Finance Committee - Regular Meeting

Okay, welcome everyone to the Finance Committee meeting here Tuesday, June 16th at 5.30 in the City Council Chambers. Roll call, please. We have Councilman Hugg, Councilman Reardon, and myself are here. Can I get approval for the minutes? So, motion to approve. Thank you. Is there a second? Second.

I'll second. I'm sorry. I'm reading something.

All in favor, aye. Aye.

Glad you guys came prepared.

Excuse me. You know, this is being taped. You don't want to embarrass yourself. Citizens to be heard on agenda item. Seeing no one at this time, we'll move on to the agenda items. Resolution accepting $26,000 in grant funds, small equipment grant for the state of Illinois office of the state fire marshal and purchase turnout gear.

So I chief carries in the audience if you have any questions, but this is to do exactly what it says so Grant from state fire marshal for turnout gear in the amount of 26,000 with no match Resolution designating the financial institutions to be used as depositories for the city's funds So City Code restricts the institutions that the treasurer and myself can invest funds in to those that have been approved by council. This resolution adds Wintrust Financial, Oak Plain Trail Bank, which owns Joliet Bank and Trust, to that list. I've had discussions with them. They've got a product that has a little bit better interest rates than Illinois funds. Actually, it's indexed off of Illinois funds. And so looking to add them to gain some additional yield for the city.

And we're not eliminating any of the other?

Nope. You have 15, 20 banks?

Yeah, 10, 15 banks. I try to centralize those that have a physical presence in the city of Joliet. There are institutions that are outside of those. I did not remove anyone, but there are institutions that once had a branch but don't, so I've left them on the list, but we don't have any funds in those.

Next on the list, resolution.

So resolution approving a new grant and extending a previous grant with the Rialto. So this resolution, the city starting in 2024 restricted the grants for capital purpose. The Rialto for the 24 grant said we're going to use it for our HVAC project, which has just started this year. given that is enough time has lapsed that grant to be used we'll have to convict council to extend and so it extends the 24 grant in the amount of 475 which was the original grant amount so that it can be used in calendar year fiscal year 2026 and then it would also provide for a new four hundred seventy five thousand dollar capital grant to be used in calendar year 2026 Rialto is indicated for the same HVAC project

Didn't we have them approved in the budget already?

Yes. These are already funded. It's just when the council approves the grant, you approve the grant, and then there's a one-year extension that the city manager can do. And so that's why 25 is not on here. But the 24 is beyond that. It has to come back to council for them to be able to.

No, I understand 24. Not a problem there. But why are we approving a 26? We already did.

you approved the reservation of funding in the budget but the actual grant itself needs to come back to council okay yes because it's reimbursable just because it's a grant it's the money out the door now kind of think of it as a construction project just because the construction projects in the budget you still have to award the bid and the contract same concept and then for the next item i'm going to here wait can you It's authorization of a loan agreement with the Rialto. I must disclose, first off, I had a typo. It is not a $2.5 million loan. It is only a $2 million loan. So that's the first correction I want to make as part of the memo. But once again, Rialto's here. We'll let them kind of talk about this item, and then I'll be happy to jump in with any questions in addition to Wade Welsh.

Thank you.

Thank you, Steve. Yeah, just page that.

