Tag Archives: Gary Matthews

City of Peoria, Peoria Journal Star

Puff piece ignores controversy on Matthews Market disposition

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The Journal Star just published a puff piece on East Peoria developer Gary Matthews written by the recently retired Paul Gordon. It includes this gloss over the disposition of Matthews Market:

Matthews returned to Peoria – something he’d always planned to do – and went to work for his father at Matthews Market in the early 1970s after they made peace with each other. The idea was that he’d take over the business some day.

“But I didn’t like the grocery business. I don’t know why, exactly, but it just wasn’t for me,” he said.

He got his real estate license and went to work for David Joseph in his company’s residential real estate division. “My dad was disappointed, but he understood. He sold the grocery store after I left.”

Well, there’s a lot more to the story than that. And it’s all chronicled in erstwhile reporter Gordon’s own newspaper’s archives.

Matthews Market was located at 1500 NE Jefferson and was open until December 1992 under Gary Matthews’ ownership. It closed reportedly due to crime and urban decay in the neighborhood, as well as competition from larger grocery stores. The store still carried a mortgage and a lien, but suddenly the City of Peoria was interested in acquiring the property. On January 16, 1993, the Journal Star reported this:

Peoria’s second police storefront is expected to open this spring in the former Matthews Market building, 1500 NE Jefferson.

The City Council will be asked Tuesday to approve a deal to acquire the building.

The city’s cost is expected to be $135,000, provided a deal can be worked out with Northside Neighborhood Housing Services. That deal would involve the trade of a city-owned house at 1120 NE Jefferson in exchange for the housing service releasing its $33,000 lien on Matthews Market.

First of America Bank holds the first mortgage on the building, which closed in December.

The city’s first police storefront opened Dec. 15 in a city-owned building at 101 N. MacArthur. In addition to neighborhood policing, the storefronts deal with zoning and code enforcement issues.

“What it represents is the partnership of the city, community-based policing and the neighborhood,” 3rd District Councilman Dave Koehler said. “Hopefully, (area residents) will have an ear for their concerns and complaints that is more readily available.”

Development Director Tom Tincher said the second storefront is expected to open within 90 days. Police Chief Keith Rippy said last year he plans to open a total of five storefront police offices throughout the city.

Pretty sweet deal for Mr. Matthews. He had more into the store building than it was worth, but the City was willing to take it off his hands for the cost of the amount owed on the property. Controversy erupted on February 11, 1993, when this story broke:

Third District Councilman David Koehler showed poor ethics in mingling his private matters with Peoria City Council business, his opponent in the upcoming election said Wednesday.

Koehler responded by calling candidate Nina Nissen’s charges “politics of desperation,” and added that Nissen is ethically suspect herself for mounting a “smear” campaign.

Nissen, a former assistant personnel director, issued a statement Wednesday calling for a “cleanup of City Hall in the area of ethics.” In recommending a city ethics code, Nissen questioned … the city’s recent purchase of the former Matthews Market, 1500 NE Jefferson, for use as the city’s second police storefront. The city will assume a $135,000 first mortgage on the building and swap another house to the Northside Neighborhood Housing Service to clear up a $33,000 lien.

The problem, Nissen said, is the building is owned by Koehler’s former campaign manager, Gary Matthews.

“It’s wrong if Koehler used his influence to help his campaign manager benefit from an action of the City Council,” she said. “Sure, we need a storefront. But does it have to be Matthews Market?” Koehler said Gary Matthews is no longer involved with his campaign. Koehler’s campaign organization statement on file with the city clerk lists Matthews as his chairman, but Koehler said the statement — — filed in July 1990 — is outdated.

“Yeah, Gary helped me out” in his 1989 campaign, Koehler said, adding that he kept a distance from the Matthews Market negotiations. “In terms of whether there was any special favors on my part for Gary — no.”

Koehler won reelection, but not before more criticism was heaped on the project. The following article appeared in the Journal Star on February 22, 1993 — which is also when we learn that, in addition to a $135,000 mortgage and a $33,000 housing service lien, Gary Matthews still owed $65,000 to the City of Peoria for a loan they gave him as well:

A local political organization claims city officials are wasting taxpayers money by purchasing a deserted grocery store for a storefront police station.

