Notice I said nationwide and yet I continue to hear about how this loss of revenue through decreased sales tax, persistent debt created prior to his election and loss of revenue as home construction went down, people were not spending money on large or small items = less sales tax revenue = blame the new Mayor. I would like to believe that people in Peru are smarter than what I believe is a small minority who still have not gotten over the defeat of Don Baker and in retaliation continue and without reason to label Mayor Harl as the cause of it all. This may be a few angry people with too much time on their hands who choose to use our blog to vent their frustrations because they are no longer "in the loop" so to speak. They offer nothing constructive but only find fault.
Did Mayor Baker bring some good to the community? Absolutely. Is it time for the community to exhibit more of a "can do" mentality. I would hope so. Since there are no perfect people on earth, it is time for people to accept the democracy of the ballot box. The election was legal and the majority spoke. If your guy didn't win, make the best of it and move on and be a positive contributing member of this community.
Do I commend the council members when they do what I believe is right for our town. Yes and I would hope they see that, give us some respect and you will get some back. But many times from someone on the outside looking in, I don't see that coming back to those who have taken an interest in Peru government. We have a Mayor who is trying to do what is best for the city and not for the council or for himself. Everyone needs to put their egos aside and work for Peru because yes we need to pull together, pay down this debt. Attitudes need to change, new ideas need to be brought forward. But as you hear persistently on radio and TV.
"We need to stop spending"
40 comments:
Lois: What a beautiful post! You hit the proverbial nail right on the head. When we buck each other, when we put the blame elsewhere, when we cry over spilt milk, we accomplish nothing. When we work together toward a common goal - things begin to happen. I would like to think we all want the same thing (to see Peru prosper and grow) but, we're going about it the wrong way. We need to unite and become one.
You are right "We need to quit spending" When will the Mayor hear you and QUIT SPENDING?
Library, Pool, new equipment,i.e. trucks, blacktop heaters,lawnmowers.
All of this spending is the objective of this blog and the mayor to BLAME BAKER.
WELL,We know better.
This mayor continues to spend money and is the "KING OF MIS-MANGAGEMENT"
The next 2 years are going to be VERY long before we get him OUT.
8:16AM
Why don't you research you comments before you make a lot of poorly thought out comments. Your post is exactly what I am referring to in my initial posting.Thanks for giving our readers an example of someone who has too much time on their hands and has made comments that are outright lies. Why don't you FOIA the correct information just to keep yourself informed with the right information and not misinformation.
Hmm! I'd say the "king" and "queen" of mismanagement were voted out. So now we're dealing, instead of double-dealing, with new folks who have an interest in what they can do for the city versus those who were more interested in what the city could do for them.
Ah, that's probably not a completely fair statement as Mayor Baker did tons to improve the city. But the headiness of ruling the community with no holds barred was not insightful. It was only a matter of time before the City of Peru would be in these same straits.
Please remember that your aldermen went along with everything that was proposed in the previous administration. If the city is falling apart now, it wasn't due to a change in the administration. It would have happened anyway. And then who would the naysayers blame?
Tone down the rhetoric. Please ask where the debt is and get a understanding on the process. Every major company and every city has debt. How would you pay for major city infrastructure improvements? Also over the course of the last 30 years the city has abated the taxes, this means that the bonds are not being paid for by tax dollars. It appears that the city needed water/sewer, electric system improvements and the only logical step was to bond these improvements over a long term basis. Or you could of saved for it. And after the 20 years of savings you would never have enough money to pay for the project. You also stated that all the aldermen went along with everything in the past. No you are wrong, before like now we remain in a democracy and that has always resulted in a difference of opinions. But collectively the majority prevails. It doesn't mean everything was wrong or everything was right,it means the majority wins. I would mention that the cry that Peru is broke is just another ploy for political gain for those who desire the office. Lois,Steve its that strategy that divides the city!
Well stated 10:42 p.m. You make a great point about the current aldermen failing to provide the checks and balances as you so appropriately put it, the former King and Queen. The current aldermen failed to protect the citizens interests and made no effort to determine the actual state of city finances for many years. In fact, at least a few of them still refuse to acknowledge the fact that we are operating on a "Paycheck to Paycheck" basis if not at a deficit with every operating fund except the Electric Light Fund.