Good evening. So just wanted to take everyone through kind of how we got here, obviously with the Rialto and our ask for this loan. So if everyone remembers back in 2024, we tried to start our HVAC renovation project, and the first line of operations was asbestos mediation. Unfortunately, the company we hired, which was Illinois State Licensed Asbestos Mediation Company, Had a violation and was the IEP a the Illinois EPA was alerted came in did an inspection and shut the theater down The theater was shut down from late July through mid-october And then work continued even through the Christmas season that year down in the basement until everything was cleaned up on that side of things so That was the kickoff to this issue, which we then ended up having to punt our HVAC project until this summer due to time constraints, all that kind of stuff, which bid costs increased, as you can imagine, all that kind of stuff. And then the dollars that we had allocated from the Rialto to help pay for this project, along with, obviously, as we just talked about, city grants, Will County grants, and state of Illinois grants. We use those funds to fund the cleanup on that side of things. So that is why right now as we sit here, we are short. The total budget came in for the project through the bid at $9 million. We had secured between $6.9 and $7 million. So that's why they asked, was that the $2 million on that side? Obviously, we are, over the past two years, still going from the legal process. We are currently in the mediation phase, as far as that goes. So there are some confidentiality agreements that have been signed, so I can't say too much on that side of things. But that is the phase of the litigation we're in on that side of things, as far as that goes. So this presentation just kind of takes you through, obviously, the challenges that we've had over the past couple of years. As you can see, some of the pictures of the asbestos mediation, the areas that were affected, we cleaned the entire theater for the IEPA's direction. The violation happened in the basement, but they made us clean the entire theater, including University of St. Francis, including Midland Bank, including all of our admin offices, everywhere in the theater on that side of things. So just some high level things about the Rialto. I presented this presentation about a year ago to the board as well. So with some updated numbers, just who's coming. So I've been here now for four seasons. So fiscal year 23, now through fiscal year 26. Kind of shows you number of events, total event days, and attendance per year. Your eyes should go to fiscal year 24, where we had our best attendance, 140,746. That's where we should be. Fiscal year 25, as I talked about, we were closed because of the asbestos issue. And here in fiscal 26, we've also closed for the month of June because we started the HVAC project. So our last full season at the Rialto, we drove 140,000 people to downtown Joliet. We completely understand our role as the economic engine for downtown Joliet. With that being said, we've still had two great years in 25 and 26, driving over 100,000 people downtown both years. Financially, from an operating standpoint. So this slide shows since VenuWorks came on board in 2017 where we stand from a net operating income from fiscal year 2017 through an estimate for this year for fiscal year 26. So hopefully your eyes go right to the black, which starting in fiscal year 24 was the first time ever in the entire history of the Rialto that they turned a net operating income. Some called it a fluke. Some board members from our end even said it could never happen. Well I'm proud to say that we're estimating right now in fiscal year 26 that it'll be three years in a row that we're turning a net operating income. So obviously huge, huge gains in that world. So we're treating it as a business. Obviously we understand we are a historic landmark and with that comes a lot of responsibility. We're also treating it as a business and obviously wanting to drive revenue. So here's just some of the things that have happened over the last two or three years. So we completely restored our terrazzo floors. So we did a $1 million restroom renovation on the first floor for both men's and women's, so tripling the number of women's stalls, increasing the number of men's urinals, adding a family restroom. The big one, securing our roof, which was in horrible, horrible shape. So a $4 million roof and masonry restoration that replaced 13 total roofs for the Rialto. And obviously the one we just started here in June, the HVAC renovation. So this has been my biggest concern over the four years I've been here. My concern is I was gonna come into the office and the boilers, the chillers, all which are dated back to the 1950s and 1960s just give out. And as you can know, with no conditioned air, we have no shows, we're shut down and our reputation in the entertainment industry is gone and we're getting no shows for downtown Joliet. So that's why this has been a hot button for me to get this done as soon as possible. And then just some reasons why we're the economic engine downtown Joliet. Some of the local businesses just kind of giving their thoughts on what the Rialto means to them, and more importantly, what we mean to their businesses and the revenue we drive for them. So whether it be Chicago Street, whether it be Arcus Restaurant Group, Blue Taco, obviously the Joliet Chamber, and obviously the City Center Partnership as well on this side of things. So that's why, obviously, we come asking for some assistance with this loan. Obviously, as it's explained in the memo and everything, we will fully pay this back, obviously, once this litigation gets settled in one way or another. And obviously, if there is anything left over on that side of things, it would come out of our future grants on that side as well. So not asking for a handout, just asking for a little assistance while we're kind of struggling financially. Can I answer any questions?

Yeah. Cool. Thank you. What was the HVAC? Was the HVAC estimate $9 million?

So originally back in 2024, the estimate was between $8 and $8.5. But once we went to bid to start it this year, the bid came in at $9 million. Okay.

And what was the total cost on the asbestos removal?

The asbestos removal itself was about $1.7 million. And...

I know you can't go into any detail with the original contractor. This was reported, there was a problem reported in 24, am I understanding that right?

Correct, yes.

Who reported it?

A worker with the company doing the asbestos removal.

So they were removing the asbestos already? Correct, yes. We had started the project. And then they reported that you had asbestos?

No, not that we had, we knew we had asbestos. The asbestos wasn't handled properly. That was the issue at hand. By the company they worked for? Correct. The state licensed company, yes.

So what was the, so was there an additional cost involved from their mistake?

Additional cost, I don't know. And the asbestos removal. So as soon as the violation happened, they were taken off the job.

Did their mistake cost more than it would have had they not made the mistake? Absolutely. How much more?

