Tag Archives: Craig Hullinger

City of Peoria, Economic Development

Discussing incentives with Craig Hullinger

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Craig Hullinger has written a blog post about the necessity of providing incentives to rebuild a city’s downtown/older neighborhoods. Hullinger used to be the Economic Development Director for the City of Peoria until he retired in 2009. Since that time, the City has not hired a replacement; instead, Economic Development personnel report directly to the City Manager du jour. Hullinger is a very nice guy and has said some kind things about my blog; nevertheless, we have some disagreements on economic development theory.

“If an older city does not lead the redevelopment of its older central city, it will continue to decline,” Hullinger says. “[A] decision not to incent redevelopment is a decision to give up on your older areas…. [I]ncentives are required to rebuild downtown. Developers go where they are certain they can develop and get a great return. Redevelopment is much more costly and high risk then greenfield development. We have to equalize these costs through incentives if we want private sector renewal.”

What’s missing from this argument? It doesn’t specify what he means by “incentives.” An incentive is “any factor (financial or non-financial) that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives.” If this is what we mean by “incentives,” then Hullinger and I do not disagree. I believe cities do need to invest in their older neighborhoods and to incentivize redevelopment where necessary.

The point of disagreement is over the kind of investments and incentives that should be made.

Let’s look at a specific example of the kind of incentives to which I object. Hullinger talks about equalizing costs of redevelopment with greenfield development. One of the tools to accomplish this is something called an “enterprise zone.” Its very purpose is to help cities revitalize their older central cities by providing sales tax breaks on building materials or a partial property tax abatement. The City of Peoria’s enterprise zone looks like this:

Notice where these incentives are predominantly going? Along the riverfront, and far north Peoria. Question: When the same incentives are given to greenfield sites as the central city, what effectiveness do they have? Answer: None. If anyone in the city can receive Enterprise Zone status, it’s no longer an incentive to locate in the central city. It loses all effectiveness, and becomes nothing more than developer welfare — a perk for the well-connected, like Firefly Energy, which you can see received EZ status on the map above (the thin red line that snakes down Detweiller Drive and Route 29 to the old Foster and Gallagher site). EZ status was even used as an annexation tool to keep a pizza place from moving out of the City — a pizza place that had already received an incentive from the City in the form of a business development loan.

When you eviscerate your economic development tools like this, it leads to an arms-race for more extravagant incentives to draw people to the central city. And that needlessly costs the taxpayers more money. We need to maximize the effectiveness of our economic development tools, and that means (among other things) using them where they’re needed, and not using them where they’re not needed.

And under no circumstances should we give a $9 million fee to a private developer to build a private hotel for his private profit. That’s not economic development. It’s pure, unadulterated developer welfare — welfare we can’t afford.

City Council, City of Peoria

Take me to your leader

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As I mentioned in my correction to the last post, one of the cuts approved by the City Council on Tuesday is this:

Eliminate Economic Development Director
The current compensation for this position in $125,329. $25,000 is retained for restructuring the department. Without a full-time director, there will be a serious reduction in efforts, especially in marketing the City to regional and national developers and companies.

The Economic Development Director position is currently held by Craig Hullinger, who recently announced he will be retiring on November 6.

This raises a whole host of questions. Why would they keep an Economic Development Specialist position, but eliminate the Director position? How will decisions be made in the department without a Director? Majority vote? Or will one person act as the de facto leader without the title or the pay? (I don’t see how that could be avoided, frankly.) If the department doesn’t need a Director in order to function efficiently and effectively, then why have we had one all these years? And are there any other departments where the Director is unnecessary and could be cut to save money?

City of Peoria

Hullinger to retire Nov. 6

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The City of Peoria’s Economic Development Director Craig Hullinger announced yesterday that he will be retiring, effective November 6. He explains his reasons for leaving on his department’s blog:

I believe that I have successfully met my goal of “Leaving my City a better place than I found it.” … The Mayor’s latest budget message of September 15, 2009 makes it clear that the City must make further substantial budget cuts. The City needs to cut expenses and senior staff. I will be 62 this year. I retired from the Marine Corps last year as a Colonel. It makes sense for both the City and me to retire. I will remain in Peoria (and Sarasota in the winter), and start a small part time economic development and planning consulting firm, continuing to help communities revitalize their older neighborhoods. And I will keep working to help improve the City and region.

His resume is posted online. I asked Craig about rumors that he would be rehired by the city as a consultant (a la District 150). He replied, “The City would be a great client. I plan to only work part time, targeting 1/2 time. I did propose to the City to continue to work for 25K a year to help close some developing development deals such as in Warehouse, Eagle View, and HIZ, but no response yet. The City is very busy with the budget crisis, and saving my salary and overhead will help. But I will help out with or without a consulting contract. I think most people want to see the Heart of Peoria successfully redevelop. And I live in the HOP [Heart of Peoria], and want it to succeed whether I am working for pay or not.”

