By David Glenn Cox
Years ago as I was studying for my Real Estate license I learned about the law of hotels. As a general rule a hotel benefits a community by anchoring visitors to your area. They buy gas and food and spend money by visiting the local attractions and since as a general rule this is true, many new hotels use public funding to generate their construction capital.
However for every action there is an equal but opposite reaction, ever notice how hotels tend to congregate? That is the reaction, If I build a hotel and charge $100.00 per night and make a good profit then why shouldn’t a competitor using the same public finance build a competing hotel across the street? Most municipalities have in place a lodging tax per room, per night, so why should local government ever complain? So the guy across the street and I are still making a profit when a third hotel is built. The new owner is offering his rooms for $79.00 per night, the hotel across the street and I must now split the business again by a third.
This puts us at a break-even position, when the competitor across the street goes to $59.00 per night. The law of hotels is as follows, you build hotels until everyone goes broke. Then investors and other hotel chains purchase the distressed properties at a substantial discount. All across America downtown revitalization programs are centered around a hotel and convention center project.
So for most mid size cities the conventions never materialize and the taxpayers are left to pay for the white elephant. In 1983 Springfield Illinois the home of honest Abe Lincoln fell for the lure of shiny bait. The President Abraham Lincoln Hotel and Conference Center was built with the help of a $15.5 million in state-backed loans. The city of Springfield and the Springfield Metropolitan Exposition and Auditorium Authority also loaned $3.1 million in grant money to help with the hotel’s construction and SMEAA owns the land on which the hotel was built. 80 private investors where also involved including influential Springfield Republican Bill Cellini.
The hotel has been in financial trouble from the start, the loan had been restructured twice. In 1985, state Treasurer Judy Baar Topinka, a Republican, reached a deal with the hotel owners to let them settle the loan and accumulated interest for 25 cents on the dollar. Or in the words of Eric Cartman “Sweet!” $15.5 million to be written off for a paltry $3.7 million. Topinka said it was the best deal the state could get, based on appraisals. However, then-Attorney General Jim Ryan squelched the deal after his analysts said the hotel, then called the Springfield Renaissance, was worth much more than the appraisal indicated.
In 1990 a deal was worked out where the hotels owners would only make a payment when the hotel showed a profit. Here’s a no brainer, would anyone like to guess how many months the hotel has showed a profit? Remember now, its not like they ever showed a talent for turning a profit in the first place so when you make a deal like that you can’t honestly expect too much. Twice, the hotel turned a profit twice, two payments in the last ten years.
The loan with interest has ballooned to over $29.5 million dollars guaranteed by the people of Illinois and it grows by $2,300.00 a day. In a legal move than can only be named “Duh,” The owners have dropped the legal fight to retain ownership of the hotel and convention center. Sangamon County Circuit Judge Patrick Londrigan issued the agreed upon foreclosure order Monday. “Going forward, the days of sweetheart deals and cronyism at taxpayer expense are over,” Illinois Treasurer Alexi Giannoulias said Tuesday.
Mr.Giannoulias efforts are to be applauded but the state and the people are still going to take the hit just as in cities across America that have built golden palaces for the illusionary convention business have taken the hit. No one goes to jail and the owners of The President Abraham Lincoln Hotel and Conference Center rode the public gravy train for over two decades. Drawing salary and benefits while billing the hotel for all the legal expenses and when that was disallowed by the court appointed receiver they just walked away.
Giannoulias said filing the foreclosure order completed “the most difficult and by far the most arduous task in resolving this debacle that’s been going on for 25 years and cost the state millions and millions of dollars. I’m not sure there’s a bigger mess in Illinois government.”
“We have no intention of holding on to it,” Giannoulias said. “The state of Illinois is not in the hotel business, nor should it be.”
Instead, he said, the state will conduct a public auction and sell the hotel to the highest bidder. Giannoulias could not say when the sale might occur, although it is still several months away. He also would not estimate how much he expects to get from the sale.
Two million American home owners thrown out of their homes for deficiencies of a few thousand dollars yet corporate welfare operatives can continue on for decades milking the public trough and when the feed is finally cut off just walk away free to start again. No one questions, why the banks financed such a project or if the investors where capable of ever paying off the loans. Meanwhile the President and the media castigate the sub prime borrowers for allowing themselves to ever get into such a predicament.
Maybe if the sub prime borrowers were offered the same deal, say 25 cents on the dollar? But not no but hell no, the President insists, its wrong to bail out people who have made poor financial decisions. Especially the little people, his philosophy is to help those at the top and when that fails to help them again. The politics of exploitation and of pillage of the working class of double standards and hypocrisy