I print this blog with the permission of Karrie Alms; who I add, does her research better than I, who attended the Finance Committee Meeting Thursday and reports on what was NOT discussed by board members at this meeting.
Also, my information submited at that meeting is correct as was the information given me by Ken Hinton correct if you read my email to Superintendent Hinton carefully.
Here is Karries letter.
Good morning John and Karen:
I am seeking to understand why either or both of you pointed your doom and gloom towards Merle Widmer when he was only reporting what Peoria County Staff has provided in their analysis. Where was your criticism for Patrick Urich, Erik Bush and./or Steve Sorrel?
Merle was simply vocalizing the information staff has so professionally prepared. I am wondering how many of the eighteen PCBM have actually read their notebook of information?
Have either or both of you read the Peoria County Staff analysis of the museum posted at the Peoria County website?
The document is clear about what will be the outcome. There is no crystal ball about what the future will be --- the Peoria County Staff has laid out the consequences, just read page 241 of the analysis. Staff outlines what Merle stated at the Finance Committee meeting with the conditions that the museum would nned to have a $6.75M endowment and operate at 100% Pro forma, still sustaining an operating loss in year one.
The 100% scenario is for a $6.75M initial endowmet. The museum group has only budgeted for a $3M initial endowment, that is why Patrick Urich was talking about bonding for above the $34.7M net bonding proceeds to allow for the possibility of private donations to be used to increase the endowment while the taxpayers would may for more of the bricks and mortar costs.
Page 13 of report and attachments link
County staff wanted to review the operating budget to see the impact if there was a "best case"
where revenues were 10% higher than the break-even budget prepared, a "worst case" where
revenues only hit 90% of projections, and run the scenario over the 20 year bond repayment
period with certain assumptions about expense and revenue growth. Staff assumed 3% revenue
growth, a 4.5% rate of return on interest in the endowment, and most importantly, staff
developed some basic expense growth assumption that increased expenses from 3.26% up to
3.79% each year. This would provide the County Board with an indication of how much would
be needed to put into the endowment to ensure the sustainability of the project (Attachment 12).
Expenses would grow from $4,167,000 in the current year to $8,052,000 in 20 years. The
endowment would need to contribute $1,138,512 in the best case scenario if revenues came in at
110% of projections. Endowment proceeds would have to be $11,693,195 in the Lakeview
"stable" operating budget, and $22,247,878 in the reduced revenue scenario. County staff
concludes that the operating budget will need to be scrutinized for expense efficiencies and
considerable pressure needs to be placed on the Museum Group's Board of Directors to fund
raise in order balance the operating budget. In the stable budget scenario, County staff believes
that the endowment needs to be at a minimum $6,750,000, and to hedge against not meeting
revenue collections, it should be over $12,000,000.
What business operation does not face an increase in costs over the years for conducting business? None that come readily to my mind. If either of you can provide an example or examples of such non increasing busness operations without cutting staff and services, I would be most grateful.
Elaine and I met with Jim Richerson and Kathleen Woith last week (01/14/09). Elaine asked about the endowment and if the museum had taken a loss in the stock market downturn. Jim Richerson answered that the museum has a $2M endowment and that they had lost money. Elaine committed about the Sanitary District having a lot of money which was invested in CDs. Elaine nor I got the impression that the museum's endowment was invested in CD's because the endowment had just been reported having lost money.
So, the museum's endowment had taken a loss. Elaine asked what was the current value of the endowment. Jim replied that he did not know. Elaine and I thought that that was puzzling as he is the director and at least we thought that he would know that figure at a moment's notice.
I have included Elaine on this communication so that you are welcome to verify that I am accurately representing our conversation with Jim and Kathleen.
Furthermore, the museum is budgeting $3M for the endowment. We did not think to ask at that time if that was $2M plus $1M or $2M plus an additional $3M which would make for the $5M the museum group has outlined on page 232 of this report, it appears that the $3M would be in addition to the museum's current $2M endowment which is now less. If the market goes up and down as it historically will coupled with a 20 year time period --- then what? The museum's current endowment is most likely less than the $2M.
The information in this next section was calculated by county staff, not Merle.
The operating losses were calculated with a $6.75M initial endowment with 100% pro forma. The second scenario is $13.5M initial endowment with 90% pro forma endowment. Karen, I believe you were sitting to my left at the 15 Jan 2009 Finance Committee meeting, when I asked my question regarding the amount needed for the initial endowment relative to each additional 10% increment decrease in pro forma realization of projections. --- Not sure how to word that statement. I asked for each 10% decrease there would be a need for the initial endowment to be raised by an approximate $6 - $6.5M. Patrick Urich replied yes unless the shortfall would be made up from some other funding source / revenue stream. What other revenue stream? More donations, earmarks, ????
That is a sobering thought, at least to me. In view of the fact that I cannot recall one project in the last fifteen years which has been promoted as a silver bullet with rosey projections has ever met those projections. It would be interesting to see what the other projections were and the reality of what came to pass. Just recently we have the Midtown Plaza project falling apart. The list is long for the past fifteen years.
Since 2003, the RDA has gone through significant changes. Removing the WOW features, decreasing the size while the cost continues to rise. Wondering if everyone in the group is still on board and happy with this project?
From attending the meetings, it appears that there are many policy questions which the Peoria County Board has not addressed regarding this referendum so that the public would be able to have a clear picture of what is down the road.
I have been told and I have not been able to confirm that the museum group is reported to be sending upwards of $300,000 - $355,000 with Simantel for a PR compaign to persuade voters to approve the referendum. Now, any persons against the museum proejct as currently planned, do you think that they will have that type of money?
I am hopeful that either or both of you will use your journalistic skills to cover the potential full impact of this referendum so that the public will be able to be informed in an unbiased manner. I hope that you will allow and report both voices for this referendum to be treated with respect and stick to the issues and the information which is being presented rather than making personal attacks on the messengers of such information would be appreciated, as has been done with Merle Widmer in yesterday's column.