Tag Archives: Gary Matthews

Caterpillar, City of Peoria

Who’s actually paying for the Caterpillar Sky Walk?

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Remember in my last post, how I said Caterpillar had purchased the naming rights for $1 million? Well…

Under the “Purchase” section of the Naming Rights Agreement, one of the conditions that must be met for the deal to go through is this: “Pere Marquette Hotel Associates, L.P., a Kansas limited partnership shall have paid to Caterpillar the amount of One Million and 00/100 Dollars ($1,000,000.00).” Pere Marquette Hotel Associates, L.P., is the company that sold the Hotel Pere Marquette to developer Gary Matthews.

So here’s how this works: Peoria gives $29 million to Matthews. Matthews gives $7,384,000 to the Pere owners to purchase the property. Pere owners give $1 million to Cat. Cat gives $1 million back to Matthews for naming rights. That $1 million then must be used (as specified in the naming rights agreement) “to pay for non-qualified rehabilitation expenditures … related to the construction of the project.”

This raises a couple questions. First, was the selling price of the Pere artificially inflated in order to kick back a million dollars to the developer? Did that million really come not from Cat’s pocket, but from the taxpayers? And second, where is that money going? Do “non-qualified rehabilitation expenditures … related to the construction of the project” include the developer’s fee, for instance? Or if it’s reinvested in the project, does it count toward Matthews’ personal equity in the project?

City Council, City of Peoria

Congratulations to the City Council

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I just want to congratulate the Peoria City Council on accomplishing something I really thought was impossible. According to the Journal Star, the Council has managed to find a deadline that Gary Matthews was able to meet. This is no small feat. It only took three and a half years, three redevelopment agreements, and five or six deadline extensions, but through persistence, perseverance, and a political will unrivaled by any other effort the council has made, they have succeeded in foisting this folly on the taxpayers.

I sincerely wish they would put this much effort, determination, and tax money toward the things they should be doing: enforcing law and order, maintaining existing infrastructure, and making Peoria a safe and beautiful place to live for those who actually, you know, live here, and pay taxes that increasingly go toward baubles that hang on our deteriorating civic structure.

No doubt, I ask too much.

City Council, City of Peoria

The latest line drawn by the City

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The Journal Star recently published the following quote regarding the Wonderful Development:

“The developer doesn’t need a reminder from the council of the hard deadline in place,” Mayor Jim Ardis said. “He knows he has to deal with any obstacles and put us in a position to close by the end of the month. That won’t change.”

Did you see that? This latest deadline is different than all the previous deadlines. This one is a hard deadline. We really mean business this time! No more of those phony deadlines of the past three and a half years! This is a hard deadline. Do you hear me, Mr. Matthews? HARD!

It is to laugh. Does anyone really believe this? It’s like that old Bugs Bunny cartoon:

City Council, City of Peoria

Chronicle prediction comes true

56 Comments

Back in January, when the Peoria City Council agreed to extend the Wonderful Development deadline until the end of February, I predicted that “Long about February 21, you can reasonably expect the council agenda to include another deadline extension.” Well, it’s February 22, and guess what? The council agenda for next Tuesday includes a request to extend the deadline until the end of March now.

I feel confident in predicting that, if this is approved, the new deadline won’t be met either. At the end of March will be another deadline extension request. This may happen every month in perpetuity, or at least as long as the majority of this council is allowed to remain in office, and Gary Matthews is never held to a real deadline.

Just for those council people who are unaware of the definition of “deadline,” here it is: “The time by which something must be finished or submitted; the latest time for finishing something.” That’s not how the Council has been defining it, obviously.

City Council, City of Peoria

Peoria to put retiree funds at risk for hotel

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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

City of Peoria

Peoria Chronicle Exclusive: Matthews threatens to sue over hotel deal termination

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In a statement released today, EM Properties claims it…

…has satisfied all conditions of the Redevelopment Agreement required to proceed with a closing for the Downtown Marriott Project. We believe we have provided sufficient evidence of financing. We plan to confirm the financing we currently have and further solidify our submissions to the City Council within the next week. We share the City of Peoria’s urgency for a real estate closing and look forward to one this fall to bring this great project to fruition.