He also has recommended having Chris Setti replace him as Economic Development Director. “Knows the City, worked in ED as our top ED Specialist, very capable guy.” Setti left the Economic Development department to become a Six Sigma blackbelt for the city. He’s now the assistant to the City Manager.

The Journal Star reports that new City Manager Scott Moore “said the position will be analyzed in the coming months as city officials examine a potential restructuring at City Hall. ‘I don’t want to do anything prematurely,’ Moore said. ‘I want to get feedback from the departments, from (Hullinger), and input from the council, so that when I’m making that decision, I’m not making it in a vacuum.'” Setti is quoted as saying, “I’m a team player. I’m willing to do whatever the city leadership thinks is best for the city.”

City of Peoria, Economic Development

Enterprise Zone answers raise more questions

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Back in May, Peoria’s Economic Development director Craig Hullinger asked District 150 to be a part of the Enterprise Zone for the Main Street Commons project, and I wrote this post in response. Craig, who is a really nice guy and very communicative, wrote me and we had an interesting e-mail exchange. He asked me if he could post it on his blog (did I mention he’s very communicative?), and I said that was fine with me, so here it is. I’m not sure why his post is dated September of 2008 because we didn’t have our discussion until just the last couple of months. Perhaps he just updated an old post.

Anyway, I was rereading it today, and now I have some more questions. For example, Craig says:

Any development is risky. The safest developments are on undeveloped land (green grass sites). It is easier to buy a large tract of land. Less likely to have costly environmental problems hidden underground. Urban redevelopment is always more difficult. It is harder to assemble the land – usually multiple owners. Older areas have more poverty and crime.

I think you can see that this is true by comparing the level of development in the suburban areas of Peoria versus the older areas. More development takes place in new areas. It is always a struggle to get investment in older areas. We try to equalize the difference between new and old with incentives.

Now look at this map of the current Enterprise Zone:

EZ map 2 28 09

Notice the big red area up in the far north part of town? Up there where there are green grass sites? Where it is easier to buy a large tract of land? Where it is less likely to have costly environmental problems hidden underground? Up where they, in short, need no incentives?

Why is the Enterprise Zone up there?

And furthermore, doesn’t that just step all over the theory of “equaliz[ing] the difference between new and old with incentives”? If a developer can get the same incentives up where there’s a green field, doesn’t that kind of “equalization” work against redeveloping the older parts of town?

One more question, for the record. Craig said:

There is a good market. We hired the premier market research firm, Tracy Cross, to assess the market for new close into downtown housing. They said the market was strong, for creative class young professionals, but that renters lead the urban renaissance, and that the rents had to be about $1.00 a square foot. It is hard to build a quality brick building that will rent for that rate without incentives.

So, we can expect this development to be a “quality brick building” now that these incentives are in place? And that rents will be competitive? So noted. I’ll be referring back to this post when the construction materials are made public. When I asked at the public meeting what materials would be used, I was told they hadn’t decided yet.

City of Peoria, Peoria Public Schools

2009 Worst Timing Award: Craig Hullinger

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I like Craig, so nothing against him personally. But has he read the paper lately? I have a hard time believing he has when I hear news reports like this one from 1470 WMBD:

Peoria School District 150 is being asked to participate in an Enterprise Zone to allow a developer to construct a combination of retail space and housing units along Main Street. Devonshire Group plans to build Main Street Commons at the site of the former Walgreen’s at Main and Bourland…. If District 150 goes along the developers will pay property taxes on only the current value of the property for five years…. City of Peoria Economic Development Director Craig Hullinger says District 150’s participation is vital to the project moving forward.

Dude! District 150 is LOSING MONEY! They’re in terrible, terrible debt. They’re closing schools. They’re laying off teachers. They’re raising class sizes. They’re getting ready to issue $38 million in 15-year bonds to pay off short term debts and make payroll. And… AND —

I have here the 2008 Tax Computation Report on District 150 that just came out a few weeks ago. Would you like to know how much property tax revenue District 150 is not receiving because of tax increment financing (TIF) districts? $3,027,801.91. And the City has already put the new Marriott Hotel in a TIF, so District 150 won’t see any benefit from that development. And the museum is in a TIF, so the district won’t see any benefit from that development. And now that a developer comes to Main street, the City says, “Hey, District 150, would you mind doing without a little more tax revenue for just a little bit longer?” Five years, that is… unless they extend it.

This couldn’t have been suggested at a worse time. And the really crazy part? Check out the quote from the developer about this project:

Shawn Luesse of the Devonshire Group told the District 150 school board Monday the project is targeting Bradley University students. “Our feasibility study shows there’s a housing need for Bradley students,” Luesse said. “We would virtually be full overnight.”

Wait a minute…. If it’s going to be this successful, explain to me why they need this tax incentive to make it happen. Is it just because everybody else gets incentives, so now we’ve trained our developers to have an entitlement mentality?