It cost the cleanup. That was at $1.7 million, I mentioned. We would have never had to clean up the theater at all.

So the $1.7 million was the cleanup of the mistake?

Yes, the cleaning of the entire theater. What was the estimate of the removal of asbestos before the mistake? I'd have to pull up the bid document. I want to say the actual cost was somewhere around $200,000.

So, and if I understand right, with the HVAC, I'm trying to get my head around the numbers. I'm not so worried about the inside. You had a $3 million grant from the state lined up, roughly, a $3 million grant for the county that goes towards the HVAC? Correct. And you had $2 million in reserve? Correct. Roughly?

Correct. Along with fiscal year 24 and 25 of the City of Juliet grants as well, so another $975,000 there. And... Or 950, excuse me, if I do have my math right.

So I guess the question is, and the same thing with the payback of the loan, right? I'm not comfortable saying that future councils are going to give $425,000 a year, but that's an integral part. If you will, that's your collateral, isn't it? I may not be here in a year or two or four, and the next council may say, we're done paying. So why would the banks not... If this was a no risk, low risk proposition, why would the banks not extend the line of credit?

I'm going to bring Bob Vlado, our board president, up to speak to that a little bit. But I think it's because of our corporate setup, for lack of a better word.

Well, yeah, that's part of it. But when we talked to several banks, they just didn't fit their risk model. They did not want to.

No, but Bob, they have a vested interest in making money on interest. That's how they make their money. So I'm curious why they overwrote the loan.

Well, they could make money on interest, but if they're going to lose $2 million, it's not worth it.

But you're saying that they won't?

No, they won't.

You see what I'm trying to reconcile here?

Well, I see what you're trying to reconcile, but I would respectfully say that, again, they don't have a vested interest. city of Joliet does.

Now where is the, for as much information as you can provide, where is the lawsuit at this point?

The lawsuit is that we've started formal mediation. We've had two meetings, I believe, and we are at a point where both parties are considering the next step, if you will.

Has mediation produced any kind of settlement number yet without giving me the number?

Yes, it has.

Should we not wait until that's finalized? I mean, is it enough to cover?

I really can't answer that, Larry.

Okay, so I would be asked to approve a loan without the information that I need. I understand your fiduciary restriction that in the process of the... of the litigation, there's only so much you can say. I get it, it's kind of a conundrum, a quandary, and probably a tabling would be better, but all right, I got the answers I wanted, thank you. Thank you, Bob.

Thank you.

Your first name again? I'm Wayne. Wayne, thank you.

I also, as you know, I'm the liaison, and I can't say any more than what they can say, nor do I know all the ins and outs of it. But I do want to have us consider the fact that this is, they do have a contingency in what they already have as far as the funding goes.

In the 9 million, there is a contingency.

So there is a contingency, there is a mediation going on, and this would be just like any other loan for construction, it would be a draw loan. So what they would be first of all drawing on would be that initial seven million, And in that timeframe, which we're close three months?

Yeah, so we're close through mid-September.

Yeah. So in that timeframe, I'm sure we're all hopeful that this mediation will finalize. And whatever will come forth from that would be, I would hope, a good sum. And between that and... You know, the contingency possibility, this may be a done deal before it's ever used at all. But we're trying to keep them, give them an insurance policy that they can keep going and continue the Rialto the way we all have used it and loved it over the years. So I feel much less risk than that. then you you apparently do but I I can see that we're gonna we're gonna be months down the line hopefully before we need to be Running out of that nine million or seven million that we already have right I was gonna say that I think that's my biggest concern councilman hug is just timing lies with the project that if we do table it and

the litigation takes a little longer than we all hope or expect or anything like that, that we do, we can't have the project stop and not have a fully finished HVAC because then we're canceling shows. We're having a way bigger economic impact across the board if we just kind of stop the project waiting to see how this litigation plays out. So I just wanted to share that on that side of the question.

No, I appreciate that. So using hypotheticals, okay, so you get a $2 million loan. If the litigation were to be settled in our favor in any way, shape, or form in your favor for $2 million, then that would be the end of that.

Correct.

If it's only settled for $1 million, well, then it would only pay half of that off. And if two years from now a new council no longer gives you funds, how would you pay it off in that worst-case scenario?

Yeah, I mean, we obviously have to figure that out on that side, right? So if the city didn't honor it on that side of things, we'd have to figure it out on our own to come up with those dollars. We'd have no other choice.

