Tag Archives: Economic Development

City Council, City of Peoria, Economic Development, TIF

Saving downtown one new hotel at a time

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I stopped blogging for several years shortly after the big Wonderful Development opened downtown. You may recall that they remodeled the Pere Marquette, opened the new Courtyard Marriott, and had plans to put in restaurants and bars and retail, and oh, goodness, that block was going to be hopping! And the best part was, it wasn’t going to cost taxpayers a thing because, “It pays for itself,” an exuberant Mayor Ardis said at the time.

As it turns out, not one restaurant, bar, or retail shop has ever opened in the storefronts along Monroe. In fact, the interior was never even finished; it still looks like a construction site inside. Taxpayers lost the $7 million loan and is saddled with ongoing lawsuits with developer Gary Matthews. And since the pandemic, the Courtyard has been closed, ostensibly due to low demand.

But no worries. It turns out that what downtown really needs to start bustling like it’s 1939 again is — wait for it — another hotel! Yes. The Peoria City Council has just approved another redevelopment agreement with another hotel developer that’s promising 70% occupancy, a national flag (this time it will be a Hilton Garden Inn), a restaurant/bar, and a convenience store. And it won’t cost taxpayers anything. It’s risk-free!

The new hotel is planned for Adams street, across the street from the new OSF Health Care corporate headquarters, in place of the former Sully’s bar and the former downtown Illinois Central College campus (also known as the Perley building). Plans call for the two properties to be razed to make way for the new development. Incidentally, artists’ renderings show Fulton Plaza replaced with two-way vehicular traffic again, but there’s nothing in the redevelopment agreement about it.

Oh, and it’s absolutely, positively, nothing at all like that Wonderful Development from a decade or so ago. Everybody says so: the developer, the developer’s attorney, various other people with a vested interest in the project, and the City Manager.

They have a point. There are many differences. This project includes apartments on the upper floors in addition to hotel rooms on the lower floors. That’s a new twist. The City isn’t loaning $7 million from underfunded pension funds this time. That’s a plus. They’re also not handing $33 million to the developer up front (backed by municipal bonds that we’re still on the hook to pay off), although they swore that was an awesome idea the last time. But hey, we all make multi-million-dollar mistakes with other people’s money now and then. Can’t remain bitter about that forever, am I right?

But on the other hand, there are a lot of similarities. It’s highly debatable that we need more hotel rooms downtown. As mentioned, one entire hotel downtown is still closed–try to book a room in the Courtyard. The occupancy predictions presented at the council meeting tonight (brought to you by Hotel & Leisure Advisors, a consultant for the hotel industry who reportedly did the feasibility study for this project) are unrealistically high, just like they were for the Wonderful Development. They’re also promising a new restaurant and retail, just like they did with the last hotel project, but which never materialized.

And there’s one more similarity worth mentioning: This does come with a cost to taxpayers. This hotel will be in the Downtown Conservation TIF (tax increment financing district), and the City has promised to pay the developer up to 100% of the redevelopment costs out of the increase in taxes attributable to the project site. That’s money that otherwise would go to other taxing districts, such as the County, District 150, the Park District, ICC, etc. That means taxpayers like you and me will have to take up the slack.

This also means the new hotel will be competing with the Pere Marquette and (still shuttered) Courtyard Marriott. The $33 million in bonds to build those hotels is supposed to get paid back out of revenues from those hotels. If revenue goes down due to increased competition for an (I would argue) over-supply of hotel rooms, then the bond repayment has to be made up from taxpayers like you and me. You can’t stop a private developer from building another hotel (that’s capitalism), but you don’t have to give them a sweetheart TIF deal that will likely harm your other investments, either.

True to form, however, the deal was sealed before the Council ever met, and it passed unanimously tonight. That’s okay. We’re finally going to get downtown moving again, just like we were promised with the Pere Marquette renovation. And the Civic Center expansion. And the museum. And the new Cat headquarters. And One Technology Plaza. And Riverfront Village. And….

Economic Development, Radio

This American Life on economic development

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There’s a Public Radio show called This American Life, hosted by Ira Glass, that I enjoy. They have a theme for each one-hour episode, and the episode is split into several segments, or “acts” as they call them, with each act looking at the same theme in different ways. Back in May, they had an episode with the theme of “How to Create a Job,” and I found Act 3 especially interesting. There’s not a way to embed the audio here, but if you follow this link, it will take you directly to Act 3 of that program. The segment lasts about 15 minutes. Take a listen. It will help you understand the rhetoric that comes from our own economic development gurus in Peoria.

This American Life: How to Create a Job (full program)
Direct Link to Act 3: Job Fairies

City Council, City of Peoria, Economic Development

Council to address pervasive poverty on Brandywine Drive

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I’ve talked about the misuse of Enterprise Zone status on several occasions here at the Chronicle (e.g., “A New Kind of Poverty,” “Discussing Incentives with Craig Hullinger“), so there’s no need to go into another lengthy explanation. Here’s a quick summary: the Enterprise Zone is supposed to be used in “depressed areas,” defined as areas “in which pervasive poverty, unemployment and economic distress exist” (20 ILCS 655/3(c)). But the City of Peoria completely disregards this qualification and uses the status indiscriminately throughout the city. See for yourself:

By taking this tool and using it in growth areas, greenfield sites, and other non-depressed areas, the City has not only eviscerated its effectiveness, it’s put depressed areas at an even further disadvantage.

It looks like that trend will continue at tonight’s City Council meeting, as the Council will probably approve extending Enterprise Zone status to the horribly depressed area of — yes, you guessed it — Brandywine Drive. Yes, when one thinks of pervasive poverty and economic distress in the City of Peoria, the first place that pops into my mind is “across the street from Northwoods Mall.”

I don’t want to minimize the challenges faced by all parts of town, but having just come off a huge recession, it’s not surprising to find vacancies throughout the city. We certainly want to do what we can to encourage reinvestment, but misusing incentive tools is poor public policy. It’s dishonest — the wording of the statute is unambiguous that this should only be used in areas of pervasive poverty. It’s unfair — it puts poverty-stricken areas at an even greater disadvantage.

The Journal Star ran an article on this agenda item, and the council members they interviewed (the usual suspects) were all in favor. They have regularly defended the misuse of EZ status by saying “everybody does it,” so those responses were expected. I was disappointed to see new council member Beth Akeson’s response, however:

“I kind of question the use of the enterprise zone in the city, but the city has already set a precedent,” at-large City Councilwoman Beth Akeson said. “Once you set precedent, and once you extend an enterprise zone to (particular) properties, you are hard pressed to do other things than continue on.”

What is she saying? That past misuse of economic development tools has somehow become binding precedent, obligating the council to future misuse? That someone could sue the City for not giving one property the same economic development incentives as another property? If that were true, then every hotel in Peoria should be suing the City for their own pot of gold based on the Wonderful Development incentive package.

The city is under no obligation to extend the enterprise zone to a single additional property. We need not continue every bad precedent set by past councils. We are not constrained to keep repeating past mistakes.

But we will. That’s what we do in Peoria.

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.”