue will not be enough to sustain the $102 million in cost. That is why the city is involved. The argument by opponents shouldn’t be that the rooms aren’t needed, the argument should be that the city shouldn’t be involved.
The reason the city is involved is because they are on the hool for the massive debt and operating expenses of the PCC and it needs more business. The hotel will help with that.
I think the nine other hotels within 1/2 mile of the Holiday Inn Brandywine/Ramada/Grand Hotel was its downfall.
No doubt that competition and a possible overcapacity can hurt hotels. But new and renovated hotels aren’t failing at the same rate as old and tired hotels are failing. It is no secret in the hospitality business that new and well kept hotels have a much greater chance of success than old and tired hotels.
That said, in the current economy, I think it is fair to say the vast majority of hospitality properties are not doing well. That includes virtually all hotels in the Peoria area.
I agree with 150 observer. If you want to attract conventions and events to the Civic Center, hotels 10 miles away at Grand Prairie aren’t going to do much to really sell the convention. The only hotels within walking distance of the Civic Center are the Pere, the City Center Holiday Inn (whose days may be numbered anyway), the Mark Twain, and the Embassy Suites (which isn’t necessarily an attractive walk, but walkable nonetheless).
Since no one decided to comment on my earlier post, I will reiterate…
Sterling writes, “If you want to attract conventions and events to the Civic Center, hotels 10 miles away at Grand Prairie aren’t going to do much too really sell the convention…”
If you want to attract conventions, a ‘city’ must offer something besides a fair number of hotel rooms. What can Peoria offer in the way of entertainment? A museum?
There are a number of first-rate hotels across the river that offers easy access to a variety of restaurants, gambling, ‘gentleman’s’ entertainment, etc.
Do we really need more hotel rooms? According to 150 Observer, “The PCC feels so, the local EDC feels so, Caterpiller feels so and many in the medical community have said so.” Of course they do….. What do you expect? Although I have NEVER heard anyone actually in the medical community say we need more hotel rooms, the others… well….? Lets just say that the people who run these organizations are all tied at the hip. CAT also thinks Peoria NEEDS a new museum and CAT Visitor’s Center…….
Who stands to profit from all this?
Hopefully, the city stands to profit, the PCC stands to profit and all Peoria stands to profit. Time will tell.
Also, lets not forget how all of these ‘convention goers’ will get to Peoria. The airport…sure. Maybe most of them will arrive via paddle boat? How about Peoria concentrates on becoming a rail-hub first?
Rail-hub would be fine. Go for it.
150 Observer,
I applaud your optimisim, but… I am NOT willing to ‘BANK’ on it.
Just getting tired of the ‘Mafia-esque’ way Peoria does business.
Nobody believes for a minute that Matthews is going to stick his neck out, or risk ANY of his personal fortune on a venture as risky as this. Spending millions in hopes of attracting future conventions? Right…..
And maybe Ransburg really does want to give back just a ‘little.’
“Rail-hub would be fine. Go for it.”
Oh yeah…? What’s that supposed to mean?
That was a low-blow even for you 150.
Low blow? What the hell are you talking about? Where did you come up with that? You have a vivid imagination.
Rail service is fine with me, though I don’t know a lot about it. Go for it, man.
I stayed at the Holiday Inn Brandywine many times before I moved to Peoria and always thought it was a great hotel. Sorry to see it go down so much.
This is America. You don’t need to “bank” on anything. Not sure exactly what that means. ^^Shrugs^^.
References to the “mafia” are just what I referenced earlier-wild claims, name calling, over reaching.
Developers stick their necks out all the time. That is why there aren’t many of them. They risk their personal assets frequently. I applaud them for it—that is how things get done in America.
Agree, Ben, it once was a neat place.
I’ll take 9 million in taxpayer money and I’ll give you a railroad hub with daily service to Chicago and ST. Louis.
Where’s my check?
I give up. Where is your check?
150,
Slow down…. just having a little fun with you.
Relax. Your brilliant defense of Gary Matthews has you all wound up. No name calling here.
Does this mean that Peoria will soon have an overcapacity of senior living centers?
