Tag Archives: Heywood Sanders

City of Peoria, Economic Development, Peoria Streets

Peoria’s priority problem

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“The city doesn’t have a budget problem,” Gary Sandberg told me after the city council voted to spend taxpayer money for a walking trail and a private hotel. “It has a priority problem.”

That was the same observation made by Dr. Heywood Sanders of the University of Texas-San Antonio. Sanders is a well-known critic of the convention center (and increasingly, headquarters hotel) “arms race” taking place in cities across America. He’s currently writing a book about it. I asked for his thoughts on the argument that cities simply must offer huge, tax-supported incentives.

The argument goes like this: “In an ideal world, the free market would reign and projects like the hotel would be built 100% by private investment. But that’s not the world we live in. We’re in a struggle with other communities that are providing public incentives in order to lure businesses to their cities. If we don’t compete in offering these kinds of
incentives, we’ll lose out. It’s not the way it’s supposed to be, but it’s the way it is, and we just have to play the game.”

Dr. Sanders has heard the argument many times before. His response was instructive:

The “we have to do it because everyone else is” argument is repeated endlessly in city after city to justify a host of “economic development” efforts. But that doesn’t make it correct. Cities do need to compete for some things. The crucial questions are what the goals are that the city seeks, and whether the decisions make sense or not. The “we have to” argument neatly avoids laying out real goals and objectives, things that can be measured and assessed over time. And an investment decision necessarily involves risk.

The real [important things to consider are] what the potential rewards are, how they relate to community goals, and what the balance of costs and benefits are. It’s all too easy to hide behind simple homilies so that one doesn’t have to really consider what you’re trying to get, and whether it makes sense. As we’ve discussed, Peoria (like a great many cities) has been trying to “save” its downtown for decades. It doesn’t appear to have made much headway. If that’s really the goal, then you need to consider multiple strategies and alternatives, and see what actually happens.

The problem is that planners and local officials almost invariably seek to imitate what someone else has done, with little understanding of how it came about and why it works. There’s an endless parade of architects, planners, and local officials who visit San Antonio’s famed Riverwalk and conclude that all they need is [a] river (or a canal) to get “economic development.” It’s not that simple. Just like everyone thinks building a new convention center will bring hordes to town, and that they then need a new hotel to make the convention center work. And there are a host of consultants who are willing and eager to give local officials (and the business interests they serve) the urban solution du jour.

Peoria has a long history of trying to use large civic projects as a silver bullet to revitalize downtown:

  • The Civic Center was supposed to revitalize downtown, but it hasn’t. It does bring people downtown for Civic Center events, but once the events are over, they all get in their cars and empty out of downtown. The restaurant with the best location relative to the Civic Center — the Grill on Fulton — couldn’t even stay in business. The Civic Center continues to operate in the red every year.
  • Then the City developed the riverfront. There was $2.6 million for the Gateway Building, which the City spends $170,000 a year to operate and maintain. They tried to sell it in 2007, but were evidently unsuccessful. Riverfront Village — the raised concrete slab with parking underneath it that blocks your view of the river — was supposed to “pay for itself” with increased property taxes and parking fees. Parking is now free, and the tax-exempt Heartland Partnership is one of the three tenants on the slab. According to the 2010 budget, the Riverfront is expected to bring in $1.07 million in revenue toward the bond payment of $1.3 million.
  • Then there was One Technology Plaza, which was supposed to “redefine downtown.” Remember that? As the Journal Star editorialized a year after it opened, One Technology Plaza “was advertised as a novel way to put Peoria on the high-tech map, to distinguish Peoria and its work force from virtually every other mid-sized city in America.” The city spent $9.6 million on that project “in part because the $28 million private development would feature the computer-training agency.” That agency — RiverTech Center — opened in April 2000 and closed in May 2001.
  • Then the City acquired and prepared the land for a new ballpark to the tune of $3.3 million. That was supposed to lead to a renaissance south of downtown, turning blighted properties into a “Wrigleyville” atmosphere. The ballpark opened in 2002, but no Wrigleyville has materialized.
  • Along the way, the City picked up the Sears property for around $1 million — the so-called “crown jewel” of downtown Peoria. They’re poised to give the land away to the County so Lakeview Museum can relocate to the block at taxpayer expense.
  • And then there’s the Wonderful Development (City attorney Randy Ray’s ebullient appellation for the downtown hotel project), which the City Council has approved twice now. It’s a big project with a single developer and no public benefit — but a lot of public risk. This is the latest big, civic, silver bullet that will finally bring tourists to Peoria and make the Civic Center profitable. But just like with the other projects, no measurable, objective criteria for success has been identified for the downtown hotel project. Presumably, as long as the project meets its debt obligation, it will be declared a success, regardless of whether it brings in new conventions, regardless of whether other hotels and restaurants close.

