Tag Archives: hotel

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.

City of Peoria, Peoria Journal Star

Word on the Street counterpoint

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Let’s talk about today’s Word on the Street column:

Critics of publicly financing a Downtown hotel have linked last year’s City Council vote to extend $39.3 million in bonds for the $102 million Marriott with this year’s budget reduction decisions.

Some council members are fighting back, saying the criticism is unfair and inaccurate. They say the bond issue for the hotel project has nothing to do with next year’s budget deficit, or with the budget in general.

This ought to be good. I can’t wait to hear how $39.3 million has nothing to do with the budget.

“There is a misperception being promoted that the city has $39 million in the bank and is giving it away to a private developer when that is just not the case,” at-large City Councilman Ryan Spain said.

Oh, no. I know the city doesn’t have $39 million in the bank. That’s precisely the point. The city is going to have to go $39 million in debt to give $39 million away to a private developer.

At-large City Councilman Eric Turner agreed. “It doesn’t impact anything,” he said.

By “anything” here, I’m assuming he meant it in the context of the 2010 budget. And this may shock you, but I don’t disagree with him in that assessment. It won’t impact anything in 2010. But it will certainly impact the budget in 2012 and beyond. But I suppose that’s irrelevant, eh? Why look past the end of your nose when making decisions, right?

Linking this year’s deficit-related decisions, such as cutting police officers, with last year’s hotel project vote has been done at times during council meetings and on blogs.

He’s talking about me here, in case you didn’t catch it.

At-large City Councilman Gary Sandberg has brought up the issue before, saying the priorities of the council are screwed up. He said he has received calls from constituents concerned with why the city is assisting a developer build a hotel at a time when police officers may be laid off.

If the city wanted to assist the developer by improving public infrastructure around the site, that would be one thing. It’s quite another thing to just hand over cold hard cash to a developer to help him construct his project.

At issue is the city’s public financing portion of the project.

The city’s bond will be paid back through revenues generated by the project, including tax-increment financing and additional hotel, restaurant and sales taxes it generates.

“Revenues generated by the project.” That assumes revenues will be generated, which is a point of contention. Private banks, whose loans would have to be repaid through revenues generated by the project, have not been willing to loan the developer the money he needs to start the project, despite all this backing from the city. What do they know that the city doesn’t? Or is it just that the city is content to take higher risks with taxpayer money than banks are willing to take with their private funds?

Also, not explicitly mentioned in this statement is the fact that the council raised sales taxes 1% within the Hospitality Improvement Zone. Why was this necessary if “revenues generated by the project” are sufficient to pay back the bonds?

Projections show the city is to owe $2.5 million in 2012, the year the hotel is anticipated to open. The opening date likely will be pushed back because of delays in moving the project forward.

Not mentioned is the reason for the delays: inability to get private financing.

If the revenue from the project doesn’t materialize as anticipated, it is possible the city can make its bond payments from revenues from adjoining tax-increment financing districts (the hotel project is located within a TIF district, a key economic incentive device allowing the project to potentially happen).

City officials have estimated that about half of the $39.3 million can be raised from three adjoining TIF districts and directed to a fund that is separate from the city’s general operations fund, which pays for police, firefighters and other services.

If other TIFs are so flush with cash, why don’t they use that money to retire those TIF bonds early so the tax revenue go into the city’s general operations fund where they could pay for “police, firefighters and other services”? Wouldn’t that be a better use for those funds than on a hotel?

Recently retired Economic Development Director Craig Hullinger said the project “shouldn’t have a negative impact on the budget. It creates jobs and a tax base. That’s the logic for doing this.”

That’s what they said about MidTown Plaza.

Spain said the timing is right for the project. The hotel, when completed, would connect to the Civic Center via a skywalk.

And that’s relevant because…? I’m unclear whether these are just two disjointed statements the reporter decided to put in this paragraph, or if he’s implying that the skywalk was Spain’s justification for “the timing [being] right for the project.” If the latter, I have to believe there was more to his reasoning than what was reported. No one would say that a skywalk is justification for giving a developer $39.3 million in tax money. No one would be that foolish.

Project naysayers may have another chance to publicly sway the project. If developer Gary Matthews gets the financing needed to proceed, then the council will have to vote on the sale of bonds in order to officially participate in the financing of the project.

Matthews is still attempting to secure the private financing to begin a project that was originally supposed to start last spring. A national economic recession, though, has slowed the progress. (J.S.)

Yes, the recession is slowed progress, because the economic climate makes this project too risky for credit markets. But not too risky for our tax dollars, according to Mr. Spain and Mr. Turner. After all, we won’t have to pay the piper for several years, so it’s all good.