Peoria’s second police storefront is expected to open this spring in the former Matthews Market building, 1500 NE Jefferson.

Members of the People’s Coalition for Political Reform said at a news conference Sunday they want to reveal what they call “a waste of city funds” on the abandoned building.

Although not opposed to the storefront idea, group officials said there are many questionable factors involved with land acquisition, building administration and finances.

Group members said the city is paying too much for the run-down, deserted supermarket.

The city’s cost is expected to be $135,000, which is what remained on the buildings mortgage. City Manager Peter Korn said the city will make monthly payments on the building until the mortgage is paid off. He said he is unsure what the monthly payments will be.

First of America Bank holds the first mortgage on the building, which closed in December.

That deal also involves the trade of a city-owned house at 1120 NE Jefferson to the North Side Neighborhood Housing Service in exchange for the release of a $33,000 lien on the former market.

“The only thing they are doing is putting the city of Peoria more in debt. What we have here is a money pit,” said organization spokesman Rolf Sivertsen.

Korn said the city will also forgive a $65,000 loan balance owed to the city by the former owner of Matthews Market , Gary Matthews. The original loan to Matthews was $110,000, but $45,000 has been repaid.

The city became interested in the property because they already had money invested in it as a result of the loan, Korn said.

In addition to financial problems with the project, the People’s Coalition said the facility is too large for what the police need. The building is 8,000 square feet.

Korn said the police facility will occupy about 2,000 square feet and the remainder of the property will probably be used for community organizations.

But Sivertsen said he won’t believe the city will lease out the extra property until he actually sees the leases.

By September 10, 1993, the City was looking to resell the building, which was too big for the City’s needs from the beginning, and lease a portion of it instead:

Peoria’s third police storefront amounts to a pig in a poke, a city councilman said this week.

The city’s purchase of the former Matthews Market, 1500 NE Jefferson, was first announced in January. The deal took a new twist in recent months, however, as a business offered to buy the building and lease a portion to the city.

“The net result will be an economic situation that’s less costly than for us to be in the . . . storefront at Sheridan and Nebraska,” city development Director Tom Tincher said Wednesday.

The city currently operates police storefront stations at Sheridan and Nebraska and at 101 N. MacArthur Highway. Fourth District City Councilman Steve Kouri is not sold on the deal, which he figures will cost more than $250,000 before the storefront opens.

“It’s a bottomless pit, as far as I’m concerned,” Kouri said.

Tincher refused to divulge details of the pending resale of the building.

The City Council in January approved the first part of the deal: assuming the $135,000 mortgage held by store owner Gary Matthews and swallowing a $60,000 city loan. The store closed in December 1992. Tincher said the business approached the city about six months ago, intent on buying Matthews Market and occupying a portion of the structure.

Third District City Councilman David Koehler agreed the Matthews Market deal might not look good on paper, but said it represents a life preserver tossed to an inner-city neighborhood drowning in disinvestment.

Further repairs on the Matthews Market building will cost an estimated $63,975, according to city estimates. The City Council approved $27,315 of that amount Tuesday in the form of a roof repair contract awarded to Peoria Roofing, a contract awarded after competitive bidding and an approval based on the criteria list in this article (Common Questions To Decide How To Treat Your Roof – SWS Roofing).

Kouri said he supports the concept of community-based policing, but not the storefronts, which have been lambasted by critics as mere public relations ploys.

On December 22, 1993, the aforementioned deal was approved. In a story about the council’s decision to grant a sidewalk cafe license for, ironically, one of the buildings adjacent to Big Al’s that Matthews now plans to tear down, the Journal Star added that the council also took the following action:

Authorized the sale of the former Matthews Market building, 1500 NE Jefferson, to A&E Blueprint, which would lease a portion of the building back to the city for a police storefront.

A&E Blueprint currently is located at 3530 NE Adams, but will be bought out for the Illinois Department of Transportation’s McClugage Bridge and Adams Street improvement.

