Hello everyone, and welcome to the Peoria City Council meeting for May 25, 2010. Hold on to your wallets, as a lot of your tax money is destined to be given to a private developer tonight. It’s also packed in council chambers. Outside there are a bunch of AFSCME employees chanting “chop from the top” very loudly to try to disrupt the meeting [note: the crowd was dispersed by the time the meeting got underway]. All the council members and the mayor are present, and we’re on our way. The clerk is reading the consent agenda now. As usual, I’ll be updating this post throughout the night, so please refresh your browser often to see the latest comments. Here’s the agenda:
Is the Civic Center expansion meeting consultant’s predictions?
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
What’s the justification for the Wonderful Development?
The ordinance that would authorize the Wonderful Development (downtown Marriott project) to move forward includes this justification:
WHEREAS, the City Council of the City of Peoria finds as follows:
- That the buildings on the Project Site have remained underused for a period of at least one year.
- That the Project is expected to create or retain job opportunities within the municipality.
- That the Project will serve to further the development of adjacent areas.
- That without the Agreement, the Project would not be possible.
- That the Developer, EM Properties Ltd., meets the high standards of credit worthiness and financial strength as demonstrated by a letter from a financial institution with assets of $10 million or more attesting to the financial strength of the Developer.
- That the Project will strengthen the commercial sector of the municipality.
- That the Project will enhance the tax base of the municipality.
- That the Agreement is made in the best interest of the municipality.
Is this the standard for getting $37 million from taxpayers? I can think of all kinds of businesses that could make such claims — it will create jobs, strengthen the commercial sector, enhance the tax base, meet “the high standards of credit worthiness,” etc., etc. Is that really a justification for taxpayer assistance? Where’s the line at City Hall for those handouts?
I would also like to point out that the buildings on the Project Site have been underused for the past year and a half precisely because of the previous unfulfilled redevelopment agreement with EM Properties, whose “high standards of credit worthiness and financial strength” were not impressive enough to result in actual financing of the original project. Why would the current owner try to get tenants for the vacant buildings when he has an agreement to sell those buildings for imminent demolition?
And I take great issue with the contention the Agreement is in the best interest of the municipality. If the hotels (there are two now!) do not perform up to expectations, the bonds will have to be repaid from the general fund — a fund which is insufficient to provide the basic needs of the City. The City Manager is asking City departments for wage concessions to plug an anticipated $10 million budget deficit for 2011.
Supporters of the project will point out that defeating this project will not help the current budget crisis, and they’re correct. But what Peoria residents need to know is that approving this hotel project will create a future budget crisis. The MidTown Plaza project didn’t create a budget crisis in year one either, but we’re feeling its effects now. The same goes for the Firefly Energy loan guarantee. We won’t have to pay the piper for this hotel fiasco for five years or so, but mark my words, we will be paying the piper for it.
Pittman resigns from RTA over silence on KBCC deal
Recreational Trail Advocates (RTA)/Friends of the Rock Island Trail Vice President David Pittman has resigned, according to an e-mail released by Merle Widmer on his blog, Peoria Watch. Why? Because the group tacitly endorsed the $140,000 payment to the cunning Kellar Branch Corridor Corporation (KBCC):
I feel that our group silence worked well for KBCC, allowing them to get $140,000 with NO PUBLIC scrutiny or audit or previous public agreement. Even though I asked our group leadership to raise these concerns in public, the email exchanges of the past weeks made it clear that I am a minority of one; don’t ask, don’t rock the boat, and speak publicly only to praise the KBCC for its success. I am alone in my dismay and I cannot reconcile continuing in this group without violating my internal sense of right and wrong. As an officer of RTA /Friends of the RI Trail I felt obligated to keep silent, per the majority will of the leadership. Now, with the deed done, I can step away….
We as taxpayers and activists were not allowed to see how the KBCC justifies $140,000 for their expenses. Why not $120,000, or $180,000? No one knows. KBCC gave the cities a bill for services rendered. But our elected representatives never signed a contract, never made a deal. I believe this is very wrong…. I have chosen to keep silent for the sake of my friends and out of respect for their long, long struggle to make the Kellar into a trail. But I am ethically challenged beyond my limits and will step away from the tainted odor.
You can read the whole e-mail at Merle’s site. Pittman and I have been on opposite sides of the Kellar Branch issue since the beginning. We even debated it once at a meeting of the Neighborhood Alliance. But on the issue of the Kellar Branch Corridor Corporation, we’re in agreement. I have the same deep concerns about the lack of public oversight and the improper obligation of public funds without any kind of contract beforehand.
While I publicly stated my concerns on my blog, in e-mails to the Council, and on the public record before the Council’s vote (not without criticism, I might add), my concerns were easily dismissed because I’ve “long opposed the rails-to-trail conversion,” as the Journal Star put it. I tried to explain in my remarks that I was not complaining about the project in this case, but the process, but I’m sure the distinction was dismissed as tactical — an eleventh-hour effort to derail the project once again.