City Council, City of Peoria, Peoria Civic Center

“Wonderful development” agreement raises questions (Updated 2x)

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The proposed redevelopment agreement (aka “wonderful development”) for the Pere Marquette hotel was finally made public at 5:00 p.m. on Friday. Monday night, the council will be voting on it. Council members have to read all the details online because the hard-copy packets weren’t ready by the end of the day Friday. Talk about a fast track!

In reading the agreement, some things caught my attention, and I hope the council members consider these items carefully before voting. In fact, it would be better if they deferred this until their next meeting instead making a hasty decision, but I’m not holding my breath expecting that to happen. Anyway, here are my concerns:

1. The use of General Obligation Bonds

The nearly $40 million in city funding is proposed to be in the form of general obligation bonds instead of revenue bonds. Both types of bonds would be paid back out of revenue generated by the project, assuming the project is profitable. The catch comes if the project is (God-forbid) not profitable. General obligation bonds are backed by the full taxing authority of the city. So if the project goes south, the bonds get paid for out of the city’s general fund — that is, taxpayers assume the risk. Revenue bonds are backed by the hotel building itself (which is used as collateral) and/or a specified revenue stream (H taxes, for instance), so if the project goes south, bond holders would be able to foreclose on the hotel, but the city wouldn’t be obligated to settle up the debt out of the general fund. As a taxpayer, that makes me nervous.

The explanation given in the packet is a bit cryptic: “A revenue bond is not likely to be successful because there is no current revenue and, thus, no history on which to base a revenue stream. A revenue bond would almost certainly result in a higher interest rate for the City.” Perhaps someone out there with a finance background can explain this to me. I thought the lack of history for a revenue stream was precisely why revenue bonds had higher interest rates. Under the scenario presented, when would a municipality ever be able to utilize revenue bonds for new construction?

2. Optimistic occupancy projections

The developer of this hotel project is anticipating occupancy rates of 60% in 2012, 69% in 2013, 72% in 2014, and 74% in 2014 and beyond — best-case scenario. However, the developer also states that the hotel will be successful even under more conservative figures: 60% in 2012, 65% in 2013 and 2014, and 68% in 2015 and beyond.

The Pere Marquette had a 54% occupancy rate in 2005, according to published news reports. And in September 2006, a Civic Center Hotel Study was prepared by HVS Convention, Sports, & Entertainment Facilities Consulting. They were looking at building a new hotel immediately adjacent to the Civic Center that would add 250 rooms to the hotel market and compete with the Pere and other downtown hotels. The project being proposed now, of course, is an expansion of the Pere by 200 rooms (the addition of a new tower). Their market analysis concluded:

HVS estimates a stabilized occupancy of 67% for the proposed Civic Center Hotel. Although the subject property may operate at occupancies above this stabilized level, we believe it is equally possible for new competition and temporary economic downturns to force occupancy levels below this selected point of stability.

So, the stabilized occupancy rate prediction was 67% in 2006 — before we entered a recession — which is a point lower than the “conservative” stabilized rate the developer is now using for his projections — in the midst of a recession.

When this report was presented to the City Council, Bob Manning asked about that projected occupancy rate and whether it could support a 250-room hotel:

Discussion was held regarding the projected number of room stays and how the projections were determined. Council Member Manning expressed concern regarding how the occupancy rate was determined, which he felt would not support a 250-room hotel. Mr. Hazinski said he agreed and that was the reason the study projected a decrease in occupancy rates in the market. He said the market ran in the mid-sixties when it was doing well, and really could not be expected to do better than that.

Given this information, and the fact that we are in a recession, it would seem that the more conservative figures are closer to the truth. And if you look at the bond payment scenario based on those conservative figures, there’s not a whole lot of room for error. It looks like, if they miss their projections on those occupancy rates by even a little bit, they could be quickly operating in the red. Guess where the money comes from to make up the difference if that happens — money that could be used to pay police officers or fix streets and sidewalks.

Also, what’s the average room rate going to be? That seems like a reasonable piece of information to include, especially in financial predictions. It will make a difference when it comes to occupancy rates. If these rates are higher than the Embassy Suites and a newly-renovated Holiday Inn, will budget-minded conference-goers and their employers opt for cheaper room rates and forgo the luxury and convenience of an attached “headquarters hotel”?

3. Questionable comparisons.

In the Request for Council Action cover memo, Interim City Manager Henry Holling mentions several other hotel projects in Illinois that used government subsidies, including Normal, East Peoria, and Tinley Park. So I thought I’d look up a little info on those projects.

