Tag Archives: Marriott

City of Peoria

Good news: Your tax dollars are being wasted on time and on budget

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The Wonderful Development (aka The Downtown Marriott Hotel Project) is progressing on-budget and on-schedule, according to a report by the City’s project manager, PSA Dewberry. The new parking garage is still expected to be completed by the end of this year, and the renovated Pere Marquette is scheduled to open as the Peoria Marriott Pere Marquette by the end of April 2013.

Now, if you’ve been following this project for awhile, you should be scratching your head and thinking to yourself, “How is an end-of-April opening considered ‘on time’?” Good question. I thought the deadline for opening the Pere Marquette was supposed to be March 1, 2013–in time to host all the people coming for March Madness.

It turns out, that wasn’t really a deadline. According to the City Manager’s office, there is a penalty if the hotel doesn’t open by March 1, but March 1 is not a deadline. (If that sounds crazy to you, remember that the City has no working definition for “deadline” — the word is simply not in their vocabulary.) Here’s the pertinent part of the redevelopment agreement:

“7.5 Liquidated Damages. In the event that the Hotel Pere Marquette is not open to the public on or before March 1,2013, the Redeveloper will pay to the City on demand as liquidated damages and not as a penalty an amount equal to $41,000 for each calendar month or portion thereof that transpires after March 1,2013 (including March, 2013) until the date that the Hotel Pere Marquette is open to the public. In addition, in the event that the Courtyard Inn & Suites is not open to the public on or before May 1, 2014, the Redeveloper will pay to the City on demand as liquidated damages and not as a penalty an amount equal to $41,000 for each calendar month or portion thereof that transpires after May 1,2014 (including May, 2014) until the date that the Courtyard Inn & Suites is open to the public.”

With an opening date for the Pere slated for the end of April 2013, it looks like the City will be receiving $82,000 in “liquidated damages” … if the City decides to collect it, that is. The City Manager’s office said today that they will collect it if the hotel is not open by the deadline target date.

Without any defined deadline, it should be easy for Dewberry to determine whether the project is on schedule. It’s always on schedule. How could it not be? There’s no reference point against which to measure it. We can just rest assured that the project is on time, whatever time it gets finished.

View the complete report:
Wonderful Development Progress Report as of 9/14/2012

City Council, City of Peoria

Peoria to put retiree funds at risk for hotel

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The City Council is voting on a revised redevelopment plan tonight for the undead Wonderful Development. This new plan not only gives the developer $29 million, but also loans him an additional $7 million because he couldn’t get all the private financing he needed.

So the question is, where is this $7 million coming from? I mean, did you know that the City had $7 million sitting around in a pot somewhere? Well, they do … in a retiree benefits fund. According to the council communication: “the City will provide the developer with a 25-year $7 million loan (the ‘Project Loan’) at 7% interest from the City’s Post Employment Benefits Reserve.”

The City is required to keep this Post Employment Benefits Reserve by an accounting regulation known as GASB 45. The idea is that the City should be socking away money now for the health benefits they are obligated to pay in the future to retirees. Of course, the City doesn’t fully fund the reserve. They can’t afford it. So they’re listing an increasingly large unfunded liability on their balance sheet each year.

Now, to make matters worse, they’re going to take what money they do have in reserve and loan it to Gary Matthews to build a hotel downtown — at no interest for the first two years or so, then at 7% interest after that. But here’s the kicker: this loan would be in the third position for repayment. In other words, if the project were to go bankrupt, the banks would get paid back first, then the owners of Big Al’s (who are loaning Matthews money as well), then the City. The City’s loan is subordinate to two other creditors, so the odds of the City getting paid back in the event of default are nil.

Of course, this is just the latest injustice regarding this deal. There still is going to be a $29 million gift to the developer, courtesy of your future tax money. This publicly-subsidized hotel will be competing with other private hotels downtown, giving it quite a competitive advantage. Meanwhile, our taxes (or “fees,” if it makes you feel better) are going up and the City is going deeper in debt, even as our city faces serious public safety issues and its infrastructure deteriorates.

Peoria, your tax dollars are being misused. Does anyone care? Anyone? If the Occupy Wall Street supporters really don’t like money being taken from the 99% and given to the 1%, they should be against this deal. If the Tea Party supporters really don’t like bigger government and support the free market, they should be against this deal. Where are they? Where are you? Rome is burning while you’re fiddling.ikoni

City Council, City of Peoria

Pro-Wonderful-Development letter-writing campaign continues

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Investors, doctors, politicians, and other wealthy and well-connected citizens have been flooding the City Council’s mailboxes with letters of support for Gary Matthews and the downtown hotel project. Many of them are form letters, or at least incorporate boilerplate language such as this:

It is my [or “our”] understanding that EM Properties has worked closely and judiciously with city staff, Civic Center authorities, labor unions, construction companies, lenders, sellers and the well respected hotel group, Marriott, in order to piece together all of the parts of this intricate transaction. All aspects of the project have been vetted, reworked and vetted again to insure its success. It is crucial to the revitalization of our downtown and the future of our city and region that the project moves forward. Job creation and maintenance are vital.

The completion of this project will better position many companies in the area to better market our community and enrich our local economy in order to compete with surrounding areas.

In March of this year, ground was broken for a new Courtyard by Marriott in Newark, New Jersey. It will include 150 rooms and 14,000 square feet of retail space, and is “expected to generate approximately 175 construction jobs, and a total of between 50 and 75 permanent jobs through the hotel and retail operations.” How much money do you think the City of Newark contributed to this boon to their local economy? Answer: a $500,000 loan “to assist the Courtyard by Marriott with gaining site control.”

