The City Council is voting on a revised redevelopment plan tonight for the undead Wonderful Development. This new plan not only gives the developer $29 million, but also loans him an additional $7 million because he couldn’t get all the private financing he needed.
So the question is, where is this $7 million coming from? I mean, did you know that the City had $7 million sitting around in a pot somewhere? Well, they do … in a retiree benefits fund. According to the council communication: “the City will provide the developer with a 25-year $7 million loan (the ‘Project Loan’) at 7% interest from the City’s Post Employment Benefits Reserve.”
The City is required to keep this Post Employment Benefits Reserve by an accounting regulation known as GASB 45. The idea is that the City should be socking away money now for the health benefits they are obligated to pay in the future to retirees. Of course, the City doesn’t fully fund the reserve. They can’t afford it. So they’re listing an increasingly large unfunded liability on their balance sheet each year.
Now, to make matters worse, they’re going to take what money they do have in reserve and loan it to Gary Matthews to build a hotel downtown — at no interest for the first two years or so, then at 7% interest after that. But here’s the kicker: this loan would be in the third position for repayment. In other words, if the project were to go bankrupt, the banks would get paid back first, then the owners of Big Al’s (who are loaning Matthews money as well), then the City. The City’s loan is subordinate to two other creditors, so the odds of the City getting paid back in the event of default are nil.
Of course, this is just the latest injustice regarding this deal. There still is going to be a $29 million gift to the developer, courtesy of your future tax money. This publicly-subsidized hotel will be competing with other private hotels downtown, giving it quite a competitive advantage. Meanwhile, our taxes (or “fees,” if it makes you feel better) are going up and the City is going deeper in debt, even as our city faces serious public safety issues and its infrastructure deteriorates.
Peoria, your tax dollars are being misused. Does anyone care? Anyone? If the Occupy Wall Street supporters really don’t like money being taken from the 99% and given to the 1%, they should be against this deal. If the Tea Party supporters really don’t like bigger government and support the free market, they should be against this deal. Where are they? Where are you? Rome is burning while you’re fiddling.ikoni
Good analysis CJ. I would agree that if the hotel fails, the City would be unlikely to recoup this loan balance. That said, if it was still in the grant, the city would not recoup it anyway. The advantage of the loan is that, if fully paid off, the city will get a good rate of return on the money.
From a PR standpoint, it looks like the city has substantially reduced their grant moeny. Technically, they have. Only time will tell if that “loan” turns into grant money with a potential loan default.
By the way, I figured if anything would bring you back–even if briefly–it would be The Wondeful Development. 🙂
I miss the edit button. My typing is horrendous this morning.
NICE to see you still at it!!.
The city doesn’t care about us its all about giving OUR money away as fast as they can. You know this will pass they have already made the deal.
It would have been cheaper to let mathews sue them they could have dragged this out in court for decades. It wouldn’t cost them until the end of it in say 2040. Randy Ray is already on the payroll so lawyer is covered. Mathews on the other hand is BROKE so lawyering up would cost him.
Again if this is such a GREAT deal where are the banks lining up to loan money and CHARGE intrest. Why is he getting 2 years intrest free that sound VERY FISHY.
Glad to see CJ back, even if only for 1 posting. I knew he would not keep silent on the resurrected Marriott Hotel deal.
I think people in Peoria are inert because they feel helpless to stop any of this. Or afraid that if they speak out retaliation will soon follow.
Those who get elected soon fall into line.
Imagine — no one of integrity running for the D150 School Board, for ex.
And where are the city council candidates independent enough to be opposed to this? They are in the minority.
So all of us 99 percenters may as well bend over, as taxes and fees go up, workers lose their retirement and benefits, services are eliminated, all at the city level, where we could do something about it if only people would wake up and vote for better candidates, and throw those out who sell out.
I would say that this is far from over. I have heard that he still does not have all of the private financing that he needs and that is one of the reasons that this agreement has a Dec 31 2012 date in it. I think that 12 to 13 months from now that it is very possible we are in the same place that we are today.
I think the drop dead date on the closing is 1/31/12, not 12/31/12. The PJStar article had a typo.