  • Normal Marriott — This project should give us pause. According to documents available on the Normal.org, “In July of 2004, the Town of Normal entered into a redevelopment agreement with Mr. John Q. Hammons of Springfield, Missouri pertaining to the construction of a full service Marriott Hotel and Conference Center along with a required parking structure…. [T]he total project cost was estimated by the developer to be approximately $43 million ($30 million-hotel; $8 million-conference center; $5 million-parking garage).” Normal’s subsidy was estimated to be about $13 million toward the project. However, by October 2006, the estimated cost of the project had risen dramatically to $72.6 million — a $29.6 million (68.8%) increase! That, of course, meant that the Town of Normal’s share also ballooned to $21.1 million. Despite that huge increase, their share of the overall investment was only 29%. Here in Peoria, the city’s share of the Marriott project would be 40%.

  • East Peoria Embassy Suites — In 2003, the plan was to build a publicly-owned conference center and a privately-owned but publicly-subsidized Embassy Suites. The developer was the same as in Normal — John Q. Hammons. Fortunately for East Peoria, the costs didn’t rise as much as they did for Normal, only going up to $60 million. Holling’s memo states, “The level of subsidy [being proposed in Peoria] is also similar to the level provided for the Embassy Suites in East Peoria, which was also approximately 40% of the total project costs.” Yes, but we’re comparing apples and oranges here. In East Peoria, their $25 million subsidy paid for 100% of the conference center with the rest going toward the hotel. $25 million is about 42% of $60 million. But if you look at East Peoria’s subsidy to the hotel alone, it only comes out to 27% ($13 million out of $48 million). In 2007, the city decided to lease the conference center to Hammons for a progressive annual fee. They use that money to pay off its construction cost ($12 million) plus maintenance and improvements instead of relying on what one East Peoria commissioner called “unpredictable net revenue.”

  • Tinley Park Convention Center with Holiday Inn Select — According to Mr. Holling, “Tinley Park built their center with substantial governmental assistance, and is preparing a major expansion.” In the context we’re talking about, that sounds a bit misleading. Yes, construction of their approx. $6 million publicly-owned convention center was funded 100% by a $7.5 million bond issue. But the adjacent Holiday Inn Select was built with little governmental assistance compared to Normal and East Peoria. The only governmental assistance that $15 million project received was inclusion in a TIF district and some assistance with land acquisition. The hotel plan actually predated plans for the convention center and was part of a development of 300 town homes, also included in the TIF district. The Chicago Tribune reported just this month (12/4/2008) that an expansion is planned: “Tinley Park owns the convention center and will invest more than $10 million in the project. The money will come from tax-increment finance revenues, which come from increased property value from a designated area.” The hotel is also expanding, but on its developer’s own dime. Mid-Continent Development and Construction, “which manages the [convention] center and owns the adjoining Holiday Inn Select…plans to invest $10 million into upgrades to the hotel, including 68 new rooms and a second kitchen to the six-story hotel.”

None of these projects approach the kind of deal being proposed in Peoria. The highest subsidy among these three initiatives was 29% of the total project cost. So why do we need to pay 40% in Peoria? Holling explains: “The Embassy Suites did fund the Conference center construction, but site acquisition and assembly was lower cost and no parking structure was required.” So, apparently, the reason why Peoria taxpayers need to pony up more money is to help with land acquisition ($22 million) and parking ($10 million). And of course the $5 million sky bridge. Those three things total about $37 million.

So, the question is, is it worth it? That’s the ultimate question that needs to be asked and answered Monday night.

UPDATE: Regarding land acquisition, the Journal Star reports the Pere Marquette is being acquired for $11 million. The information presented to the City Council indicates that total acquisition costs are $22 million. That means the remaining properties (Lasher building and Big Al’s entertainment complex) are being purchased for $11 million. Yet the fair market value of those buildings, according to the Peoria County Assessor (and the amount on which they pay property taxes), is only $1,353,540. Even going by recent sales amounts, the Lasher building (corner of Main and Monroe) sold in August of this year for $1.05 million, and the four parcels that make up Big Al’s entertainment complex sold in 2004 for $1.5 million. That’s a total of $2.55 million for all the buildings — yet the City is poised to purchase them from Al Zuccarini for $11 million. Plus, they’ve already facilitated his move to an as-yet-undisclosed location, likely to be 414 Hamilton Blvd., by changing their adult use ordinance. Wow. One would think with that kind of money (our tax money, by the way), Al could have found a place that complied with the adult use ordinance as it stood.