And they are threatening to sue the City for breach of contract if the project is cancelled. You can read the letter from their attorney here:

Husch-Blackwell-Letter

Here’s the bottom line: The redevelopment agreement listed thirteen things that Matthews/EM Properties had to fulfill. The City’s termination letter said that EM Properties had not fulfilled them. Now EM Properties’ attorneys are saying they did fulfill them, and therefore the City has no right to terminate the agreement.

But there’s one thing that EM Properties’ attorneys are missing. The redevelopment agreement states in section 6.7, “If the conditions precedent set forth in Section 6.4 do not occur on or before December 31, 2010, then the City may cancel this Agreement by notifying the Redeveloper in writing.” Note the date: December 31, 2010. It’s a publicly-established fact that these conditions were not met by the deadline. So EM Properties doesn’t have a leg to stand on. They can argue until they’re blue in the face that they’ve satisfied all the conditions, but if they weren’t satisfied by the deadline, the City has every right to cancel the agreement. Case closed. This is nothing more than a scare tactic — an act of desperation.

City Council, City of Peoria

The (not so) Wonderful Development, 2008-2011, R.I.P. (UPDATED)

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It’s all over but the shouting.

The Journal Star reports that the City has notified Gary Matthews that they are terminating the redevelopment agreement for the Hotel Pere Marquette and surrounding properties.

In short, the three-page letter states the city is within its rights to pull out of the agreement because it is after Dec. 31, 2010 — the date at which the city could unilaterally withdraw under the terms of the deal if certain benchmarks were not met — and that there still are significant details missing on the financing Matthews’ business, EM Properties, was required to obtain. Indeed, it states that what has been provided thus far is “nothing close to what the city could prudently accept” as evidence. […] Though city lawyers believe the letter sent to EM Properties is adequate notice to terminate the agreement, City Council members will be asked to formally ratify the decision in a vote at their Sept. 13 meeting to confirm they agree with the move.

Letter Terminating the Wonderful Development

And so dies the vaunted Wonderful Development — a project that was so time-critical that it had to be approved practically overnight three years ago without any public input and as little notice as legally possible; a project that was going to be constructed “immediately” according to Matthews in May 2010; a project, the financing of which the Council was assured by Mr. Matthews was all in place over a year ago; a project Mr. Matthews was so confident about that he loudly and publicly blew off Councilman Gary Sandberg’s questions, saying “Just vote no, councilman”; a project that was going to cost the City of Peoria taxpayers up to $37 million, most of which was going to go into the pockets of Mr. Matthews and the owners of Big Al’s; a project that was going to relocate Big Al’s to a piece of property immediately adjacent to a day care facility; a project that ultimately fell apart like a house of cards.

City leaders will no doubt bemoan the cancellation of this project and say it’s a sad day for Peoria. And there may indeed be some unfortunate outcomes. The fate of the Pere Marquette would seem to be in question, for instance. But the losses that would have resulted had the project come to fruition would have been far worse. The City simply can’t afford the debt service on up to $37 million in bonds. No matter what they tell you, that project was never going to pay for itself. Their predicted occupancy rates and revenues were about as likely to come to pass as the Cubs winning the World Series.

On a positive note, I just want to express my appreciation to Mayor Ardis and City Manager Patrick Urich for finally pulling the plug on this project. You just know there was no small amount of pressure placed on the City to contribute even more toward making this project a reality, but to their credit, they said enough is enough. They didn’t let Matthews come back to the well a third time looking for more concessions and/or funding.

My hope is that, out of this abject failure a better project will arise: one that is privately funded and likely to succeed; a truly wonderful development.

UPDATE: I contacted Randy Ray to find out the disposition of the Franklin Street lot. Here’s his response: “The contract with Main Street Trust and Al’s for the Franklin lot terminated by its own terms because closing did not occur by July 31.” So, in other words, Big Al’s will not be moving, and the City retains ownership of the lot adjacent to the bus depot.

City of Peoria

The Wonderful Development, Day 955

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Since December 15, 2008, when the City Council first passed the $39 million redevelopment agreement for the Marriott Hotel deal downtown, 955 days have elapsed. That’s a little over 2.6 years for a project that had to be passed that night — after only two days of public disclosure and without any public input — because “time [was] of the essence,” according to Councilman Spain.