Enjoy an event at the Civic Center. Spend $200 a night at the Wonderful Development, then meander the dirty, unlandscaped, pedestrian-unfriendly downtown streets. Stroll past the many drab bank buildings, the law offices, and the ugly parking garages. Stop at Swingers World and maybe do some pawn shopping across the street. Remember to spend an afternoon at Big Al’s before flying out of town. Looking for Big Al’s? You will find it nestled behind the Riverside Community Church. Oh Peoria, city of intriguing contrasts, no other small city can compare to your irresistible beauty!
Swinger’s World?!?
Hells Bells… I forgot all about Swinger’s World!
No wonder Matthews is so eager to bet the pot on this one!!!!!!
150 Observer says, “The argument by opponents shouldn’t be that the rooms aren’t needed, the argument should be that the city shouldn’t be involved.”
I disagree. I believe the the rooms aren’t needed, and neither should the city be involved. Consider for a moment that the market for our Civic Center is regional, not national, largely because of Peoria’s proximity to larger markets and our poor airlift service. Most people who come to conventions here are driving in to Peoria, not flying. Given that they have their own vehicles with them, staying at a hotel right next door to the Civic Center is not critical. There’s ample parking for a minimal fee in the Civic Center lot(s), and as New Voice has pointed out, there’s a dearth of evening entertainment downtown. There’s quite a bit of incentive for a convention-goer to stay in a hotel near one of the malls and simply drive to their convention during the day, then retreat from downtown in the evening. It would result in cheaper rates and closer proximity to restaurants and entertainment.
“Developers stick their necks out all the time.”
NO ONE CARES that Matthews want to build a hotel. Let him do it the old fashioned Capitalist way… with his own money. NOT with taxpayer money.
Hell, he can buy up all of downtown and turn it into one giant hotel if he wants to… as long as he is willing to pay the cost of it and the taxes.
He doesn’t, does he? No one wants to… why? because the city is willing to pay him OUR money to do it… win, lose or draw. He makes millions and the city gets… what? The city doesn’t even get the property taxes. What do the tax payers get? What do the real “investors” in this project get?
C.J.
The only solution is for the city (or someone else, of course) to bankroll a venue that is comparable in size and quality to that found in Chicago. No other solution will do. For example, I prefer to see Peoria build a world-class aquarium that is much bigger and better than the Shedd in Chicago.
I am more in the line with 150. Can we really be mad at GM for pulling this off? No. He is Guaranteeing it but that means nothing if he turns around and sells his shares which will more than likely happen given the length of time. The fear here is another operator comes in and drags it down like other hotels downtown. If you want to be mad, be mad at the Ardis Gang and get them out of office.
Also 150 is correct in that the proponents say there is a lack of Quality Rooms downtown which I agree.
So the only valid arguement as 150 states is should the City be invovled in Hotel projects and that is where we should complain. I have argued NO WAY NOT THIS PROJECT.
150 says the city is involved because it is on the hook with the debt on the PCC. To me this does not make a valid case to be involved with hotel developemnt or this particular project or the way it is structured. Throwing more money at a problem is no way to solve it and you can find many failing banks that have done just that.
Charlie, the city WILL get the property taxes. There is no abatement of property taxes here. You continue to spread misinformation.
New voice, where was my name calling? There was none.
CJ, I think it is entirely appropriate to protest the use of significant city money for a hotel. No problems with me on that at all.
I also know that there is demand for quality downtown hotel rooms. We shall see how much demand in a couple of years.
I am really not sure about this…would it be possible for the city to sell off the Civic Center? If there was an interested party…
Anonymous 150 observer: -There is no abatement of property taxes here-
“25 percent tax credit of the amount of eligible expenses”
What kind of credit is that? When there is no income produced (as in a construction or rehabilitation project), what tax is being credited?
“The legislation is considered a pilot program for a possible statewide historical property tax credit.”
Quotes are from the PJStar article cited above. OOPS… someone is telling the truth.
“I prefer to see Peoria build a world-class aquarium that is much bigger and better than the Shedd in Chicago.”