UPDATE 2: The Journal Star agrees with me. Excellent editorial. That new guy is working out okay. 🙂

City Council, City of Peoria, Peoria Civic Center

On hotels and sky-bridges: Look past the hype, Pt. 2 (Updated)

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One of the apparent non-negotiables of this hotel deal is the $5 million pedestrian bridge that is supposed to connect the proposed Marriott to the Peoria Civic Center and the hotel also have other luxuries like a gym and a pool that they kept clean using the best pool filter for this. We are told that this will help the Civic Center draw bigger conventions to Peoria because what’s been holding us back is the lack of high-quality hotel space adjacent/connected to the Civic Center. In order for the Civic Center to consider the Pere/Marriott its official convention-center hotel, it wants to have it physically connected.

I buy the lack of high-quality hotel space — our hotels definitely need to be upgraded. But I’m not sold on the physical connectedness being essential. No objective study that I’m aware of has quantified how much more business we would get by having a physically-attached hotel.

Indeed, in a 24 March 2006 memo to the City Council, the Civic Center Authority itself said, “We believe [the expanded Civic Center] can be successful without an attached hotel [emphasis mine] but more and larger regional opportunities will be possible if more and better downtown hotel rooms are available.” Note their main concern is quality and quantity of rooms. The C. H. Johnson Master Plan Analysis said, “To effectively service a convention center and add value to the convention sales effort a hotel property must typically must be located within ten blocks (or reasonable walking distance) [emphasis mine] of a center, the property must be willing to commit approximately 60 percent of its room inventory to the convention center room block, and the hotel must offer a quality room product.” The Pere Marquette and the proposed addition is within one block. Here’s another quote:

The Peoria Area Convention and Visitor’s Bureau tracks “lost” convention and meeting business. These are groups that that looked at the city, but ultimately decided to stage their events in another market because the PCC was either too small, the hotel room inventory in downtown Peoria was insufficient or not of the quality preferred by meeting planners, or other factors.

Again, the quality and quantity of rooms was most important according to the Civic Center’s own study. Connectivity was not a major factor.

I’m not saying that having an adjacent or connected hotel would not be an additional advantage for convention sales. I’m saying that (a) it’s not the most pressing problem holding back convention business, and (b) there’s no quantifiable data showing that building a $5 million sky-bridge is going to give the Civic Center a sufficient additional bump in convention sales to justify its cost. How many years (decades?) would it take for the city, private investors, etc., to see a return on that investment? To put it another way, evidence from the Civic Center and their consultant indicates increasing the number and improving the quality of rooms will provide a sufficient boost to convention sales; the additional amenity of a sky-bridge does not appear to provide a $5 million added value. The only “evidence” I’ve heard in support of a sky-bridge as a way to bring in more convention business has been anecdotal or, at best, inconclusive.

Another problem with the sky-bridge plan is this: the hotel plan includes street-level retail around the parking deck, which is a good thing if you’re trying to activate the street. But these shops are going to be below the sky-bridge. The people most likely to patronize those shops — the hundreds of guests staying at the hotel during a convention and walking back and forth to the Civic Center — are going to be directed to the sky-bridge to access the Civic Center. And the shops will be inaccessible from the sky-bridge. Has anyone thought about the self-defeating nature of this plan? Who is going to be on the street to patronize these businesses?

Mayor Ardis is quoted in the paper as saying, “In addition to improving the ability of the Civic Center, it will help us revitalize Downtown Peoria on the business side.” With all due respect to the Mayor, downtown is not going to be revitalized by taking more people off the streets and funneling them through sky-bridges. Plenty of other cities have proven it.

Generally, sky-bridges are a thing of the past. Cities that have them are removing them. They’re outdated and cause more problems than they solve. We should be learning from the mistakes of other cities instead of making the same mistakes ourselves. That’s the thesis of a report by Kathleen Hill, written while she was getting her Master’s degree in urban planning from the University of Utah.

I’d love to quote the whole darn thing, but it’s 43 pages long. So let me quote just this one passage that deals with the most common justification for sky-bridges I hear:

And for those who argue that protection from the elements is necessary, consider the following write-up (People of the Skyway, November 2004) specifically addressing skywalks in the winter cities,

“Why doesn’t Chicago or New York or any of dozens of other cold-climate urban centers have skyways? After all, the main difference between winters in the Twin Cities and in other places is the outlier months, November and March, which tend to be colder and snowier here. The answer is simple to urban architects and planners like Ken Greenberg, head of Toronto-based Greenberg Consultants: Skyways are a bad idea. “The skyway network is a prime example of a highly focused, oversimplified solution to one problem—exposure to climate—that in turn creates others,” he says. “Climate protection is achieved but at a great cost. Street life virtually disappears; retail is moribund, functioning at best for weekday noon hours but not on weekends or in the evening.” That criticism hits its mark in both downtowns, but particularly in St. Paul, which practically ceases to exist outside regular office hours. As one fellow bus-rider remarked to another the other day, heading from downtown toward Lowertown, “This really is a ghost town after five.”