I don't believe the city is falling apart and will in fact thrive in the years to come. But, if we continue to elect aldermen who refuse to recognize and take responsibility for the current financial state of Peru, we could very well fall apart under the weight of overwhwlming debt.
It isn't that the aldermen went along with everything that the former mayor and city clerk proposed, it's that the aldermen failed to even make an effort to determine who was doing what with our money.
That is unacceptable.
To 10:14 a.m. - Thank you for mentioning bonds for capital projects etc. Of course there is nothing inherently wrong with issuing bonds, which is essentially borrowing money. I understand the need but I also understand you had better have a plan to make good on your payments. You may be an insider so let me ask you if you agree with how the previous administration had been handling payments on the Hydro-Plant bonds since the initial issue. These bonds have been re-financed at least twice to date, presumably for a better interest rate. But, why did the previous administration make "interest only" payments on these bonds? Did you know that? How would we ever pay off our principal obligation on this massive debt paying interest only? Isn't that just kicking the can down the road? Do you consider it a sound financial strategy to make only the minimum payment on your credit card debt? Here is the sad reality. Since the Hydro-Plant was built we have not seen one penny of profit from it's operation. Furthermore, we will continue to not see a profit until what? That's right, until the bonds are paid off. So, why would we not pay off that debt on schedule or asap?
"Broke" is a term that gets tossed around and exaggerated a bit. You suggest that I and others are promoting a "political ploy" or "strategy" because we ask the tough questions about how this city has been run in the past.
Can you explain the strategy of elected officials who endorse making "interest only" payments on any outstanding debt? I suggest you take some time to ponder why previous city leaders were either "unwilling or unable" to pay down the principal on a $20,000,000 bond issue. You should also come to terms with the reality of the burden that this "strategy" now places on future generations in Peru. But first, please answer any or all of my questions.
Steve: Do you happen to know what year the hydro project was completed and what was the final cost of the project?
And what type of bond was issued and for what amount?
And how much do we still owe on this bond?
Steve, have you ever heard of principal and interest? Bonds are principal and interest payments. Hear we go again on the previous administration. The debt for the Hydro is not close to 20 million, the cost was 20 million. The Hydro has created electricity to the consumers in which we receive reduced costs for the consumers. To say that the Hydro has not created one cent of profit is another political ploy. Your understanding of finances, electric generation, and many other operations borders on a lack of common sense and a real lack of finance experience. Did you know that typically refinancing saves money? You get a lower interest rate!
Steve, you must spend alot energy discussing the city with the Mayor. That must be the problem, negative comments and a lack of business sense. I would not consider either of you financial experts.
10:48 - I have a pretty good understanding of the basics of finance and how the Peru Electric Department operates and you still haven't answered any of my questions. I stand by what I said. The Hydro will never generate a real profit until the bonds are paid off. If you know better just explain it to us. Don't just tell me I'm wrong and you're right. Explain it! I'd like you to explain how I'm wrong and how you will ever pay off a debt by making "interest only" payments.
10:52 - I have never claimed to be a financial expert and I rarely talk to the mayor.
Do you have anything to contribute to the discussion other than telling me I'm not a financial expert?
Linda and 10:45 a.m. - I left a voice-mail for Treasurer Hylla regarding the Hydro Plant bond questions. I will post that info when I recieve it.
If you have a good understanding of the city debt? Why would you give the wrong figure of the hydro debt at 20 million, why wouldn't you confirm this with the treasurer? The statement about paying only interest payments will not pay off debt is accurate, unfortunatly for your story to be accurate that would mean that the city eould still have 23 million plus in debt for the hydro project. That again is a creative way to make critical statements about the past administration. Lower electric rates produced by the hydro plant equals lower rates for the residents in Peru. That is called profit Steve! Maybe you should speed dial the former Mayor or the former electric super or even a informed city council member about areas that you have little knowledge like finances,bonds,electricity,ambulance,fire,police,personnel,public works,recreation,library,water,audits. Please stick to items you are versed in!