Now the Courtyard is lagging behind the Pere and this may have to do with financing issues. Just guessing.
Peorians need to stop being inert. The Council is counting on people being apathetic. The power to stop this is in the hands of the people, but they have to get off their duffs and do something.
Could this be another “Midtown Plaza” Just follow the money. Thanks CJ for your Blog.
What can we do? We write our councilman and he votes completely the opposite that we want him to. Going to the meeting isn’t an answer as they don’t listen to us. I could have told you that Urich going to the city would not be good for us. That is why the ole City Manager was forced out. He wasn’t for this and knew that the citizens were getting screwed. I think every hotel in Peoria needs to file a discrimination suit against the city for not receiving help in building or remodeling their hotels. This to me is discriminatory. I have yet to see anyone file a lawsuit against the city for falsely labeling the garbage tax when that isn’t what it is.
What can we do? I have written my councilman several times and also many of the others and they vote the opposite that we want them to. Going to the meeting isn’t an answer as they don’t listen to us. I could have told you that Urich going to the city would not be good for us. That is why the ole City Manager was forced out. He wasn’t for this and knew that the citizens were getting screwed. I think every hotel in Peoria needs to file a discrimination suit against the city for not receiving help in building or remodeling their hotels. This to me is discriminatory. I have yet to see anyone file a lawsuit against the city for falsely labeling the garbage tax when that isn’t what it is.
Dist 150 observer – thanks for correcting my error.
I went and reviewed the agreement. It is interesting to look at Schedule 4 on page 47 of the pdf of the agreement on the City of Peoria website. Out of the $93 million project total:
* $3.7 million (4%) for pre construction services
* $27.5 million (29.5%) for Courtyard Construction which includes $11 million for property purchase and other expenses and $14.1 million for construction
* $6.3 million (6.7%) for parking deck and skywalk
* $6.2 million (6.6%) for misc soft costs and continency. This includes $2.5 million for project management (wonder who that is?)
* $5 million (5.3%) for finance costs
AND
* $43.9 million (47.2%) for Pere which includes $23.5 million for rehab and $9.6 million for land acquisition (for a property in foreclosure!).
I wonder what the cost would be to demolish the Pere since we are spending more to rehab it then we are to build a new Courtyard!
anp, a couple things. The project manager is Faithful+Gould out of Chicago, a very reputable international project management firm–local office is Chicago. They are top notch.
The Pere needs to be practically gutted. Remember when comparing costs that the Pere has 286 room and the Courtyard has 116 rooms. The Pere also has extensive common space (ballrooms, meeting rooms, restaurant, etc) that the Courtyard will not. Look at the total cost on a “per key” basis, how much each project costs per room. That is the metric used in the hospitality business.
The Pere is a historical landmark–if it were, or even could be, demolished at this time, the project would lose millions in historical rehab tax credits from the Feds.
In addition, from examining the docs on the City website, it looks like the Pere acquisition price came down about $2 million from the last redevelopment agreement.
I am glad the city put those docs up on their website. It will clear up some of the misconceptions we all had about the project.
So what about the 2 years or so of FREE intrest. Riggenbach being a banker should know NOT to give away PROFIT. SOMEBODY IS GETTING PAID for this SWEET deal. We have to be talking several thousand dollar in intrest. The city should not be giving this away.
D150 Observer. Pere Marquette can get historic rehab credits without the new development added on. In fact, additions do not qualify in historical rehab credits, so they legally will get nothing from the new part.
This developer is behind with payments on his other properties in East Peoria, as well as real estate tax payments on said properties. If he can’t keep current on property he already owns, he should not be allowed to get the green light for this project.
If I may be blunt and I sometimes have been known for being blunt but We’re F#$ked!
Have you guys seen this (tweeted about an hour ago) – An alternative to the Marriott project? – http://blogs.pjstar.com/wordonweb/2011/11/01/an-alternative-to-the-marriott-project/
I understand the Courtyard does not qualify for historical tax credit. I was addressing the poster who suggested the Pere be demolished. THAT would eliminate the historical tax credit.
Jenna, that is interesting. I suspect though it will not save Pere jobs as the Pere will close down shortly, IMO, without a substantial remodel.