A&E will pay the city $135,000 for the building and lease back 2,600 square feet for the city storefront, at an annual rate of $2.50 per square foot, or $6,500.

I’m not sure when the police storefront idea fizzled, but at some point this leased space became the Peoria Township office. Recently, the township also moved out of the building, and the City no longer rents the space for anything to my knowledge.

The bottom line is this: The taxpayers of Peoria gave Gary Matthews a $98,000 gift 19 years ago by forgiving his $65,000 city loan and erasing the $33,000 housing service lien as part of the exchange for his run-down Matthews Market building. The sweetheart deal was alleged to have been political payback by then-council-member Dave Koehler because Matthews had been his campaign manager. The building was in such bad shape that the city resold it less than a year later and just leased a portion of it.

This is the same Gary Matthews to whom the taxpayers of Peoria are now giving a $37 million gift (including a $9 million developer’s fee) to build the Wonderful Development (aka, the downtown hotel project).

And now you know the rest of the story.

General News

Probably no connection

19 Comments

On 11/17/2009, Gary Matthews of E. M. Properties contributed $10,000 to “Taxpayers for Quinn.” Previously, Matthews had given no more than $500 in a single contribution to any political candidate, most of them Republicans, according to campaign disclosures currently available online.

In a completely unrelated matter, Governor Quinn signed Senate Bill 2534 on June 19, 2010, giving Gary Matthews’ Wonderful Development a 25% income tax credit for qualified renovation costs with a cap of $10 million. The legislation is designed to be a “pilot” program for possible statewide historic tax credits of a similar nature, meaning that, for the time being, Mr. Matthews is the only developer in Illinois who benefits from this tax break.

City of Peoria, State of Illinois, Taxes

Come watch the rich get richer

15 Comments

From my inbox, this notification from the City Clerk’s office:

WE HAVE JUST BEEN ADVISED AND YOU ARE HEREBY NOTICED THAT A MAJORITY OF A QUORUM OF THE CITY COUNCIL OF PEORIA, ILLINOIS, HAVE BEEN INVITED AND MAY ATTEND TO WITNESS ILLINOIS [GOVERNOR] PAT QUINN SIGN THE HISTORIC TAX CREDIT FOR THE PROPOSED HOTEL PROJECT ON MAIN STREET ON SATURDAY, JUNE 19, 2010, AT 9:15 A.M., AT THE PEORIA MARQUETTE, CHEMINEE BALLROOM, 501 MAIN STREET, PEORIA, ILLINOIS.

Please note this is not a meeting and no official action will be taken.

Tax credits for a guy making $9 million on this Wonderful Development, after he’s already received a $37 million gift from the city. That’s capitalism?

Thanks, State of Illinois. At least you can afford it. Oh, wait….

City of Peoria, General News, Peoria Area CVB, Peoria Civic Center

Civic Center rates the No. 1 reason conventions skip Peoria

40 Comments

Why do organizations skip Peoria and choose other cities to host their conventions?

The reasons were revealed by Sami Qureshi on WTVP’s public affairs program “At Issue” Thursday night. He should know. He’s the Holiday Inn City Centre’s General Manager, President of the Heart of Illinois Hospitality Association, and Secretary/Treasurer of the Peoria Area Convention and Visitors Bureau. He’s talked to convention organizers and read the PACVB’s lost business surveys.

Based on those primary sources, Qureshi says the number one reason Peoria is bypassed is because of the Peoria Civic Center’s rate structure. The number two reason is limited air service. The main reason is not, he says, due to a lack of quality hotel rooms.

Gary Matthews, the hotel developer who hopes to turn the Pere Marquette into a Marriott and connect it to the Civic Center with the help of $37 million in municipal (i.e., taxpayer-backed) bonds, disagreed with Qureshi. Matthews said that Marriott officials told him the Peoria Civic Center’s rates are perfectly fine. Qureshi countered that he wasn’t stating his opinion, but is just repeating what actual organizers who actually said “no” to Peoria had told him.