The completed projects have not delivered on their promises of downtown revitalization, and there’s little reason to be hopeful that the proposed projects will fare any better. These projects are all big, flashy, and give the appearance that “things are really booming in Peoria.” Meanwhile, many less-exciting projects get put on the back burner or eliminated altogether. Those projects are called “basic services.” Things like road and sidewalk repair.

At the same time the Council approved the Wonderful Development, there was another $40 million project the council could have funded instead. It’s the Washington/Adams (U.S. Route 24) upgrade project. This would improve Route 24 from I-474 to I-74, which would benefit the public (it’s a public street) as well as numerous business/land owners and developers all up and down the stretch. It would implement key elements of the Heart of Peoria Plan (adopted “in principle” by the City Council) and the Warehouse District form-based code.

It would remove the median from the southern portion of the roadway, making the properties along that stretch more accessible and marketable, thus raising their value. It would make the Warehouse District area more pedestrian-friendly, spurring development of loft apartments/condos which would bring more residents back to downtown, which will spur more demand for retail services in the City’s central business district. Currently many of those properties sit vacant, contributing to the City’s budget woes.

This project is not without risk. There might not be enough property improvements or increases in tax receipts for the project to “pay for itself” (although I’m sure the City could find a consultant to say it will pay for itself if they really wanted to do it). But the project also carries significant public benefit, and the presence of multiple developers and property owners over a large, diverse area mitigates the risks. Yet this project languishes in the Land of Insufficient Resources while the Wonderful Development moves forward.

Conclusion: Success is not a priority for Peoria. Downtown revitalization isn’t really a priority for Peoria. Peoria’s’ biggest priority is the appearance of progress. And based on that criteria, we can all say “mission accomplished.” There’s a lot going on. Stuff being built. Stuff being torn down. Money being spent (mostly tax money, alas). It all contributes to the image that Peoria is moving and shaking.

But it’s not. Peoria is in debt and it’s continuing to lose population. City services are being slashed every year, driving more people away. The appearance of progress is bankrupting us. It doesn’t just affect the City. It also affects the County and, especially, the school district (Things are changing! Look at our shiny new buildings! Just don’t look at our test scores).

Sandberg is right. Peoria doesn’t have a budget problem. It has a priority problem.

City of Peoria

“Right now is an absolutely horrible time to be in the hotel business”

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So says Ben Thypin, senior market analyst for market research firm Real Capital Analytics, in a November 30, 2009, article for Moneynews.com. Why? Occupancy rates are falling on the order of 10%, and more and more hotels are going into default.

Hotel loans have begun falling into delinquency faster than any other kind of commercial real estate debt.

The rising defaults paint a grim picture for an industry with increasingly more rooms than guests, and more hotels still opening every day. It’s a problem that could get worse before it gets better, with demand expected to remain weak and ambitious new projects planned before the meltdown worsening the room glut.

The oversupply means room rates should stay low for at least another year, good news for consumers but not so great for hotel owners and the banks that lent them the cash to build or buy.