But had Mr. Pittman spoken up, too, he might have been able to make a difference. Pittman has long been and continues to be a huge advocate of the trail project. If he had raised questions about the KBCC, I think he could have affected the outcome. Perhaps the process would have ended up being more transparent. Speaking up would have been risky — in essence the effort to buy out the rail carriers and shippers was pitted against the pursuit of good public policy.
It’s interesting that only Pittman felt any pangs of conscience among the members of the RTA on this issue. Nevertheless, he submitted to the group and kept silent, allowing the deceitful process to prevail. It’s a surprising irony that a group who once decried inappropriate legal maneuverings from Pioneer Railcorp became willing participants in legal chicanery themselves.
Pittman’s resignation is really more of a confession. I think he fears he may have been wrong to put his principles of loyalty ahead of his principles of transparency and proper public procedure. I have no standing or desire to judge his decision. But I have no qualms about judging the rest of the organization for selling their integrity for a trail. Pittman did the right thing by resigning in protest, however belatedly.
Conan! (Updated)
In case you were wondering why I haven’t been blogging lately, I’ve been busy vacationing. Last night, my wife and I saw Conan O’Brien’s “Legally Prohibited from Being Funny on Television” show, and it was terrific. Special guests were Bears player Brian Urlacher and actor John C. Reilly. Reilly sang a little off-script number that went like this:
Missed Jay Leno last night
His jokes just make me snore
Awfully different without you
Don’t watch the Tonight Show anymore
His jokes just make me snore
Awfully different without you
Don’t watch the Tonight Show anymore
And the crowd roared. It was surprising to hear a blatant anti-Leno joke, considering that Conan is prohibited from making fun of Leno or NBC under terms of his severance. But as Reilly explained, he (Reilly) isn’t prohibited from saying anything. I’ll share more later. It was a fantastic show.
PJS Editorial pretends City asset giveaways have nothing to do with budget crisis
A couple of responses to today’s Journal Star editorial. First, there’s this:
Even Mayor Jim Ardis, who never saw a tax increase he didn’t greet with contempt, seems to have come to the realization that City Hall probably can’t cut its way out of this.
That’s not exactly accurate. Mayor Ardis happily voted to increase sales taxes by 1% within the Hospitality Improvement Zone downtown.
And then, there’s this:
As a result [of the need to make more cuts to city services or raise taxes to balance the budget], a fair number of locals are venting, understandably, though some of them paint either-or scenarios that do not exist. Indeed, the choice is not a recreational trail vs. police officers, or a museum vs. firefighters. The vast majority of the funding for those quality-of-life projects comes out of dedicated revenue streams controlled by other local governments – the park district and county, respectively, with the help of grants. Those dollars couldn’t be used to put more badges on the streets even if the council wanted to. Like them or hate them, those projects — one of them initiated by a successful citizen referendum — are not what created this operating deficit.
First of all, this framing of the argument is obviously a “straw man.” I know of no “locals” who have made the assertions they are countering. Clearly “either-or scenarios” as painted here do not exist. But to imply that these projects have absolutely no relation to the City’s fiscal crisis is also false.
Yes, construction of the rail-to-trail project is funded by the Park District, but it’s only made possible by the City of Peoria giving away a $3 million asset to the Park District for one dollar. The City just threw away $3 million (or at least $750,000, the last bona fide offer to purchase the rail line) while at the same time they need to cut $800,000 from this year’s budget. Why didn’t they put the land up for sale to the highest bidder? Putting this land into the hands of a rail carrier and working with them to woo new manufacturing business to Pioneer Industrial Park would have resulted in raising the tax base in Peoria through new business and new jobs.
Then there’s the Sears block, which has lain dormant for over a decade now because the City won’t enforce deadlines on redevelopment agreements. This is prime real estate that could be parceled off and sold, which would provide a couple of things: income from the initial sale, and on-going revenue from sales and property taxes by the businesses who locate there. Instead, the City is sitting on the land indefinitely, until they can finally give it away for nothing to be used by a non-profit organization that will be a perpetual drain on the county taxpayers.
In addition to the lost opportunity to generate revenue with these assets, taxpayers now have to pay for their development and maintenance in perpetuity. That means we have to pay higher taxes to support these drains on the economy. And that exacerbates the City’s budget woes. Since taxes are high because of increases by other local governments (to which the City directly contributed, as shown above), it puts pressure on the City not to add to the tax burden. And that means the City continues to try to balance its budget by cutting — police, fire, public works, etc.
The Journal Star is simply trying to rationalize its support for non-essential pet projects by using straw-man arguments to dismiss valid criticism.
See also Billy Dennis’s post in response to today’s PJS editorial.
Civic Center loses wrestling tournament to Springfield
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.