Meanwhile in Peoria, to get our own new 119-room Courtyard by Marriott, plus a renovation of the Pere Marquette with a gerbil tube to the Civic Center, it will take a gift of $37 million from the taxpayers. Does something seem a little off to you? Perhaps the reason is that our workers are not as efficient. According to a May 23, 2010 Journal Star article, “professor Bob Scott at Bradley University expects 840 construction jobs to be created when EM Properties and Marriott International team up on the $102 million Downtown project.” That’s nearly five times as many construction jobs as are necessary to build a hotel in Newark.

I think the letter writers and supporters of the Wonderful Development are missing the point. They’re all arguing the merits of an upscale downtown hotel in close proximity or connected to the Civic Center. That’s all well and good. But at what price? Should the City take on a third of the risk for this $102 million private development? Should a City taking on said risk continue to trust a developer that has demonstrated a consistent inability to meet deadlines and projections? Would doing so really be in the taxpayers’ best interests? If the developer is unable to meet short-term projections (like when he can start construction), how can we trust him to meet long-term projections (like the future profitability of the venture)?

This project has been approved for two and a half years. It was approved twice. It has been over nine months since the latest deadline was missed. Each time the developer has come to the table, he’s assured the council that he was ready to start. In May 2010, he said he was ready to start “immediately.” Everything was in place. All that was missing was the Council’s approval.

Sixteen months later, nothing has started, and the City Manager cancels the agreement. So now what do we hear? Here’s another sample from a pro-hotel letter to the Council: “All pieces are in place, as outlined in brief above, we just need the nod from the council, and the city to sell the bonds. We can close in 60 days.” Where have we heard that before?

The Wonderful Development must die.

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

Civic Center rates the No. 1 reason conventions skip Peoria

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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 Council, City of Peoria

City decides to do market study of Wonderful Development after all

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On the Peoria City Council agenda for Tuesday night is this item:

ACTION REQUESTED: AUTHORIZE THE CITY MANAGER TO CONTRACT WITH HVS FOR UP TO $15,000 TO PROVIDE ANALYSIS AND CONSULTATION REGARDING DOWNTOWN HOTEL PROJECTS.

BACKGROUND: Since 2006, the City has worked with HVS to analyze potential hotel projects involving the Peoria Civic Center. This work included conducting a 2006 market study for a Hilton adjacent to the Civic Center at Kumpf and Jefferson and professional advice on the redevelopment agreement reached with EM Properties in December 2008. Currently, the City has contracted with HVS to conduct a market study of the most recent version of the Marriott Pere Marquette project at a cost of $7,500 [emphasis added]. (The City was able to work with HVS to reduce the cost of a full market study by agreeing to complete some of the local staff work.) That specific task will be concluded by April 30, 2010, but HVS’ expertise may also be required to analyze particular facets of the redevelopment agreement. The proposal from HVS to provide these services is attached.

HVS’ 2006 market study is available here. The most recent version of the downtown hotel project has a different design and fewer rooms, but at the same overall cost of $102 million. The developer is asking for $37 million in public assistance for the project.

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 Council, City of Peoria, Peoria Mayor

Former mayor counsels council

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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 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 of Peoria

“Wonderful Development” Update

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The “Wonderful Development” (that’s what City Attorney Randy Ray called proposed downtown Marriott project when the City was still keeping it a closely-guarded secret) has yet to meet any of the deadlines in its redevelopment agreement with the City. The most recent Issues Update gives the details:

REDEVELOPMENT AGREEMENT BETWEEN THE CITY OF PEORIA AND EM PROPERTIES, LTD. This Redevelopment Agreement was approved by the Council on December 15, 2008. This Agreement provides that the Redeveloper shall commence construction of the Project not later than one year from the execution of the Agreement (December 19, 2009). Alternatively, the Redeveloper is to commence within 20 days of closing the initial series of the Bond, and the Bond issue has not occurred and the pre-conditions to the Bond issue have not yet been met. There is another deadline contained in Paragraph 3.5 of the Redevelopment Agreement which provides that the Redeveloper shall submit construction plans to the City no later than June 1, 2009. That has not occurred. Although this deadline has not been met, the Contract remains in full force and effect.

Going back to Paragraph 3.2.1 concerning commencement of the Agreement, the Agreement provides that if the Redeveloper does not commence construction of the Project within 18 months from the date of the execution (June 19, 2010), the City shall have the right to terminate the Agreement.

According to a recent Journal Star article, the Redeveloper is “optimistic” that he will be able to get all the financing he needs to acquire the Pere Marquette and adjacent properties by January 1, 2010, or thirteen days after the deadline for construction to commence. That would leave him five months to submit construction plans to the City (already four months past deadline itself), secure approval, and start construction — or else the City could terminate the agreement.

I don’t think he’s going to make it. But then, I don’t think it’s going to matter, either, because the City never cancels redevelopment agreements that miss deadlines. In fact, I don’t know why they even bother to put deadlines into their agreements anymore when they’re demonstrably meaningless.

This Wonderful Development — to the tune of approximately $4 million in debt service per year on average — will continue to sail through, even as we cut police officers (to save $1 million annually), road resurfacing, animal control, and other vital public services. Your streets will take a little longer to get plowed in the winter, but we’ll have a downtown Marriott. The police will take a little longer to respond to your emergency, but we’ll have a downtown Marriott. That rabid dog in your neighborhood threatening your family’s safety on a Saturday? Call back Monday; the office is closed weekends due to budget cuts — but we’ll have a downtown Marriott.

As taxes continue to rise and service continues to decline, more people will give up and move out of Peoria. But that’s okay, because when those folks come back to visit, they’ll have a place to stay: the downtown . . . Embassy Suites in East Peoria.