Qureshi and Matthews were on “At Issue” along with Peoria Mayor Jim Ardis and Holiday Inn City Centre owner Bruce Kinseth to talk about the “Wonderful Development” and its ramifications. There was also a prerecorded clip of Mark Twain Hotel owner and former Peoria mayor Lowell “Bud” Grieves explaining his alternative proposal. The episode will be replayed Sunday at 4:30 p.m. on WTVP, channel 47.

City of Peoria

No market study performed on Wonderful Development

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The other day, I was reading in the Journal Star about former mayor Bud Grieves’ plan to publicly unveil his all-hotels-connect-to-the-Civic-Center idea, and this just jumped out at me:

City Manager Scott Moore said the city is looking to do its own market study on Grieves’ plan, a similar process the city took in 2008 when Matthews of EM Properties Ltd. pitched the $102 million Marriott project.

The city did a market study on the “Wonderful Development”? Really? I don’t remember any council action authorizing funding for that. I immediately sent a Freedom of Information Act request to see this market study of which the City Manager spoke. Here’s the response I received:

Thank you for your inquiry regarding a “market study on Gary Matthews’ hotel plan.” No official market study of Mr. Matthews hotel plan in 2008 was conducted. [emphasis added] Over the past few years, the City has worked with HVS – a global hospitality services consulting firm – to determine the feasibility and reasonableness of a variety of hotel projects. Their largest work for the City was conducted in 2006-7 in support of a plan to build a Hilton at the corner of Kumpf and Jefferson. HVS was involved in the discussion regarding the December 2008 Matthews plan, but never produced any written analysis. They provided us with advice and counsel on the scope and need for the project and the parameters of the Redevelopment Agreement. Their involvement included a series of phone calls with City staff, representatives of EM Properties and our respective attorneys.

So, as it turns out, there was no market study. No independent analysis of Matthews’ plans. There are references to a feasibility study that took place before the recession started. This is evidently what the City of Peoria calls “due diligence.” And this is the process they’re going to use on Grieves’ plan as well.

I suppose we should be grateful that the City didn’t spend money on doing its own market study, since they’ve been known to ignore them anyway and just go with the developers’ promises, like they did with MidTown Plaza. That certainly turned out well; I’m glad we’re doing the same thing again, and with higher stakes.

City Council, City of Peoria

City mulls over cuts to basic services, giving $37M to hotel developer

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According to this Journal Star article, the City of Peoria is looking for ways to cut basic services like sidewalk and sewer improvements due to a nearly “flat projection” in sales tax growth. Meanwhile, according to this other Journal Star article, developer Gary Matthews is still pitching his hotel plan which relies on $37 million in TIF and sales tax revenue. That figure is down from the $39.3 million originally proposed (and approved), but the project is smaller now, too. There are 70 fewer rooms and “[i]t will be designed so that another 100 rooms can be added later, if needed,” according to Matthews.

“It has taken me a lot longer to reach this point than I expected. I didn’t see the recession coming, especially one that deep. Even so, I never thought it would be so tough to finance a project that is 50 percent equity,” Matthews said.

He didn’t see the recession coming when he submitted this project for council approval in December 2008? Really? That’s funny, because the recession started in December 2007, according to the National Bureau of Economic Research. Yet despite this striking admission, we’re still supposed to trust his judgment with our $37 million in tax money. And the City has such a great track record of choosing economic winners and losers… well, at least losers. Cub Foods. Firefly Energy. A few more “self-supporting” projects like those, and we’ll be completely bankrupt.

It’s time the City stopped acting like a bank for entrepreneurs who can’t get private financing because their projects are too risky, and started doing what they’re supposed to be doing, which is providing basic services for the residents of the City. It’s past time, actually.

General News, Peoria Civic Center, Peoria Mayor, State of Illinois

Civic leaders line up to tout Wonderful Development

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I regret that I couldn’t make it to the Illinois Finance Authority’s public hearing on Tuesday regarding the Wonderful Development (i.e., the proposed downtown Marriott hotel project). It looks like I would have been the only dissenting voice. The Journal Star reports that “Every person who publicly spoke before the authority was in favor of it. No one spoke in opposition.” Those who publicly spoke included Mayor Jim Ardis, Civic Center General Manager Debbie Ritschel, Peoria Area Convention and Visitors Bureau President/CEO Bob Marx, and “various trade groups.”