In a related story (forwarded to me by one of my alert readers), Governing magazine takes a look at cities building convention hotels and asks the question, “Should cities be in the mega-hotel business?”

[Heywood] Sanders, a professor of public administration at the University of Texas at San Antonio, is the nation’s leading critic of publicly funded convention centers and hotels. He argues that conventions in general, not to mention the facilities that host them, are a declining business. He says that more and more meetings take place online rather than in gigantic buildings, that the recession has only accelerated this process, and that recovery is not going to bring back the old days of massive trade and professional shows with participants flying in from all over the country. The crisis is causing some people to visit Sereno today instead of staying locally.

Sanders cringes as he sees cities betting on convention centers that cost hundreds of millions of dollars, then doubling down on that bet with hotels that cost hundreds of millions more. His research suggests to him that the link between new headquarters hotels and increased convention business rarely emerges. “You get to do a big project with big promises and lots of money for consultants and bond counsel and underwriters and engineers,” he says, “but you may do it at the expense of the very important things that may make a city’s future.” Sanders would prefer that cities invest in schools, roads and affordable housing.

Meanwhile, back in Peoria where we ignore data such as this, the City is still breathlessly waiting to pour $39.3 million into a new downtown Marriott hotel. Jim McConoughey, president of the Heartland Partnership, recently was interviewed by the Journal Star. It included this bewildering exchange:

Q: There has been some criticism of late with regards to the city of Peoria’s involvement with assisting the hotel project with a $39.3 million revenue bond. Given the current economy and considering the struggles with other TIF projects like MidTown Plaza, how do you respond to someone who says that now is not the time to do the hotel and that the hotel project is a different TIF project than MidTown Plaza?

A: I may never be able to convince that person. They are trying to save their way out of an economy. This is about investing. When you look at a hotel project compared to other things, you can look at it in a couple of different ways – one is that they have been collecting taxes on that site for a hundred years. They have needed positives for a very long time. It’s only been in recent years the condition of (the Pere Marquette) hasn’t paid its own way. To have some degree of investment in it is a positive event for that particular project. For the short term, if you did nothing, it would feel like you are taking a less risky position. But the riskiest position is to not do anything.

First of all, the question is incorrect. It’s not a $39.3 million revenue bond, but rather a general obligation bond. That means if the hotel flops, the taxpayers are still on the hook to repay the bond debt.

Secondly, McConoughey is right about one thing: he’ll “never be able to convince that person.” The rest of his answer is basically the Peoria motto, “it’s better than nothing!” McConoughey treats “investment” here as though it is a purely positive thing. In reality, there are good and bad investments, and this downtown hotel scheme is a bad one (for reasons stated above and previously). A great investment today would be in the cannabis industry, with plenty of notable companies investing in it and getting huge returns. You can check out this article “https://www.newcannabisventures.com/sol-global-reports-c244-million-investment-gains-in-q1/” to learn how companies are investing in the cannabis industry.

Radio

Smart City Radio

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Awhile back, my friend Beth Akeson told me about a public radio show called Smart City. It’s not broadcast on our local public radio affiliates (although I’ve recently put in a request for it at WCBU), but it is available on the internet:


Join host Carol Coletta for a look at the trends and ideas shaping our cities. Only on public radio.

As you can see, the synopsis/tag-line for the show is, “Join host Carol Coletta for a look at the trends and ideas shaping our cities.” It’s an interview show, so there are always interesting guests with thought-provoking points of view. Throw it on your iPod and take a listen — I think you’ll find it interesting.

I’m hooked. I’ve been putting past shows on my mp3 player and listening to them in the car. Especially interesting to me recently is an interview she did with Heywood Sanders called “Are Convention Centers a Silver Bullet?” and her interview with Andres Duany, who put together the Heart of Peoria Plan in 2002.

I think all civic-center-expansion and convention-hotel supporters should listen to the Heywood Sanders interview. His points are worth consideration.