A primary mover behind the downtown development blueprint St. Paul has been following since 1996, “The Saint Paul on the Mississippi Development Framework,” Greenberg points out that retail and street life can and do thrive in similar, very cold urban areas without skyways—even in places just outside downtown. “A good example is Grand Avenue in St. Paul,” he says. And downtown St. Paul itself, before the skyways. “Where skyway solutions have been employed in other cities like Toronto, Calgary, and Edmonton,” Greenberg adds, “the results have been similar.”

For evidence, Greenberg points to an April 11, 2004, editorial in the Hartford Courant, in which urban planner Toni Gold delights in the demise of that city’s twenty-year-old skyways (which they called “skywalks”). Gold, who works at a New York City nonprofit called Project for Public Spaces, begins her commentary: “Hartford’s skywalks are coming down, with barely a whimper of protest from their one-time proponents, or even a hurray from their one-time opponents. Well, hurray, I say. Two cheers for city sidewalks. It’s now become obvious and widely acknowledged that cities should reinforce their sidewalks, not compete with them.”

Incidentally, the report goes on to state that Minneapolis mayor R.T. Rybak “refus[ed] to build a large hotel adjacent to the Minneapolis Convention Center, precisely because ‘people wouldn’t get out on the streets enough’.” I’ll bet they still get more conventions than we do, even without an attached hotel.

UPDATE: When I wrote this post, I was unable to access the entire C. H. Johnson study because the Civic Center’s link to it had been removed, so I was relying on incomplete information. Never a good idea. I have since been able to obtain a copy of the full report (now available here on my site), and it does, in fact, propose a sky-bridge to connect the Pere Marquette to the Civic Center:

With the recommended expanded and renovated facilities, Peoria will need a larger, higher-quality hotel package. In order to not only be competitive, but to accommodate more and larger groups, Peoria should consider:

  • Connecting the Hotel Pere Marquette to the Peoria Civic Center via walkway, as is the case in many cities in the US. One recent example is the 257-room Radisson Hotel in Lansing, Michigan, which is connected to the Lansing Center via a heated sky bridge over the Grand River.

That correction made, however, my larger point still stands. The report does, in fact, focus primarily on the number and quality of rooms available within close proximity. The additional boost that physical attachment would give is not quantified. And, I’m sorry, but I just don’t see Fulton Street as the same kind of physical barrier as the Grand River in Lansing.

City Council, City of Peoria, Peoria Civic Center

On hotels and sky-bridges: Look past the hype, Pt. 1

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At its next meeting scheduled for Monday, Dec. 15, the City Council will almost assuredly approve a new hotel development in downtown Peoria that includes an elevated pedestrian walkway, or sky-bridge, connecting the hotel to the Civic Center.

Naturally, the prospect of getting a downtown hotel of the caliber of a Marriott is exciting. New and/or improved hotels are desperately needed in our central business district by all accounts. When someone comes to the city and waves a $102 million project under their noses, it’s hard not to jump at the opportunity.

But this isn’t a purely private venture. The developer and investors are asking for just under $40 million in revenue bonds from the city to help pay for construction. These bonds would be paid back with revenues from the hotel over a 23-year period. It’s being presented as a sure thing — but there is a risk to consider — whether the hotel will perform well enough to pay back those bonds. The council members have an obligation to weigh that risk and make their decisions based on facts and the long-term interests of Peoria’s citizens, not hype.

And there’s no small amount of hype, starting with one city official’s pronouncement that this is a “wonderful development” before it was even made public. More recently, it’s been described as “a key to bringing large conventions to central Illinois and generating millions in revenues every year,” as the Journal Star put it. But are these predictions about the Civic Center and the need for a hotel with a sky-bridge to be believed?

Heywood Sanders warned the Peoria City Council back in 2004 — before they voted to expand the Civic Center — that similar predictions then of “millions in revenues” from “large conventions” being lured here were wildly optimistic. The Journal Star reported on October 18, 2004:

Since the mid-1980s, Sanders has reviewed more than 80 feasibility studies for new or expanded convention centers and tracked the outcome of those facilities in terms of new conventions and trade shows added to the annual roster, attendance at those events and hotel nights resulting from new convention business.