10:01 Am
The last time the former Mayor opened his mouth at a City Council meeting it ended up costing us thousands of dollars. Just tells me that he does not know what some of his continued supporters believe he does. And the former electric super made so much money off the city of Peru, he should be a free consultant for life.
I noticed your name is 10:01 Am. January 25, 2011. That is a really unusual name but it does make it easy to pretend you are very knowledgeable. BTW, you compose your ideas well. Not necessarily correct but put together well.
ANON 10:01 Did you read the post above yours? Apparently not because if you had you would know that Steve has questioned the Treasurer and is waiting for his response. Think before you speak. And, if you feel that Steve gave the wrong figure why didn't you give the right one (or don't you know it)? I hate it when people cut down others but don't back their sarcasm with facts and figures. That, to me, just shows a lack of intelligence and a hatred for the fact that the previous administration was replaced.
To all posters who don't see their postings, I must say you have become the most embarassing and ignorant people I have encountered in a long time. It really does embarass me that you might actually be a resident of Peru. If you think I would subject anyone who reads this blog to what you say you are quite wrong and I do not encourage your coming back because i will not change my mind and it just reinforces my opinions of what I believe to be happening in our city government. You will slip up sometime and I will know who you are face to face and I am looking forward to that day.
To 10:01 a.m. - There you go again. The $20 million I quoted was my recollection of the initial cost of the project. It turns out it was actually $19.4 million. As I have said, since the principal amount due on the bond(s)that financed the Hydro construction has not been paid down as initially scheduled.....that was a critical failure by the former administration. Most likely because of having to fund more current obligations like construction of the new municipal building. Remember that decision?
Now, tell me why you assume the Hydro Plant produces power at a lower rate. What does it cost to produce power at the Hydro? If you don't know the cost to produce it, you don't know you're selling it at a good rate. And don't try to compare Peru's rates to surrounding cities served by Ameren because that does not answer the the important question, which is....................
With "all" things considered, including principal and interest payments on bonds used for construction, plus the cost to operate the Hydro Plant, plus the cost to maintain and or replace worn components, which by the way will be about $1 million from just last year to the end of this year due to the failure of Mayor Baker and Joe Prazen to allow the proper manufacturer recommended maintenance on the units. Is the Hydro Plant making a consistent profit? I say of course not and it will not until its paid for.
There is no doubt you were an insider and you likely played a role in the poor decisions of the past. Or, you did nothing to stop them. Either way, you are as responsible as anyone and you still don't get it.
As an alderman if I don't know something about any one of the topics you cited, I will take the time to research and learn it and then move "forward". Why would I consult any of the characters you mentioned? Nothing but stale air and "status quo" from those guys.
To Linda and others - As is common when I have attempted to find older financial information about the city of Peru, the details of the exact dates and initial financing of the Peru Hydro Plant are not readily accessible to Treasurer Hylla. Records with details from that particular time period would have to be requested and located from the city "archive" (boxes in the basement)at city hall according to Mr. Hylla.
However, I believe construction began in 1993 or 1994. Mr. Hylla confirmed the construction cost of $19.4 million based on bond issues of $9,685,000 in 1998 and $9,745,000 in 1999. Re-issue or re-financing of those bonds took place in 2008 for the 1998 bond and in 2009 for the 1999 bond. Prior to the election of April 2009. Treasurer Hylla confirmed that no principal was paid on either bond for at least a two year period during 2008 and 2009. All payments during that time were "interest only". Treasurer Hylla informed me that the total outstanding debt on the bonds is currently at $14.2 million. That is 18 years after construction and we are a little more than 25% paid off. The 2008 bonds are scheduled to be paid off in 2020 and the 2009 bonds in 2025. Therefore, any benefit from the re-financing was effectively wiped out by the two year lapse in principal payments.
Isn't it interesting how the time frame of those "interest only" payments on the bonds coincides with the mad scramble of the previous administration to build and pay for that new municipal building that Don told us "we have the money to pay for"
Just a coincidence?
10:01 a.m. - We all look forward to hearing your rebuttal. Take your time.