Jenna, I looked at that PJS blog on Eric Heard’s proposal. Dang, where was he 3 years ago, or even last year? Looks like a decent alternative.
Key would be if Ameren was willing to sell their building, though, at a fair price.
well, it passed with 2 no votes–Weaver and Akeson. Sandburg not present.
That was no surprise … simply unconscionable … pledging employee pension money for what?
Peoria’s governance is akin to the state’s and fed’s … individuals who buy have expensive, shoes, threads, cars et al while the baby goes without diapers. Once again, the circus came to town …
Weaver again proves he is in the pocket of big business. 🙂
This reminds me of our Social Security. We paid into it and then they borrowed from it and now it is in danger of going under. Sounds like the same thing with the retirement benefits. They are going to borrow from it planning on this whole Wonderful Thing working out and if it doesn’t the retirement benefits, that each employee has earned and count on when they retire, maybe broke when they retire and need it. So city is following the federal government. Didn’t they learn anything from the social security debacle?
CJ, were you there? Was there much public comment?
That explains why Pat Landes decided to get her retirement while the getting is good.
From the article, Mayor Ardis said, “We’re looking forward to seeing the face of Main Street change significantly in the next couple of years.”
Are we experiencing some deja vu there? Seems either the Mayor or a Councilman has uttered words like that the last 2 times a ‘redevelopment agreement” was approved.
Keep in mind, I have supported this hotel project, even more so now that Mr. Matthew’s fee will be contingent on hotel profits vs. a check handed to him by the City Treasurer’s office. But seeing is believing, so we should be hearing about the property closings, and the Pere closing for remodeling, no later than January 31, 2012. Hopefully soon after that a wrecking ball will finally, finally show up on Main Street for the rest of the block.
Weaver voted against the project 150, public comment was next to nothing. the people have been taught well that their opinions do not matter. Robbing the employee’s retirement fund is not only like the feds, but the state as well. They justified it as an investment, yet investing those funds into a private, pet project doesn’t seem like it would fall within the parameters of investment strategies for retirement funds. They are also looking to rob the southtown tif of it’s funds, as they already robbed the central business district of those funds for the warehouse tif. it’s a shell game that they will cover by raising the fees and reducing services. I have never more disappointed in the council than last night. The city manager focused solely on gaining $3 million in interest from the loan to matthews. Riggenbach, a “banker” said 7% return was unheard of. Well, there won’t be any return. The loan can be paid back early without any penality or interest owed within 3 years. The developer will simply use the money for whatever purpose he wants then give the interest free loan back. The tax payers loss is the interest they could and should have gotten. also the interest rate cited on that money is lower than the savins account at CEFCU, maybe they should move the money there and collect more. It was dodging and weaving for questions. Urich didn’t answer Akeson’s questions. Spain once again tried to take credit for another council person’s suggestions. Last night was a bad joke on the public, now will come act 2 (the tradegy) where they are sorry that they are having to lay people off and we have to make tough decisions bullshit. They have misspent the money allocated for services and now want to jack the taxpayers to cover that up also.
First of all, welcome back, C.J. It was good to see your smiling face back in the Council Chambers.
Okay, down to business. Just read the “alternative plan” and I agree with the proposer’s comment….it’s a little late in the game. Hindsight is always 20/20, but hindsight is what we should have seen before.
As to the Post Employee Benefits Obligation Funds that are being used, I’d have to agree with Riggenbach (I know, I know) that a 7% return on those funds is one hell of a lot better than 0.6%. [You have no idea how much I hate having to agree with Riggenbach]
My main concerns are in alignment with Ryan Spain and Beth Akeson, and therein lies the problem. Both of them expressed real concerns about the materials to be used in the construction of the Courtyard, the Parking Deck, the Elevated Connector, and the rehabilitation of the Marquette. While I grant you that materials have come a long way in recent years, there are still standards of construction that Marriott will insist on if it is to bring it’s business to Peoria. Given these expectations, if they sense or realize that this hotel will not live up to their standards, they will pull out and leave us hanging in the wind. And they can afford to be in court for a decade or two, while we cannot. The City Council needs to be hyper vigilant through all phases of this project to ensure that it is done right.