Without exception, every report has assured cities that if they “build it, you’ll do great.” But high expectations laid out within the studies are going unrealized as the convention market stagnates and new or recently renovated centers add millions of square feet of space per year, effectively shrinking the share of business to go around, Sanders said.

Sanders told a U.S. House of Representatives subcommittee basically the same thing in 2007:

The expansion of convention center supply, coupled with changes in demand and convention attendance since the late 1990s, has resulted in a highly competitive market. A great many cities have seen significant decreases in their annual convention and tradeshow attendance in recent years, and have come to rely on a variety of financial incentives.

And what are those “incentives”? Mainly discounts on rental costs and hotel rates. He goes on:

The increased competition for convention business has two direct implications for communities that have invested in new or expanded centers. First, discounts and incentives reduce the operating revenues of a center, increasing annual operating losses and the public subsidies required for convention center operation. Second, the volume of annual convention attendees has become increasingly uncertain, as groups and organizers face a growing roster of medium to large size centers seeking to gain new business.

So, what are the projected revenues for this hotel? Are they realistic? Or are they based on optimistic numbers in a consultant study like the C.H. Johnson Consulting study from August 2002 upon which the $55 million expansion of the Civic Center was based? Johnson Consulting at that time predicted “an additional 221,600 visitors to Downtown Peoria in the first year after improvements are complete, with 87,500 attending 66 new events in the convention and ballroom areas,” according to the Journal Star, and “The total of new visitors would spend an estimated $19 million, generating $1.4 million in general sales taxes, $188,000 in hotel taxes, $102,000 in restaurant taxes and $36,000 in amusement taxes.”

So, let’s add those numbers up and compare them to actual figures. In the first year after the expansion was completed, we should have seen 66 new events and $326,000 more in HRA tax revenue. The expansion was completed in 2007. At the end of fiscal year 2007, the Civic Center reported 544 events and $1,729,846 in HRA tax revenues. At the end of fiscal year 2008, the Civic Center reported 590 events and $1,779,762 in HRA tax revenues. That works out to an increase of 46 events and $49,916 in increased HRA tax revenues — both well short of projections, just as Sanders had predicted.

Note in particular how far short the HRA tax revenues fell — they rose only 15% of what was projected: $49,916 instead of $326,000. Will the hotel’s occupancy and revenue projections be more accurate? St. Louis’s taxpayer-owned convention center hotel (also a Marriott, incidentally), which opened in 2000, is on the verge of having its bondholders foreclose on it since it started missing payments due to lower occupancy than expected. Peoria would be wise to double- and triple-check the numbers before agreeing to put the city on the hook for $40 million.

City of Peoria

“Wonderful development” revealed

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The much-ballyhooed “wonderful development” we’ve been hearing about — a new/expanded Pere Marquette hotel — has been revealed to the public, complete with pictures, in today’s paper:

Here are the specs:

  • 14-stories
  • $102 million project
  • Developed by EM Properties
  • $39.3 million of public financing “that would be financed through bonds and repaid through new revenues the project would generate” over 23 years; represents approx. 40% of total project cost
  • Full-service hotel
  • 489 rooms
  • Additional meeting, convention and banquet space
  • Under Marriott Hotel flag
  • 500-vehicle parking deck
  • Sky-bridge connects hotel to Civic Center

This project is, of course, a done deal. It’s been hammered out in the back room for weeks if not months and more than enough council members are on board now. So it’s sure to pass at the Dec. 15 meeting.

My thoughts: It’s predominantly glass and steel, which has all the charm and appeal of GEM Terrace and One Technology Plaza. The front of it is concave for no apparent reason. But the rest of it does front the street, which is good. And the parking garage includes street-level retail, which is great. On the other hand, there is a completely unnecessary sky-bridge which will mar Fulton Street for generations. This design is light years ahead of the proposed riverfront museum (thank goodness for that!), but I still think it could have been better, especially in building materials.

City Council, City of Peoria, Peoria Civic Center

“Wonderful Development” odds and ends

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Since I started writing on this proposed hotel project, I’ve gotten some calls and e-mails about issues directly and indirectly related to it. Rather than put up an individual post on each item, I’ve decided to just lump it all together under “Odds and Ends.”

Details, Details

I was contacted by a person who is close to the hotel project but wishes to remain anonymous. He told me a lot of the same things Billy has already mentioned in this post, but he added some information and elaborated on other issues:

  • This project has been in the works for over a year and a half.

  • The Hospitality Improvement Zone TIF (HIZ TIF) was proposed because of this potential development. However, the TIF was spread out to include the other existing downtown hotels so they could all take advantage of it if they so desired. Since the establishment of a TIF was open to numerous public hearings and ample public discourse, they feel that the public interest in this project has so far been served.