Mayor Jim Ardis defended the city’s position that it has done the appropriate due diligence on a project that is backed by nearly $40 million in public bonds.

If they really did “the appropriate due diligence,” it was all done in secret. No vetting was done in public, nor was there any public hearing before the city council decided to commit $40 million to the project.

He also defended the use of a tax bond for the project, saying that without public assistance, major Downtown projects would languish. He cited the “10 to 15 years” without development within the museum block as an example of the lack of the private industry moving forward with a project.

The City purchased the downtown Sears property in 1998 when Sears announced it would be moving to Northwoods Mall. Following that, they acquired the rest of the block. Ever since then, they’ve owned the whole block. They spent a few years haggling over what to do with it, then ultimately decided to give it to the museum. And that’s why there was a “lack of the private industry moving forward with a project.” They couldn’t. John Q. Hammons expressed interest in building a hotel on the block and the Mayor wouldn’t even return his calls. Furthermore, the museum group has had public assistance (lots of it!) for almost a full year and they still can’t get anything built down there.

“I would ask any . . . critics to name for me projects of this importance to the city that will have a private investor come before us and shoulder all of the burden,” Ardis said. “It doesn’t happen anymore.”

First of all, I take issue with his characterization of this project as one of “importance.” It’s not important to Peoria. All it will do is give us an overbuilt hotel to go along with our overbuilt Civic Center. Secondly, the reason a private investor won’t come before us and shoulder all of the burden is because they know it won’t be profitable. That’s why banks won’t loan the money, either. Why should we build an unprofitable hotel? Peoria has money to burn, apparently.

Ritschel and … Marx defended the hotel project as something that will make the Civic Center a more attractive destination for larger conventions and events.

Marx said at least 10 groups representing more than 17,000 room nights have approached the city about wanting to have an event at the Civic Center only if there was an attached hotel.

“They won’t event talk to us until we have this project come to fruition,” Marx said.

If it were that important to the Civic Center, then why didn’t they include a hotel in their $55 million expansion plan? Why did they say they could be successful without an attached hotel?

And what about those 17,000 room nights? Suppose they got $120 per room night for those (keep in mind that it will probably be less because they’ll give lower rates to big groups like that), how much would that amount to? $2,040,000. That’s not enough to make one bond payment. 17,000 room nights out of 178,850 annual room nights available (proposed 490 total rooms times 365 nights per year) accounts for 10.5% occupancy. Considering the current Pere Marquette (which has only 287 guest rooms) is barely getting 50% occupancy, I’d say we’re looking at some serious losses on this project.

But there’s no reason why Peoria residents should have to go to the IFA to complain about it. We should have had an opportunity to voice our concerns before our own local elected leaders. It’s too bad the IFA has provided more opportunity for input than our own City Council.

City of Peoria

Tough questions from IFA about hotel project

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In January, hotel developer Gary Matthews appeared before the Illinois Finance Authority (IFA). According to their website, The IFA “is a self-financed, state authority principally engaged in issuing taxable and tax-exempt bonds, making loans, and investing capital for businesses, non-profit corporations, agriculture and local government units statewide.” The IFA is subject to the Open Meetings Act, so their agendas and minutes are public information.

The IFA’s proceedings give us a bit of insight into what lenders and other governmental bodies may think about the proposed downtown hotel project since hotels are really important for people travelling, and many places have hotels or even lodges for people to stay as you can find in the Borneo Eco Tours that offer the best nature surrounded lodges for people to stay. It looks like the concerns are more than just the economic downturn:

Director Meister also noted that the Hotel Pere Marquette project will not come before the Board this month, but the project’s developer, Mr. Gary Matthews, is in attendance at the Committee of the Whole Meeting to answer the Board’s questions. Mr. Durburg stated that he was aware of the Pere Marquette Hotel project and wanted to know if it would be appropriate to ask tough questions of the developer as a new Board Member. Dr. Herrin emphatically stated that it was not only appropriate but Mr. Durburg’s duty as a Board Member to ask tough questions of any project. Chairman Brandt explained to the Board that aside from lack of specificity on project costs, there is also a potential issue with the way this project could be perceived. The fee that the developer is requesting is large and is of concern.