Jim, Jimmy Jim Jim Jim…
I PREFER we build a school system that educated all of our children, and a community that creates jobs and opportunities for all of our children and an environment that is safe and healthy first…
An Aquarium? How about carve faces of The Presidents into the bluffs below Grand View Drive or on the west bluff and charge tourists to rub Abraham Lincoln’s nose? We could recreate the Gettysburg battlefield in one of our empty farm fields or The Tractor Factory siege of Stalingrad in one of empty warehouses… Peoria could become the biggest imitation tourist destination in the world.
Or we could try and become a community.
Charlie, there are state and federal income tax credits for work done on historical properties. Those do not affect local property taxes.
Senate Bill 2534 gives a state tax credit of 25 percent of the amount of the eligible expenditures for the Hotel Pere Marquette renovation and expansion. Historic preservation groups see the pilot program as a positive step toward the ultimate implementation of a state historic tax credit. The majority of Midwestern states have a state historic tax credit.
At some point, Charlie, you need to stop throwing crap at the wall to see what sticks. You actually need to do some basic research (Google is your friend) so your posts have some semblance of accuracy and truthfulness.
Check out the last sentence below. If you are unable to use the income tax credits in the first full year after the project is completed, you can sell them to somebody who can use them.
Converting Tax Incentives Into Profitable Historic Rehabilitation Projects
1/1/2004
For years, resourceful developers have taken advantage of significant tax incentives to rehabilitate historic buildings into profitable development projects. Such incentives have sparked renewed interest in rehabilitating forgotten local landmarks and have enabled developers to successfully tap into an emerging market of commercial and residential tenants that are looking for unique space.
What tax incentives are available for historic rehabilitation projects? Depending upon the location of the property, the project may qualify for both federal and state historic tax credits.
Federal Rehabilitation Tax Credit
The Internal Revenue Code (IRC) provides a federal tax credit of either 10% or 20% of qualified rehabilitation expenditures (QREs). Tax credits are extremely valuable, since they represent a dollar-for- dollar reduction in your federal income tax liability. You may claim the credit in the year that the QREs incurred on a project are placed in service. However, many taxpayers are limited in their ability to utilize tax credits. Fortunately, an efficient market exists that allows developers to “sell” federal historic tax credits for approximately $.90 per $1 of credit.
In short, QREs represent all rehabilitation costs that are capitalized as part of the depreciable cost of the building. QREs exclude acquisition costs, land improvements, and personal property. However, they may include capitalized interest and property taxes, as well as reasonable construction management fees and developer fees paid to related parties.
150,
No name calling anywhere…… I WAS JUST EGGING YOU ON.
Now… back to business. “Mafia-esque,” was hardly “name calling,” especially since I made the word up! I think you did get my meaning though. I am just trying to follow your ‘Peoria needs more rooms’ logic.
Convention goers will NOT come to Peoria simply because there are more [quality] hotel rooms. What is it that WILL bring them here?
Peoria [area] manages to draw a sizable crowd for other events [IHSA sports, soccer, music festivals, etc]. Not one of the organizers of these events has ever complained of a lack of accomodations.
In fact, River City Classic Tourny draws enough people to fill rooms outside of Peoria City limits; actually spreading the ‘wealth’ around a little [unlike the current PRM plan, which only sucks money from surrounding area..]!
Whoa!
Even the J Star seems to be getting on the ‘anti-hotel’ bandwagon. They published an interesting editorial [Our Opinion] today.
They seem to think the tax payers are going to get bilked for $37 million dollars… Wonder where they got that idea?
Of course… that the tax payers are going to get bilked for a number of ‘quality of life’ projects, doesn’t seem to bother them……
What are TIFs? Is the Wonderful Project “TIFfed”? Isn’t that a tax incentive or an abatement? Is that a state funded mechanism for Matthews to get rich and protect “his” investment?
What and where is the HIZ TIF? When does it expire?
The Marriott project will pay property taxes like any other business. Enterprise zone projects get a 10 year abatement. The Marriott project will not get this abatement.
The Journal Star came out against the Marriott project before the City Council voted. This is not new for them.