  • They’re not asking for any additional public subsidy other than those already available (TIF, Enterprise Zone, etc.). So it’s not going to cost the city anything that would directly impact their capital or operational budgets.

  • Part of the business plan of the investors is to be the convention hotel for the Civic Center. And that’s why they want the skyway (climate-controlled pedestrian walkway/bridge) to connect the hotel to the Civic Center. You may recall that the Civic Center Authority believes an attached hotel is “critical” to their expanded Civic Center’s success.

  • Their plan is to tear down the current parking deck and build a new one that will have retail shops on the ground floor. Hence, even though they would be adding a skyway, they believe they will actually be helping rather than hurting pedestrian activity on the street as they will be generating pedestrian traffic with the new street-level shops.

  • There has been some confusion over whether there will be two hotels or one. There will be one. These investors will buy the Pere Marquette and acquire the rest of the block. The other buildings on the block will be razed and a new tower built that will be as high as the Pere Marquette, built of brick, masonry, and glass, and designed to complement the Pere’s architecture. Once the new building is up and running, the old Pere building would be temporarily closed for top-to-bottom renovations. However, they would maintain the historic character of the Pere — i.e., they will be cleaning it up, but not changing it in architecturally-significant ways (meaning some changes will have to made for ADA compliance and things like that). Once it’s all done, it will be one big hotel under one flag.

  • They claim the project will be fully compliant with the Land Development Code and the principles of New Urbanism (except for the skyway, of course).

  • The reason they want/need to move quickly is because they currently are paying for options to buy all the properties — they haven’t actually purchased them yet, pending approval of this deal by the city and all the pieces falling into place (e.g., Big Al’s moving, approval to raze the remaining buildings, etc.). The longer they wait, the more they pay for the options, so it’s in their interests to conclude this process one way or the other as soon as possible.

  • They want to raze Big Al’s and the other buildings north of it on that block during the winter months when they can’t do any construction anyway, then start construction on the new tower in the spring.

  • The major hotel chain that they want to bring in won’t fly their flag across the street from a strip joint, so if Big Al’s moves across the street to the former Euro Jack’s at 500 Main, it will have the same effect as them not moving at all. Thus, it would seem most likely that 414 Hamilton would be the new location for Big Al’s at this point, although recent news reports say that Al Zuccarini is willing to consider other sites.

  • Carnegie’s will be elevated to a fine dining establishment again.

  • Perhaps most importantly to the investors, it will be locally owned and operated. To those who say local ownership makes no difference, this source simply points to the difference between the Mark Twain hotel (locally owned by former mayor Bud Grieves) and the Pere Marquette and Holiday Inn City Center (neither locally-owned). The Mark Twain has decent occupancy and is making a profit. Not so with the other two. In fact, rumor has it that the Holiday Inn will be losing its flag before long… again.

Historic Buildings on Main?

I’ve already had inquiries as to whether there will be an attempt to save any of the buildings the developers want to raze:

No doubt some people are just being facetious. But guess what? There has been a fight over historic buildings on this very block in the recent past.

In March 1993, Duane Cassano announced he wanted to raze the circa-1848 building at 531-533 Main because it was crumbling. He struck a deal with the Central Illinois Landmark Foundation, saying he’d replace the building with an “authentic 19th century facade.” Everyone was happy.

And then, in August 1993, Cassano reneged, saying it would be too expensive to do what he’d promised. Instead, he put up a “wood decking” facade. While he was chastised verbally by the city council, it doesn’t appear from published reports that there were any real consequences for going back on his promise.

I have no idea if any of the other remaining buildings have any historic value or if anyone is preparing a last-minute application to the Historic Preservation Commission. I wouldn’t recommend it, though. Anyone who gets in the way of this project is liable to get run over.

City Council, City of Peoria

First steps toward Big Al’s move approved

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As expected, the adult use ordinance change was approved by the council 8-2 (Jacob abstaining, Sandberg and Nichting voting against) and the Class A liquor licenses for 500 Main St. (former Euro Jack’s) and 414 Hamilton were approved 9-1 (Jacob abstaining, Sandberg voting against).

But what’s really interesting to me is some of the rhetoric that is reported from last night. Unfortunately, I couldn’t attend the meeting, and of course it wasn’t broadcast since it was held on a Monday this week. But according to the Journal Star, WEEK.com, and 1470 WMBD, the council members said this:

Ardis said the potential of Big Al’s moving opens up the possibility of “one of the biggest projects that could happen Downtown since the Civic Center.”