And let us not forget the main concern of all of us. Who is going to be responsible for filling up the rooms in this hotel complex? SMG continues to do a poor job of booking events and acts and activities that will draw hordes of people to Peoria. Reba McIntyre, one of the biggest draws the Civic Center has seen, just completed her second show in Bloomington. Arena Football continues to thrive in Bloomington. And these are just a couple of the events we have lost to a city that does not have a Marriott.
If this project is to go forward, and it appears it is going to, then our City Council needs to be demanding for SMG to book the Civic Center with every possible event, starting NOW! The demand for hotel rooms will go up when there are people to fill them, and not before.
Side Note: District 150 Observer, Chuck Weaver voted NO along with Beth Akeson on the proposals.
Thanks. I knew Weaver voted no, I stated so earlier in the thread. I commented on Weaver becasue somebody here continually has stated that he is in the pocket of the business community. Clearly, he is an independent thinker.
Has anybody bothered to check the kool aid or coffee before each of these projects come up? All of a sudden almost everyone on the council jumps on the bandwagon no matter what the new idea is. Even with proof of failure with their decisions before such as Mid-town and others, they still keep voting like sheep. Like I said has anybody checked the kool aid or coffee?
Fred, there will not be any interest paid. Riggenbach and others should have emphasized that if the money is repaid within the three year time period then there is no additional three million in interest, it is a loss of the interest that the money would have gained by sitting in savings. No one with any business sense is going to pay a dime of interest on that loan. There was no alliance between Spain and Akeson. Spain made a motion based on an earlier discussion that Beth brought to his attention. He failed to mention this, citing it was his concern. Beth corrected him, and the admendement he made did not in fact address the concern at all, it just sounded like it would.
checking for details … exactly … no interest and the lost interest even if paltry from the retirees principal sitting in a savings account … what will be the amount of interest lost if the loan is repaid? Will the city then make up that interest loss? Just asking a rhetorical question.
Regrettably sheeples voting for sheeple candidates and getting sheeple governance … that’s what plays in Peoria!
City does deal with devil to move a strip club while putting city pension money and taxpayers dollars at risk to a developer who “hopes” this will be a successful project…
No vote from Akeson is based on new courtyard needs more “stone” having no comment on fiscal irresponsibility…
Sandburg doesn’t even show…
Matthews still doesn’t have all cards in place…
Where is this fantasy of a story coming from? PEORIA, were else.
When the city has to file bankruptcy on the likes of Harrisburg, Pa. (and soon to be other cities to follow suit) the only ones to blame will be the CITIZENS who voted these egomaniacs on city council.
ptowntrainwreck….
geez pay attention to what is happening around you, The vote was moved from Oct. 25th, when Gary was available to 11/1/11 to a date when they knew he wasn’t. He addressed this two meetings from the council floor.
Akeson voted no on all aspects. One of her points was the building materials and the lack of planning for which she gave a visual that anyone watching could identify with. Not everyone apparantly gets the financial shell game being placed both with this deal, the warehouse district and the budget itself. These same people believe that the garbage fee pays the garbage contract. It never has,,,,,EVER!!, but if the city and PJstar say it enough, then the lie transforms the truth, much like money laundering…..The question that needs to be asked is who besides the banks have promised money to this project. Know those names and cross reference them with campaign donations, fundraising events and the then the deal makes more sense.
“The question that needs to be asked is who besides the banks have promised money to this project. Know those names and cross reference them with campaign donations, fundraising events and the then the deal makes more sense.”
Very interesting. I’m sure our local paper will get right on that. After they give the next museum update.
.
If this is such a great deal, why aren’t the council people who voted YES to this thing offering their 401ks, pensions, etc. as collateral loans to gain the 7% interest? Seems like a great deal. Actually, if they are putting others’ future at risk, they should be REQUIRED to do so. City council people who voted YES, let Peorians see you’ll put YOUR money where your beliefs are.
Well, it is a matter of public record that Mr. Matthews donated $10,000 to Governor Quinn before Quinn proposed a Illinois Historic Tax Credit program specifically for the Pere. You can draw your own conclusions as to whether they were related.