TIF is a tool to use future gains in taxes to finance current improvements (which theoretically will create the conditions for those future gains). When a public project such as a road, school, or hazardous waste cleanup is carried out, there is often an increase in the value of surrounding real estate, and perhaps new investment (new or rehabilitated buildings, for example).
This increased site value and investment sometimes generates increased tax revenues. The increased tax revenues are the “tax increment.” Tax Increment Financing dedicates tax increments within a certain defined district to finance debt issued to pay for the project. TIF is designed to channel funding toward improvements in distressed or underdeveloped areas where development might not otherwise occur. TIF creates funding for “public” projects that may otherwise be unaffordable to localities, by borrowing against future property tax revenues.[1]
Currently, thousands of TIF districts operate nationwide in the US, from small and mid-sized cities, to the State of California, which invented tax increment financing in 1952. California maintains over four hundred TIF districts with an aggregate of over $10 billion per year in revenues, over $28 billion of long-term debt, and over $674 billion of assessed land valuation (2008 figures).[2]
49 states and the District of Columbia have enabled legislation for tax increment financing. Arizona is now the only state without a tax increment financing law. While some states, such as California and Illinois, have used TIF for decades, many others have only recently passed or amended state laws that allow them to use this tool. [3]
It is in the TIF zone and the zone is in effect until at least 2030. Matthews waived the TIF benfits, or did he sell them for 9 million dollars?
You really do a fine job a apologist for this project. What is your interest?
BTW, there is a hotel right behind the Civic Center and it’s not old: the Staybridge Suites. I wonder how they are doing?
Tough to say how Staybridge is doing as that is a different product–an extended stay hotel.
My interest is as a taxpayer and a long time Peoria area resident. I have no interewt in the Marriott project other than as a taxpayer and as someone who knows a little about the hotel business. I also like issues like these to be debated with the facts, not rumors and exagerations. I assume you wanted to thank me for correcting many of your misstatements and I accept your apology in advance.
You missed one…
“Matthews waived the TIF benefits, or did he sell them for 9 million dollars? ”
Apology? Or Thanks? Which is it you want?
I would like both. Apology for your attitude and thanks for educating you on this project.
You cannot “sell” TIF payments.
Charlie,
You missed the point of my post. Investing 40 million in public money on a private hotel will not encourage more visits to the Civic Center. Your argument is that 40 million should not be spent at all. That sounds noble, but that is not reality. This Wonderful Development project will hardly be complete before the city conceives yet another multi-million dollar giveaway – I mean, development project. If Peoria is intent on spending 40 million dollars in public money, the city should spend it on a public venue. 40 million would build a world-class aquarium that is better than the Shedd in Chicago. My point is that Peoria would need a major public attraction that ranks in size and quality with what Chicago and St. Louis have to offer. How else would you attract people from those metro areas to visit Peoria?
“You cannot “sell” TIF payments.”
They used to say that about Senate seats, too.
Another attempted glib humorous quip from Charlie when he has no defense of his position. This is a classic laydown.
Jim:
Regrettably you have hit a Bullseye! What leaders have planned will not cut the mustand. Regrettably taxpayers are already on the hook for far to many ‘wonderful development’ pre-clones. And more are in the cue. Seemingly, Peoria never met a TIF district that it doesn’t like and so the sad saga plays on.
“My point is that Peoria would need a major public attraction that ranks in size and quality with what Chicago and St. Louis have to offer. How else would you attract people from those metro areas to visit Peoria?”
Jim, the idea should not be to “visit” Peoria, it should be to ‘live’ in Peoria! Like I and so many others have stated in the past, Peoria will NEVER be a ‘tourist’ destination. It will NEVER be a top convention destination. The list goes on. Not that Peoria [area] should be without its ‘amenities,’ but these should be geared towards attracting long-term residents. Create an environment that is ‘home-owner friendly.’ Build on what we have, do not break the bank [and the taxpayer’s pocketbook] on quality of life projects that, in the end, will not improve the quality of life for ANYONE.
I do agree with one of your points; before the first brick is laid on this new hotel, our wonderful city council will be looking for new ways to throw away our money.