Dr. Herrin agreed with Chairman Brandt regarding the fees. Dr. Herrin stated that he needed firm numbers from Mr. Matthews as to the exact project costs, and then the sources and uses. He wanted to emphasize that this would not be a conduit financing, but essentially a commercial loan to EM Properties.

Chairman Brandt clarified for the rest of the Board that if this project is approved as presented; it would allow the developer to take as much as $9 million in fees out of the project at the completion of construction. Mr. Durburg offered his assistance underwriting this project as he has experience in this field. He also asked if this project would result in other hotels in Peoria closing.

Chairman Brandt explained that the Hotel Pere Marquette is an important civic facility that acts as the main event venue for the area. The project is also part of a downtown redevelopment plan for Peoria. Chairman Brandt cautioned that the State of Illinois has a history with hotel developments that is not positive and the IFA must avoid any similar entanglements.

That was just introductory. Later in the meeting, they dealt at length with this project:

No. 4: EM Properties, LTD (Hotel Pere Marquette Project)
Request for the preliminary approval of the issuance of taxable bonds backed by the “additional security” of the moral obligation of the State of Illinois. The moral obligation financing will finance a portion of the energy efficient upgrades of the 270-room historic Pere Marquette Hotel that will be renovated and converted to a Marriott and a “to be” constructed 180-room Courtyard. The development is located in downtown Peoria on Main Street two blocks from the Caterpillar world headquarters. The developments adjacent and will be connected to the skywalk to the Peoria Civic Center. Proceeds will be used to acquire the land, rehabilitation of the Pere Marquette Hotel, construction of the 180-room Courtyard Hotel, construct the parking desk, pay costs of issuance and fund capitalized interest and bank fees.

Mr. Bill Claus, Funding Manager, introduced the Board to Mr. Gary Matthews, the project developer; and stated that Mr. Matthews attended the meeting to answer questions regarding his project. He clarified that the project had already been pulled from the agenda and would not be presented for approval this month.

Mr. Matthews stated that he understood the Board was concerned about the developer fees for his project. Mr. Matthews explained that the fee was only 9%, well within the industry average of 7 to 12%. He added that he would still be willing to compromise on the exact number or timing of the fees.

Mr. Durburg asked Mr. Matthews how he could reconcile the supply and demand in a small area such as Peoria, where most of the major economic agents (i.e. Caterpillar) are suffering from the economic downturn. Mr. Matthews responded that the nearby Embassy Suites hotel has had four rate increases in the recent past. He understands that that project is doing very well, despite the economy. Mr. Mathews stated his belief that older hotels are suffering in this economy while the newest hotels in any area are not. Mr. Matthews stated that Peoria is lacking new, quality hotel rooms. He believes that with Marriott’s 30 year management agreement, along with several other factors, this property will succeed.

Mr. McInerney asked what the “per key” value of the Embassy Suites was. Mr. Matthews responded it was between $170 and $180 “per key”. Mr. McInerney requested an explanation of why the Embassy Suites’ per key rate was lower than the Hotel Pere Marquette’s. Mr. Matthews explained that the Hotel Pere Marquette project also includes an elevated walkway to the Civic Center and a 500 car parking lot that the Embassy Suites does not have.

Mr. Durburg asked if the project was contemplating any sort of agreement with Caterpillar for rooms. Mr. Matthews stated that Marriott was not interested in that sort of arrangement as they want to remain flexible. Mr. Matthews is not concerned, as Caterpillar has a long history with the Pere Marquette given the fact that their international headquarters and training center are within a few blocks of the hotel.

Dr. Herrin added that St. Francis Hospital will be developing a new children’s hospital across the street from the proposed project. This is expected to be a premier children’s hospital with people traveling from far away to receive treatment. This may be positive for the Hotel Pere Marquette. Mr. Matthews pointed out that this project was structured by Marriott based on its analysis of the market. This project includes the Hotel Pere Marquette as a full service property and the yet-to-be-built Courtyard by Marriott property will be special service.