Right. Otherwise, this kind of locks future councils into basically saying, if we want to get paid back, we can't say no to the grants anymore. You know, there was a time, Wayne, I don't think you were here. Bob, you remember. There was a time that, as a council, we talked about, and as an administration, The board and the employees talked about weaning off. Remember that? And we've never done that, have we? And we never would if we extend this loan. The loan is the collateral. I mean, the grant, the future grant is the collateral for the loan.

So there are two things. Steve reminded me that the issue with the banks are that there is no collateral in the building. We don't own the building to give that away, if you will, as collateral. So that's number one. Number two, to your concern about future city councils, right or wrong, I am convinced that we would convince them that the Rialto has to continue. And I'm convinced that no matter who sits here, they're going to see that and understand that, just like this council does.

And I believe you are convinced, but none of us can guarantee one thing or the other. There's no guarantee.

Well, that's true. No guarantee. What I can tell you is that to sherry's comments about where the discussion is and where the mediation is going to end up it is a significant number that's all i can say i can't tell you where it's at but we are close enough to each other that we are going to reach an agreement here shortly and it could work out that we don't need to borrow a dime from the city and i really hope that's the way it works out If we look at it that way, then we do have time to table to wait for the... From a timing perspective, I think Kevin wanted to bring both The 475 issue and this issue to the council at the same time. It's going tonight, yeah. As opposed to splitting it in two.

Kevin, is there a reason?

I mean, I think it's driven by the construction timeline and the fact that this route was closed, work's underway. Talking with Wade, I think the thought was you'd have to know sooner than later.

I guess what I'm getting after is it was just explained to me by Bob, and I think Wayne kind of echoed it too, that even if we did approve a loan tonight, by the time we even used it, the litigation could be settled. Yeah, I would defer to them on the timing. We wouldn't need it, so why can't we table it?

Yeah, I would defer to them on the timing.

It was funny because he deferred to you.

Well, I'm not saying that the mediation amount is going to cover the full loan amount, but between using the money that we have and that and the timing of when we would use it could very well be that we don't need the city money.

Did the banks consider the yearly grants like we're considering?

The yearly rent? Grants. Grants.

So like me, they're not convinced that it will last forever.

Correct.

You are, and there's many people that are. I'm not necessarily in that crowd. I'm in this crowd over here.

I understand.

Okay. All right. Thank you. I got the information. Thank you, Bob.

I want to bring up one more point. We are showing that for now consistently, I mean, not as great as our 2024 operating in the black, but we are consistently operating in the black. And if we get a whole season where we can really be open for the entire season, I can see That's where they would pay it back if they're not, if they don't get enough from the funding. Yeah, I mean we're operating, we're paying operating right now and we're doing great with that. We're doing expenses, income. We're operating in the black. That's where you would get the funding that you would have to use to pay back the loan if nothing else. But I also would like us to consider all the businesses this would impact. if the Rialto doesn't continue to function the way they do. I mean, talk to any of the businesses. When we have some type of event down there, it just makes every restaurant, every bar, every place buzz. And now we put this square in. This is all part of us making it happen in Joliet, and I completely support this.

Councilwoman, I understand that. However, we had a specialty program to help businesses struggling from construction just for the downtown. We have businesses on 59 that have struggled. We have businesses because of all these different reasons, some construction going back to COVID. We've had businesses up and down Route 30, you know, from downtown all the way out, and they don't get any help. So, I mean, it's tough to, I'm a private, a small business owner myself. I have been since I was 29 years old. And, you know, people think that, you know this, you're your own business owner too. People think that if you're your own business owner, you get all the leisure time. No, because if you don't sell, if you don't make money, you don't eat. And so, this is all focused on downtown. We're not doing the same thing citywide, and there's been many businesses that have been affected adversely by construction. Our business was, but that was in Crestville at the time. Over the last 30 years, there have been many businesses that have had a cutback or have gone under because of construction and certainly because of COVID. So I don't want to see any business go under, but we can't stop businesses from going under, and we can't focus on just four restaurants downtown and ignore the 34 restaurants elsewhere in the city. But we have to ignore the other 34 because we can't afford to do the same thing for everybody. I believe in an even hand. But I appreciate what you said. I do.

The timeline on the HVAC is...