To my knowledge, that is how municipal bonds work. Interest is paid on the coupon dates (usually twice a year) and all the principal is paid on maturity - unless there is a call feature. A call feature allows the issuer to “call” the bond at any time or on specific dates. “Calling” is paying the entire thing off at once. A premium is charged to the issuer and this also has an impact on the bonds value in the secondary market.
It is not entirely accurate to think of a municipal bond as mortgage. A mortgage is amortized over a set period of time in which interest is paid (mostly up front) while paying down a portion of the principal.
With a bond – at least the way I understand them – the principal is paid on maturity. That way the investor gets a steady income stream throughout the term and all his / her money back at the end. It also allows for a secondary market in which people can invest. The value of the bond floats based on the credit rating of the original issuer, number of coupon payments left, and the face value (principal) of the bond.
I may be wrong since I do not invest in individual bonds - only bond funds which are easier to understand. I also don't have enough money to float a loan like that :)
I believe the hydro bonds have or had a call feature. I base this only on the fact that one of them was “refinanced” against Mayor Baker’s advice. The bond was a Revenue Bond and it was paid off by issuing a General Obligation that had a lower coupon rate. I was at that meeting and Mayor Baker threatened a veto, but never did. The reason was that General Obligations are backed by the taxing potential of the issuer, not the money generated by the project.
If you want details of the original issue (or any issue for that matter) talk to your financial advisor. The information is available to investors for a price.
6:42PM
You have explained the bond principles and you certainly have more first hand knowledge then I do.
As I read through your post the thought that kept running through my mind was. If the city was not obligated to make regular payments on the bond for the Hydro or for any project, where would they get the money when the bond matured. Here we are with the amount of debt we presently have and to even think about the city coming up with 10, 15 or 20 million is unrealistic and would certainly involve taking out another loan to cover the first.
Tell me what I do not get?
in thoery, money is supposed to be put aside to pay the par value when it comes due. In practice (usually) another bond is issued. One thing to remember though - over the long term, inflation eats away the principal. You really don't have to put that much aside if it is invested correctly. Think of it this way. My father purchased his house in 1966 for $16K. $16K was a lot of money in 1966. In 1996 it was not so much. So if there was a baloon payment at the end - it would not be so difficult to pay off as long as money is set aside over time to due so. But - I have no real knowledge of how these bonds where issued. My definition comes from investment books. Maybe there is a muni-bond that pays down like a mortgage. The people to ask are the Mayor and Treasurer. I hope they have much more knowledge than I do on this topic.
this has been bothering me because, like you said, it does not make sense... especially for a small issuer. So I went back in reread the chapter this morning. There should be annual principal payments. What I said above is true, but not normal for small towns.
However, I don't think the issuer can choose not to make principal payments - unless that is written into the original issue. It should be covered by Illinois law, but most importantly, the city should know the repayment schedule and it should be available to the public.
Steve, you pay for maintance of all areas of public operation including streets, water,parks,sewer, and many more. To believe the City of Peru should have no maintance on the electric system is ill advised. To say that the hydro-electric system is not profitable is naive and opportunist. And as Treasurer had point out your statement about principal not being paid was wrong! And your statement about 20 million in debt was wrong also. Please read and share the annual reports on the electric fund profit, you will see that the city has a golden egg in the basket with the distribution, generation of Peru Power. The profit enables the city to provide the many services we all need. The refinancing of bonds is a typical way to take advantage of lower interest rates. Finance 101 will tell you that lower interest rates will save you hundreds of thousands of dollars over the course of the payments. If the same comparisions to the electric operations were used in other city operations I guess we would not have street repairs because they are not paying for themselves. Or police protection because its not a good investment. Clean energy is a way of the future. Its a valuable tool today and for our future. Stick with the City Hall building, but again you may know that building will also be paid for soon. Would the city be better off without its own electric generation, distribution? Would the city be better off without the sewer/water expansions? Would the city be better off without the new generators? Would the city be better off without the new school building? Would the city be better off without a airport? You have suggested that those were bad decisions, and yes you have argued against those after the fact. We all respect your thoughts and arguements but all of those areas have placed Peru in the forefront.