Mr. Durburg asked if the first mortgage on this property will be non-recourse. Mr. Matthews responded that it was recourse debt to him, personally. Mr. Durburg then asked if Mr. Matthews had prepared a pro forma for occupancy over the first few years. Mr. Matthews responded that he could not off the top of his head, but that he believed that Marriott had prepared and submitted that report. He believed Marriott projected 73% occupancy for the Courtyard and Pere Marquette in the first few years. The breakeven point for the project is 50% occupancy for the Pere Marquette and 53% for the Courtyard by Marriott Hotel. This data is based on three different feasibility studies that were conducted.

Dr. Herrin asked if the IFA had all of these studies. Mr. Matthews responded that he believed the IFA did. He added that Marriott disagreed with one of the studies that suggested both hotels be full service. Mr. Claus added that the IFA will need an “as built” study as well. Mr. Durburg then asked what the occupancy rate at the Embassy Suites was. Mr. Matthews stated that December was not a good month for the Embassy Suites, but that other than that occupancy has been high. Embassy Suites has projected that January through February will be rough as well but that occupancy will pick up in March with March Madness. It is currently at about 45%.

Mr. Durburg pointed out that to break even, the project must have 50% occupancy and the projections are for 73% occupancy. He asked how Mr. Matthews could account for that.

Mr. Matthews stated that the project will have other sources of revenue including shops, restaurants and the parking deck. Mr. Durburg asked if there would be a need for the additional parking. Mr. Matthews explained the site lay out and adjacent businesses on a large scale map of the proposed development, clarifying the need for additional parking.

Mr. Durburg then asked if Mr. Matthews will be competing with the Embassy Suites hotel. Mr. Matthews responded affirmatively.

Dr. Herrin stated that he would like Mr. Matthews to prepare a finalized total project cost, including acquisition and renovation, as well as a list of the pledged financials. The IFA can then determine if it is possible or appropriate for the IFA to fill any gaps in total financing.

Mr. Matthews explained that the City of Peoria will not close on the funds they have pledged until a guaranteed construction cost agreement has been reached with a contractor. This cannot be completed until the design for the project is completed, which is still in process.

Mr. Durburg asked who currently owns the Hotel Pere Marquette. Mr. Matthews responded that it was a long established partnership. Dr. Herrin asked if Mr. Matthews would be able to break down and identify the actual costs of the project. Mr. Matthews stated he would be able to in two to three weeks.

Chairman Brandt stated that the State of Illinois has not had a positive experience with hotels in the past, which could create problems for this deal. He added that while that alone is not a reason to forgo this project, it is an excellent reason to proceed with great caution. Chairman Brandt stated that the other primary concern for the Board is the lack of certainty on numbers. The IFA will need a final project cost before we can proceed any further.

Large developer fees, “lack of certainty on numbers,” extremely high occupancy rate projections — these are the kinds of questions the IFA had for the developer. Nobody called it a “wonderful development,” incidentally. My guess is that other lenders had the same kinds of questions.

The next IFA board meeting is Tuesday, March 9, 3 p.m., at (are you ready?) the Pere Marquette Hotel in Peoria. The agenda hasn’t been posted yet.

City Council, City of Peoria, Peoria Mayor

Former mayor counsels council

7 Comments

Former mayor of Peoria Bud Grieves, who also happens to own a hotel downtown, has written the current mayor and council a letter with some advice on how to handle the so-called “wonderful development” — i.e., the proposed downtown Marriott hotel deal:

TO: The Honorable Mayor and Members of the City Council
FROM: Lowell (Bud) Grieves, Mark Twain Hotel
DATE: February 19, 2010
SUBJECT: JOURNAL STAR ARTICLE OF FEBRUARY 16, 2010

I am writing to clarify my position regarding the Downtown hotel project that was covered in an article appearing in the Journal Star on February 16, 2010. The article, while generally correct, missed some important points of which you should be aware.