So the project, we officially closed the theater. So the project actually started back in March. So working in the basement, doing a lot of the demo work, all that kind of stuff. So we officially closed the theater June 1st. And then the goal is to be back open for business mid-September. We have events scheduled starting the end of September. And then a Completely jam-packed schedule, October, November, obviously, and then into our home for the holidays on that side of things. So, yeah, I mean, that's my concern as we're talking about this is just the timing aspect of it and tabling it. So, yes, we have the first $7 million covered, but we're going to blow through that here during these summer months that these bills are going to come due very, very quickly on that side. So that would be my concern on tabling it a month or two months to see how this litigation plays out.

The contractor handling this had no problem with the units that needed to be purchased, that type of thing? As far as getting anything?

No, everything's on schedule. As crazy as it is with the Rialto, usually everything goes chaotic. So far, so good with timelines and everything. So I think we're in good shape, yeah. So everything's been ordered. A lot of it's already on site. So it's now just putting hammers and nails into the place and getting it all in place.

Okay.

Thank you, everyone. Appreciate your time.

Thank you.

Mr. Singh would you have to talk about the budget amendment for the 26 budget provides funding to settle litigation associated with overweight and overlaying truck citations This goes back to finds back to 2016 or 2015 right and

The ordinances go back that far. On this class action, because there's probably close to 5,500 tickets, they go back to 2018. That's the general statute of limitation is five years. So we are going back.

The ordinance itself is, but the tickets that are going to be reimbursed or recouped only go back to 2018.

November of 2018 is the first one. That's the question I have.

Thank you. So these people, do we need to find them, or are they going to find us?

So it's a class action. The plaintiff's attorney kind of takes care of all that. If there's an administrator, I'm sure everyone's gotten the little thing in the mail saying opt in, opt out. It's kind of the same thing. So you enter into this and it, I want to say relieves, but it takes care of all these tickets. So we shouldn't have any more going forward.

Is your only question a good question, Pat, too? Because my question would be, what if somebody claims they didn't receive the opt-in, opt-out? Obviously, if you can prove they received it and it didn't respond, then they're... That's all pursuant to law.

Could they come back from that group? No, it's part of the class action. They would have to opt out, and there's mandatory time frames they would have to do that.

And I'm imagining that their database... It's ours. Correct.

We've had discovery. We've had to tender all that to plaintiff's counsel.

Okay.

Thank you.

Larry, do you want that item separate? Thank you. I'll space it out again. Okay. Under agenda items, I'd like to make a motion to move 9969, 9973, 9974, and 9983 to the full counsel with this committee's recommendation to approve. Okay, and then under agenda items Item 99 76 I'd like to make a motion to bring this item to the full council with committees recommendation to approve That's the rail Okay, I'll second that motion

All in favor? Aye. Aye? No. Opposed? Okay. Let the record show, two to one, this moves forward. Reports.

So just real quickly, since we're running out of time, you've got the May monthly financial report. Pretty much same story as last month when it comes to the report on that. You've got the exceptions, which is invoices paid in between meetings, generally utilities and reimbursements. library Robin passed out the more detailed in non-financial information First five months they had 61 just under sixty one thousand five hundred visitors at Black Road just under sixty thousand visitors downtown They attended thirty two thousand events of them thirty two thousand attended eleven hundred and fifty eight programs and checked out just shy of 175,000 materials You've got the travel report And then I just want to let the Finance Committee know we did formally launch the 27th fiscal year budget. First draft from the departments are actually due first thing Monday morning. And then we have meetings on the books with the city manager. And we actually created an internal budget committee to help vet through the budget, to get it balanced, to then come to the full council. Our goal and the schedule that we have crafted calls for the adoption to come to the City Council for approval in October of this year Two years ago it was ready in October just never not adopt.

No, I mean starting the process in June and

We generally launch it beginning of June. It just seems to get bogged down. And so we've made a conscious decision to not let that happen this year and to stay on track to bring it to full council in October. Like I said, it'll be ready for adoption in October. What you guys want to do after that, you may have additional, like a couple years ago, there was additional questions, some additional vetting that occurred. And so I don't want to make it sound like a bad thing. So it just gives you plenty of time to look at it. So that's our goal this year.

Questions, thoughts, motion for 99.9?

Approve all the reports. Make a motion to approve the reports.

Second all in favor aye any opposed same sign Any new or old business not for final action? Public comment I know we have some public here now if anybody wants to comment on something that was not on the agenda This would be your time Seeing none for a motion to adjourn so moved second all in favor aye aye aye Thank you adjourned. Thank you