Being we are on the subject of the Hydro I have always believed it provided Peru with all its power. Apparently this is not true by any stretch of the imagination. Does anyone know exactly how much power it provides and if the rest of Peru's power comes from the Plank Road Station.
Brian - I recall the meeting(s) you referred to when Baker threatened a veto regarding the type of bonds to be issued. The council was not sure if they should issue General Obligation Bonds or Revenue Bonds. Baker preferred one over the other and he tried to expalin the pros and cons of each type. That was the only issue being discussed.
There is no way the bonds for the Hydro Plant were designed for the city to pay the principal at maturity. I believe this situation was designed for the city to make installments of X amount of dollars annually of principal and interest. Simple as that. My opinion is this. City officials choosing to make interest only installments on bond payments is just as fiscally irresponsible as you or I making only the minimum payment on a massive credit card debt. The bond owner and credit card company are fine with it because they still make their money and the city and you and I still owe just as much as we did before. Then reality sets in and somewhere down the road we had better have a plan to pay down that principal.
I don't see why you would suggest it is any more complicated then it is.
There is no way the city of Peru could ever seriously think they could put money aside to pay off this debt principal at some future date.
9:35AM
I was also present when the information was given that because of the ignored advice to perform routine maintenance on the hydro generators, damage had occurred. I guess we need a fact or fiction Q and A on the blog. Steve did not advise, this was something done years ago and the reason we have to spend more money on equipment. Kind of like buying a car and never doing any routine maintenance and we all know what would happen to your car.
9:35 AM You mention paying off the city hall building soon. We've been told over and over again by our aldermen that it's been paid for some time ago. TRUE OR FALSE? Get your facts straqht.
9:35 a.m. - You are a stubborn one aren't you.
You aren't telling me anything. You refuse to face the facts and you continue to try to distort my comments. I laid the factsa out there for you. Now deal with it.
If you had been paying attention you would know that I have reported many times on this blog that the Electric Light Fund is the only profit making entity the city has had for decades with every other fund sucking funds from it regularly to stay afloat. Do you want to deny that also? Now, pay attention. Just because the Electric Light Fund itself is profitable is not an indication that the Hydro Plant is turning a profit. The Hydro Plant is only one factor in the equation for determining the overall Electric Light Fund balance sheet. It's obvious you really don't seem to understand the whole picture here.
So I tell you for the last time....If you look at all the financial factors of the Hydro Plant "itself", it's not going to be profitable until it's paid for so as a citizen of Peru I sure as hell expect the city officials who are accountable to pay off that debt to make the damn payments asap if not sooner. Snap out of it!
I never said I was opposed to the Hydro Plant or any of the other city services or operations you attempt to suggest I'm opposed to.
What I am passionately opposed to is the blatant mis-management and inefficiency that have plagued these services and operations for decades and I suspect you know all the horror stories as well as I do. But, because you're part of the past you just can't seem to wrap your head around the idea of changing the way things have always been run. You and others like you have created this mess.
That's the basis behind the "need" for new blood on the city council in Peru.
You don't think in terms of improving your city. You say, "All is well, All is well".
But all is not well.
We can do so much better. And we will.
11:45AM
Yes I remember Ald. Ankiewicz trying to pull that one on me when I asked if the city hall was paid for. He looked me right in the eye and said yes but neglected to give me the rest of the real truth.
You know that the city took out a loan on the Mirror Building to cover the cost of building the city Hall which by the way we are still paying on as part of the deal to sell the Mirror building. I still get angry when I think that Ald. Bob was trying to think I would swallow that comment. How many times has he done this to the people of Peru, trying to cover up the shady finances down at city hall?
We definitely need some more open and honest members on our council. We need answers and facts not cover ups and falisies. We need to drop the concept of the Leader of the Valley and work together with our neighboring cities to improve life for all citizens in the Illinois Valley. No one is better than their neighbor we are all equal.
To 10:10 a.m. - Good question. I will try to answer your question using my understanding of the system. I'm sure what I tell you will be challenged soon after by new pal Mr. Hydro who has been dogging me lately. But, here goes.