I am supportive of City assistance in this project and stated so publicly over a year ago. I am still supportive of the concept of public assistance but only for the purpose of tearing down Big Al’s and other bars in upgrading the entire block. It’s a stretch, but this can be interpreted as a public improvement that the City can choose to make to leverage the recently upgraded Civic Center – I understand the importance of this!

However, I talked to City Attorney Randy Ray prior to the interview and was told that the $40 million in public funds were not restricted to public use outside the hotel but instead could be applied to any portion of the project. That means carpeting, televisions, elevators, and even the walkway connecting a private hotel to the Civic Center could be paid for with these funds. This is simply not fair to taxpaying, existing Downtown hotels that have to pay for these very same things on their own to compete. If your goal is to offer public assistance to Downtown hotels to accommodate Civic Center conventions, then you should see to it that all Downtown hotels get public assistance! I would like to build a skywalk from my hotel to my banquet facility (Packard Plaza) and would request City funding assistance to do so.

The convention business is slow, and I have never seen the hotel business this bad. John Q Hammonds recently backed away from the build out of additional rooms at the Embassy and gave back $500,000 to the City of East Peoria. Does this sound like a strong recovering market to you? Perhaps this project will not go and let you off the hook. If not, I would urge you to limit the use of public money to public improvements, prior to issuing the bonds. Failure to do so will set an indefensible precedent, and you will have to live with the consequences.

Thank you.

The project’s developer, Gary Matthews, who last year confidently stated that he’d have all his financing in place by January of this year, now says he’ll ask for an extension from the City Council on the redevelopment agreement. He added this:

Design plans for the $100 million hotel are also set to change: Matthews tells us the “blended look” between the Pere Marquette and the Marriott will be slightly different.

There’s only one reason to change the design at this point, and that’s to save money. I shudder to think what the “new” look will be.

What the Council should do (but they won’t) is cancel the whole project for the same reasons they never should have entered into the agreement in the first place. Matthews’ inability to secure financing despite having 40% of the cost of the project covered by the City should be a clear enough sign to the council that this is a bad investment.

But then, bad investments are no big deal when all you’re investing is other people’s (i.e., Peoria taxpayers’) money.

City Council, City of Peoria

Where’s the outrage?

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We’re all enjoying the calm before the storm. We’ve heard the warnings — the city council is going to have to make some deep cuts in order to close the $10-12 million budget gap. They’re trying to plug the gap without raising taxes. That means the cuts will have to be made “with a chainsaw, not a scalpel,” and will be “bloody,” to quote the mayor and another council member.

Yet, at the same time, the council had absolutely no trouble raising taxes to collect $40 million for a private developer. Think about that — they raised the sales tax (granted, for an area restricted to downtown — the so-called “Hospitality Improvement Zone”). They will collect money from that sales tax, and they will hand it over to Gary Matthews, a private citizen and developer, so he can build a huge hotel addition to the Pere Marquette. Matthews will, in turn, give the lion’s share of that money to Al Zuccarini for the properties he owns on the block shared by the Pere.

So, at the same time that the council is talking about cutting police officers, eliminating raises for employees, cutting back on code enforcement and road maintenance, and other draconian cuts in public services, they’re giving $40 million to Gary Matthews for a private development. At the same time the council is unwilling to even consider raising taxes for public services, they had no problem raising taxes to benefit a private development. In fact, they approved that deal with nary any discussion and absolutely no public input!

The council wants concessions from everyone — except in the area of developer welfare. The one area that primarily benefits only a handful of people gets a free pass, while those areas that affect everyone in the city get the axe.

And my question is: Where’s the outrage? Do Peorians really not care? Do they think this is good public policy? Do they really think that we’re spending too much on public services and not enough on developer favors? Or are they uninformed? Do they not know this is happening? Or have they given up? Have they become jaded and numb to fiscal irresponsibility coming out of City Hall?

If this hotel deal were a good business decision, the developer would have already gotten his private financing lined up and started construction. But he hasn’t. He can’t get private financing. And you know what that means? I guarantee you it means this: He’ll be back to the city asking for more money in one form or another. Count on it.

Maybe that will be enough to wake up Peorians and cajole them into expressing outrage to their city council members. Then again, maybe not.