Changes to neighborhood zoning considered
From this week’s Issues Update for the City of Peoria:
NEIGHBORHOOD ZONING TOPICS MEETING. Staff is currently working on text changes that address several topics relevant to the appearance and quality of life in neighborhoods. Those topics include the following issues:
- Width of driveways and location of parking spaces
- Number and location for storage of recreational vehicles
- Front yard fence permit process
- Regulations for group living facilities (proposed changes to regulations for halfway houses, recovery homes, and residential substance abuse treatment facilities)
- Transfers of property
Since these topics impact or have the ability to impact all neighborhoods in the City, the Planning Department is inviting all City neighborhood associations to a meeting on Thursday, June 3, 2010, at 6:00 P.M., in the City Council Chambers to hear current regulations, issues, research, and possible options for the group to discuss and provide feedback to staff. Text changes will be finalized after this meeting and sent to the Zoning Commission for public hearing and then to the City Council for final consideration.
Everyone’s atwitter about Bass Pro Shops coming to EP
You’d think it was the biggest thing to hit Illinois since Caterpillar decided to locate their world headquarters here. A large chain store — Bass Pro Shops — is going to open a location in East Peoria by the river next year. Not many details are available about the deal, but the Journal Star article does say this:
The store will be about 145,000 square feet – almost twice the size of the Kohl’s department store on Main Street – and take up just more than 20 acres of the 35-acre site. It will produce about 300 full-time jobs when completed, and at least another 200 full-time workers will be hired during construction…. [T]he deal between the city and Bass Pro Shops is unusual in that East Peoria will own the land, building, parking lot and road leading to the store. Bass Pro Shops will be the tenant.
The city will issue $40 million in bonds to pay for the project, which will be paid off through sales and hotel/motel taxes. Further details about the deal will be released at upcoming council meetings.
Readers of my blog will not be surprised that I don’t get all excited about big box stores. According to glassdoor.com, most local jobs at Bass Pro Stores are in the $8-$12/hr. range, or about $17,000 to $25,000 per year. These aren’t what one would call “living wage” jobs. The construction jobs will be good, but temporary.
Of more interest to me is the City of East Peoria’s development plan, since it will undoubtedly be used as a benchmark for future City of Peoria projects, unfortunately. While the amount — $40 million — is the same, it’s really not the same deal as Peoria’s downtown hotel plan. Peoria is giving the $40 million to a private developer who will then own the whole block and be responsible for the maintenance of all the structures; furthermore the property will be on the property tax rolls. East Peoria, in contrast, will own the Bass Pro Shops building and grounds, making Bass Pro merely a tenant, meaning they will get no property tax revenue on those twenty acres. So East Peoria is now in the land development business, evidently. I wonder if East Peoria will be charging its tenant any rent. It appears they won’t, since the paper says the bonds will be paid off with taxes.
On the plus side, Bass Pro Shops actually has a track record of drawing in a lot of local and regional customers, unlike the current hotel and museum market. So sales tax revenue is more likely to go up. Most of that additional sales tax revenue will come from East Peoria, but Peoria will get some spillover, which is good.
Mayor’s directive elevates district reps’ power
It’s no secret that district council representatives are given a lot of deference on “district specific business” already. Most of the council votes in lock step with the district councilman and are happy to defer items for no other reason than the district council person requested it.
Now Peoria Mayor Jim Ardis wants to take it a step further. He sent this e-mail to council members on Thursday, May 6:
In an effort to insure that agenda items are ready for council debate I have asked the Manager to put a sign-off line on council communications for district council-members to approve district specific agenda items before they are placed on the agenda. This will not only insure that the district member is ready for the item to come forward it should also minimize deferrals because they are, in fact, ready for council consideration.
Thanks in advance to District Members for assuring your district specific business is approved by you for placement on the agenda.
That means that an item will not even be put on the agenda unless the district representative approves it. To state it another way, under this system, items can be kept off the agenda by the will of a single city council representative. For instance, if Clyde Gulley didn’t want the Washington Street/Route 24 changes to come before the council, he could decline to sign off on this district-specific item, which would keep it off the agenda in perpetuity — even if all the other council members wanted to move forward on it.
The Mayor’s directive gives a special privilege to district council representatives, allowing them to dictate the will of the council on items impacting their districts. But where does the Mayor get the power to make such a directive? The City’s Municipal Code and Council Rules don’t confer this authority on the Mayor, nor does any ordinance preclude any council member from submitting an item for the agenda.
Section 2-31 of the municipal code states, “All reports, communications, ordinances, resolutions, contract documents or other matters to be submitted to the council shall, not later than 10:00 a.m. on Friday preceding each council meeting, be delivered to the city clerk, whereupon the city clerk shall immediately arrange a list of such matters according to the order of business and furnish each member of the council, the mayor, the city manager and the corporation counsel with a copy of the same prior to the council meeting and as far in advance of the meeting as time for preparation will permit.” Nothing in there requires the proposed agenda item go through the Mayor or the district council representative. It merely has to be delivered to the city clerk.
It would appear that the Mayor cannot make such changes without a majority vote of the council… unless, of course, the council voluntarily consents to the Mayor’s missive, abdicating their responsibility to represent all of Peoria, not just their own fiefdoms.