On May 25, 2010, a revised $37 million redevelopment agreement was passed by the Council. Developer Gary Matthews said at that time that construction “would begin immediately,” according to the official minutes of the City Council. It’s been 429 days since then. Note that the dictionary defines “immediately” as “without lapse of time; without delay; instantly; at once.” This does not appear to be Mr. Matthews definition, however.

On May 1, 2011 — 88 days ago — the Journal Star reported that the hotel project “could be finalized by the Fourth of July,” according to Mayor Ardis, and that “City Council has to vote on changes to the redevelopment agreement, which are likely to take place in July.” The last City Council meeting of July was two days ago, and no revised redevelopment agreement has come before the council, nor has any work begun on the Hotel Pere Marquette block.

955, 429, 88, 2 — what does it all add up to? Failure. The council should officially notify the developer that they are terminating the agreement by its own terms, “immediately” — by the dictionary’s definition, not the developers’.

City of Peoria

Peoria has the perfect solution to Matthews’ inability to pay loans back on time

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The Journal Star reports that East Peoria taxpayers are having trouble getting their money back from Gary Matthews. He borrowed $150,000 from the city in 2007 to help him build the hideous monstrosity we know as GEM Terrace. He’s been paying that money back, but not exactly on time. He owes $24,862 in late payments.

The City of Peoria isn’t going to let that happen to taxpayers here. When Matthews finally builds The Wonderful Development, Peorians won’t have to worry about him making late payments. Why? Well, because the City isn’t loaning him any money. They’re planning to give him $37 million ($9 million of which will go directly into his pocket as a “developer fee”) as a grant. No repayment necessary. Aren’t we clever? While all the citizens have to check out HardMoneyLendersBoston.com and beg for payday advances and loans, Matthews continues to bumble about.

Matthews’ inability to hit deadlines has actually worked to Peoria’s advantage. We haven’t had to sell the bonds yet to come up with that $37 million because the Wonderful Developer has been unable to get the project started by the dates required on either of the redevelopment agreements he inked with the City in 2008 and 2010.

I, for one, hope Mr. Matthews continues his deadline-missing ways. It’s saving the taxpayers here a lot of money.

City Council, City of Peoria

Deadlines? What deadlines?

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From today’s Word on the Street column in the Journal Star:

The mayor, meanwhile, said the hotel project – which has yet to begin – could be finalized by the Fourth of July. He said Marriott representatives were in Peoria a couple of weeks ago. He said progress is being made toward demolition work on the existing parking deck and the businesses attached to Big Al’s later this summer.

The City Council has to vote on changes to the redevelopment agreement, which are likely to take place in July.

That quote, of course, is about the downtown hotel project that City Attorney Randy Ray dubbed a “wonderful development” during the time the city was suppressing public information about it. It was rushed through the council in December 2008 with only one business day of public disclosure. The information was released on a Friday afternoon, and the council voted for it the following Monday evening. The timing was so crucial, they couldn’t wait a couple of weeks, or one week, or even a few days extra. It had to be passed that night — December 15, 2008 — or else the whole project would have fallen apart.

Interim City Manager Henry Holling (during his first interim appointment) explained, according to the council minutes, “although the proposed development would not be completed until 2012, the timing of the project was critical because convention and meeting planners were making decisions for events three to four years from now.” Councilman Spain said, “time was of the essence.” Mayor Ardis said, “as soon as the Agreement was signed, the hotel could begin booking events
as many events were booked two to three years in advance.” It was all so … urgent.

And now it’s Monday, May 2, 2011, and nothing — zero, zip, nada — has happened to the site. The original deadlines were never met, so the developer, Gary Matthews, returned to the city council on May 25, 2010 — nearly a year ago — to get those deadlines extended and make some major changes to the design and scope of the project. The council obliged.

One of those new deadlines, from section 3.1 of the agreement: “The Redeveloper shall commence construction of the Project not later than one (1) year from the date of the execution of this Agreement….”

That means construction is supposed to commence before the end of this month. But now Word on the Street tells us the Mayor says the project won’t be finalized until July. And Matthews will be coming back to the council for more changes to the redevelopment agreement.

That’s right. The Mayor has essentially announced that the second agreement’s deadlines will also not be met. Instead, a third redevelopment agreement will have to be drawn up and approved this July, more than two and a half years after that time-critical first vote.

One wonders why the council ever bothers writing deadlines into these agreements when they are never, ever enforced.