At-large Councilman Eric Turner, however, said the votes were based on an issue of what is best for Downtown Peoria, saying that it was “dying” and losing out in economic development to East Peoria.

“The issue is not about Big Al’s, but it’s about economic development,” Turner said. “We stand to lose if we don’t make changes and start looking out for the economic development future of this city.”

Ardis says the reason the public doesn’t know more about the proposed development is because the plan has not been brought before the council yet.

“Nothing is what it appears to be until it appears to be what it is. We really don’t have all the details about this project and as time passes they’ll no more about it and they’ll be more comfortable with what were proposing to do,” says Clyde Gulley Jr.

Mayor Ardis made it a point to remind citizens that Big Al’s is doing the city a huge favor by agreeing to change locations.

In other words, even though we the citizens know nothing officially about this new development, we need to change ordinances and okay liquor licenses to make it happen based on blind faith in the city council. Even though this hotel project “has not been brought before the council yet,” according to Mayor Ardis, all the council people know about it because they’ve been skirting around the Open Meetings Act by meeting with the developer two at a time. That engenders a lot of trust, doesn’t it?

It’s clear from the comments above that the justification for approving the liquor licenses and the change to the adult use ordinance was to make way for a development project that is still being kept a secret from the public. Without the hotel project connected to it, these requests never would have passed the council. Thus, I think the citizens have a right to know what this project is that is influencing the council. I mean, if this isn’t a back-room deal, I don’t know what is.

Don’t get me wrong. This hotel may indeed be a “wonderful development,” as Randy Ray described it. I’m not prejudging the project. I’m just saying that the council is not acting with transparency on public policy issues, and that’s not good governance.

One other thing that I can’t resist commenting on: Downtown Peoria is “dying,” according to Councilman Turner. Dying? You mean the original Civic Center, Civic Center expansion, Riverfront Village, ballpark, Riverplex, etc., etc., have all been abject failures? So noted.

City Council, City of Peoria

Hotel plans still shrouded in mystery

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It’s the worst-kept secret in Peoria. Despite not getting anyone to speak on the record, information about the proposed hotel on the Pere Marquette block has been leaking like a sieve to the Journal Star and bloggers. Unfortunately, since we don’t have any official word, we don’t know how much of that information is accurate.

There’s something else we don’t know: what public incentives will be requested for this project. According to Billy Dennis’s source, “Public financing accounted for roughly 40 percent of the cost of building [East Peoria’s] Embassy Suites,” and “Project investors are hoping to secure a similar percentage of public financing for this project through a tax increment financing project agreement.” An ancillary issue is the request to move Big Al’s, with their “grandfathered” status and adult use and liquor licenses, presumably to 414 Hamilton Blvd.

And, of course, there is a sense of urgency for this project. According to the Journal Star, this whole project “could go before the City Council for consideration on Nov. 25.” That’s in two weeks. And, according to Billy Dennis’s source, any delays “would kill the $100 million project.”

Oh yes, the project has been estimated to be $100 million. So, going back to the earlier rumor that approximately forty percent of that would be “public financing…through a tax increment financing project agreement,” we’re talking about $40 million in public incentives. I’m not sure how a TIF is going to provide that amount of financing (consider that the proposed museum is in a TIF, is a similarly-sized development, and would arguably be built by now if they could get $40 million out of their TIF). I also don’t know how the city could afford to give $40 million to a private developer when the budget is already in a deficit.

I’m not sure about a lot of things, because when you get down to brass tacks, the citizens don’t really know anything about this project. We’re being told by many bloggers that this is the greatest project for downtown since the civic center (how do they know that?) and that the city should move heaven and earth to make it happen or else. Or else? Or else no small number of detrimental things will happen: the civic center will fail, downtown hotels will lose occupancy, Caterpillar won’t use Peoria’s hotels anymore, tax revenues will go down, downtown will deteriorate, no one will want to develop in downtown Peoria ever again because it’s so hard to do business here, etc., ad nauseum, ad infinitum.

Peoria is evidently on the precipice of oblivion and this hotel deal is its only savior. And that deal itself is tenuously held together — either the developers get everything for which they ask when they ask for it, or the deal’s off. No negotiation, no public input. They make the decisions and take your tax money, and you better thank them for it.

The Journal Star got it right:

We appreciate that negotiations like these can be sensitive and there’s a lot of financial risk involved and not all of that can or should be played out in a public hearing. Nonetheless, there is one overriding principle at work here: If you want the public’s support and especially the public’s money, the public needs to know a little something about the business government is doing on its behalf.

Right now, the public is in the dark. And this huge project might come before the council by Thanksgiving? Sorry, but that can’t be.