No, the Hydro Plant does not provide enough generating capacity for all the city's electrical demand. The ability of the Hydro Plant to generate viaries widely depending on river levels and number of generating units on line at any given time. If you look at the monthly reports from the Electric Department you see a wide range of percentages reported for the amount of "Residential Power Produced". One month they may report 40% and the next might be 80%. So it varies and you would have to average it out on a yearly basis. I have not done that but I would be surprised if it was more than 70%.
The remaining demand for electricity in Peru to residential and industrial customers is purchased by the city through the Illinois Municipal Electric Agency. Peru is a member of the IMEA along with a group of other municipalities in Illinois whose goal is to use their combined "buying power"
to purchase power at preferred rates. Cities then sell the power to it's residents and businesses.
The IMEA and all its members, including Peru are heavily invested in Coal and Coal fired generating facilities. The IMEA and its members are stockholders in a new Coal fired plant under construction in Southern Illinois that has experienced huge cost over-runs in the past two years totalling billions of dollars. Those costs will ultimately be passed along to customers like the IMEA and its memeber cities. Coal industry analysts are not predicting a very bright future for utiliites and others who generate with coal. Also, the Obama administration has not come through with the favorable legislation the coal industry had counted on.
So Steve, are you telling me that when we pay our city bill the city turns around and uses our money to purchase electricity from the IMEA and then sells it back to us? And BTW where does the IMEA purchase their electricity? And one more question - can electricity by stored or do we just purchase it as needed? Apparently we use the Plank road station for back up electricity. If so, why did it not be put into use when the power went out as a result of the car hitting the guy wire on Plank Road?
We need an alderman, like Steve. If he doesn't know the answer, he will study till he finds it.
I hope the citizens in Peru, use their brains, to get some new blood in the council.g
To 3:02 p.m. - I'm telling you that the city purchases power through the IMEA for a particular rate and then sells it to consumers in Peru at adjusted rates depending on the user. Different rates for residential, commercial, and industrial. I believe the IMEA has the ability to buy and sell power throughout the midwest if not the entire country. And remember, the IMEA and its membership are part owners of at least two Coal-fired Power Plants in Illinois and Kentucky.
There is no mass electric storage capability in Peru or anywhere else that I know of. It's purchased as needed. That would be nice though.
Maybe a huge Pink Bunny Rabbit off of Plank Road?
The Plank Road facility provides for all of the following. Mechanical shop for the distribution system service. Line Trucks, Equipment, Tools, etc. The distribution system control center which consists of the
computerized monitoring and control for the entire distribution and generating systems, including the Hydro Plant and the Diesel Generators which are located at the Plank Road Station.
Something many Peru residents may not understand is this. The Diesel Generators are not used on a regular basis for for generating power to the residents of Peru. The primary purpose of the Diesel Gen-Sets is to be available to the IMEA during "Peak-shaving periods". The periods during the year when the demand for power is great and the Agency needs the additional power. I beleive the IMEA provides the city of Peru the equivelant of approximately $1 million annually for the additional generating capacity of the Gen-Sets. Yes, the Gen-Sets also provide emergency back-up for the city of Peru.
Sorry, I can't answer why the recent accident on Plank Road affected the system the way it did. I suspect it may have had something to do with the fact that the newly purchased Diesel Generators are not yet operational and on line.
You can contact the Electric Department for more info about that. Christine Bell does an excellent job for the city in the office at the Plank Road facility. She can help you.
Was this a test?
No Steve this was not a test. Sorry if it seemed harsh but just couldn't quite grasp the idea that we need to purchase power when we have the Hydro and 7 Gen Sets. I appreciate your effort to explain the situation and I do have a slightly better understanding but it is still a complex set up. It's nice though to know that we may well have an alderman in the future who is willing to take the time to find answers for ordinary citizens of Peru. Once again - thank you!
To 11:10 - From one ordinary citizen to another. Thank You!
It shouldn't be to difficult to locate the Hydro file boxes-recall Kristy reviewed the entire project during the election and that is how she saw Baker's company had a lein on the project.
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