150, definately and if you look at the pjstar photo, you have Koehler, Gordon, Spain, VanAuken, all tax and spend shell gamers at heart.
also I had noticed that the tax credit disappeared from both columns of Urich’s funding analysis. Matthews was supposed to split the $8 million with the city, now no specific mention unless I missed it somewhere…..so assuming he keeps the $8million—to pay off the $7 before the interest is due? Who knows. meanwhile more people were shot last night and the assualts on the elderly continue in their own homes. The police quote was almost indignant….but hey we’re going to have a new hotel…..that’s what matters…next agenda item? crime, public safety, infastructure…hell no…it’s the other funding tax dollar shell game, the warehouse district…..perhaps the council will rob the rest of the retirement fund for that project…..
Thr state tax credit expired I believe. I think it has to be reinstated….
Govts. at all levels are hopelessly in debt. The currency is going to collapse, sooner or later. People are resigned to the inevitable. What’s another $36 Million worthless dollars?
doesn’t look like it
“Pilot program; report. The Department may award no
15 more than an aggregate of $10,000,000 in total tax credits
16 pursuant to one qualified rehabilitation plans plan for one
17 qualified historic structures structure. On or before December
18 31, 2010 and on or before December 31 of each year thereafter
19 through 2016,”
language from the bill/law
Mouse … your hypthesis seems likely … any idea of what will be used for currency?
So how is it different to anything Hong Kong ever did before it all worked out?
Pere to close 12/2/11
glad to see cj posted. i thought this topic may bring forth a post and lots of bottled up debate. glad it did on both counts.
of the different issues:
1. that somehow I or others as voters “deserve” this as I/we voted for these folks. I have not and would NEVER vote for Spain, VanAuken, Turner, Gulley or Riggenbach. Spain is the chosen representative of Heartland Partnership. These middle men organizations, of which Heartland is only one example, are nothing but well-dressed vampires. They live on the laziness of our elected representatives and the ease of access and lack of accountability for tax dollars. Volumes of examples could be listed. Simply look at a GAO report and see how millions and even billlions go unaccounted for. Hmm, generally that stuff gets people fired and indicted. Not in Illinois. Well, maybe when you’re 75 and its all over and too late to do much good.
I am very happy Weaver seems to have become a voice (if far, far too quiet) voice of reason and restraint. He, more than Sandburg, may have the juice to do something more than vote No to these ridiculous items. It will take tremendous courage for him to turn the whole council and city around. But he has money and power and is not so beholden to other council members and local influences. Let’s hope Weaver has a Superman comic or figure somewhere on his desk or mantle and that it inspires him to use his money and intellectual power for good. It is going to take a deep and abiding commitment from him. (Sorry Chuck to put in on your shoulders.)
To conclude; I have made my own attempts (not for discussion or revelation here) to change things. Others have also and with greater sacrifice and committment than I. Thus far to no avail; though effort has not ceased. So conrad stinnett and others who blame us voters…I was not yet born during the decisions to go to Vietnam. Were you? Shall I blame you for electing the people that sent thousands to die needlessly? Apparently you didnt do enough to stop those decisions. So f&^k you.
2. The Deal. Check your mortgage if you have one. I guarantee it does not allow early pay off without penalty. Banks make money based on interest. If none is paid, what use? The bank could have taken the money loaned and made at least some small interest by placing it elsewhere. And by borrowing from a retirement fund and giving the money interest free for a period, the city is doubly hurt. That money from the fund could at least be earning interest or be invested in safer investments and see growth. It may still be underfunded; but it wouldn’t essentially stand still for years.
3rd priority. The city should and has every right to demand to be placed as a priority lein holder. Its the city’s money and they can loan it at terms they negotiate. If the banks and Big Al’s do not like it, withdraw the city money. One has to be willing to walk away from a deal in order to have any bargaining power. Given the city money is really not the money our councilpeople’s money, its easy for them to bargain it away for far less than it is worth. (It’s easy to gamble with someone else’s money. Your own money? well, one tends to be more cautious.)
Almost all mortgages allow early pay-off without penalty. It is rare when one does not.