PNC is proud to support "Business Forward", where community leaders discuss the issues confronting business in Central Illinois.

(bright upbeat music) (bright upbeat music) - Welcome to "Business Forward", I'm your host, Matt George.

Joining me tonight, we've got two guys, Michael Maloof and Michael Freilinger.

Michael Maloof is the President of Jim Maloof Realtors and chair of the planning committee of the Downtown Development Corporation.

And Michael Freilinger is the President and CEO of the Downtown Development Corporation, which we'll call the DDC sometimes.

Welcome, gentlemen.

- [Michael] Thank you.

- [Michael] Thank you.

- I'm glad you're here.

So, let's start with you Michael.

(chuckles) - [Michael] Okay.

- Downtown Development Corporation, I was doing my homework like I always do and I met you probably 10, 11 years ago and I actually couldn't believe that it's been a decade already.

- [Michael] Yeah.

- That you've been on this grind, so to speak.

- [Michael] Right.

- Can you believe that?

- No, time flies by but we think we've accomplished a lot in that time period and we are diligently working to make sure that we keep moving forward.

- So tell everybody what the Downtown Development Corporation is.

- Yeah.

Well, the Downtown Development Corporation is a small not-for-profit.

It is a public-private partnership between the city of Peoria and our business community.

We have a board of about 13 of our stakeholders and they provide direction to staff, basically me.

And what we do is we try to act as a liaison between the business community, the development community specifically and the city of Peoria.

We try to motivate people to come to Peoria and develop projects here.

We provide advice to the city regarding policy changes and sometimes we actually get our hands in and purchased some property and facilitate land deals to make sure that things happen.

- I think people hear about it.

I think people now know because it's been going on for a decade.

But I don't think, it's one of those things that's just out there and people don't realize the impact.

Because one of the things that I've noticed is and the question is how do you talk to everybody but I wanna lay the groundwork here.

You've got the chamber and then you've got all these other entities and you've got, and then there's you.

How do you coordinate everything to try to get to one voice to equal what's best for Peoria?

- Well, all of those organizations that you've enumerated are here for specific purpose but generally, we all wanna help the community and specifically, the role of the DDC is to promote the downtown, Downtown Peoria.

So our geographic area is relatively small compared to a partner organization, The Greater Peoria Economic Development Council which covers several counties.

So we're focused on a small area.

We're focused on a small level of activities.

And we try to do that very well.

And we coordinate with all of the other agencies.

As an example, when the chamber launched the GP2030 Project, we participated in that both financially and with some advice.

So I think all of the organizations work very well together.

We coordinate well and we try not to step on each other's toes or get their sandbox.

- Well, that was my next question.

How do you not step on each other's toes?

Michael, when you look at your role as chair of the planning committee, what does that mean?

- It's an anticipatory role.

As we put together developments, as buildings become occupied, as we anticipate what we're going to need in terms of streets, police, supplies, making space, parking, that's a function of planning.

And so as we look at some of the developments that are about to occur and Michael will tell you what they are 'cause we're looking at about, I don't know, 300 new residences that will be opened up in the Warehouse District.

- [Matt] Oh, my goodness.

- That takes planning, you just can't make it happen or you'll have people unhappy.

- Yeah, everywhere.

Right, so does Patrick Urich, the city manager, have a role?

Do you talk to him a lot or like, who do you speak to on your committee citywide to help with this planning to, I guess, coordinate?

- The gatekeeper that I found 'cause Patrick's a really busy guy, is Kimberly Richardson.

Now she's the new assistant city manager.

And I am here to tell you, in all candor, the city is behind this.

I don't think, going back to when you were talking to me about dad being mayor, I don't know if we've ever had a better time when the city is stepping up and being a positive force to what we're trying to do.

- That's good news.

So Michael, you're talking about policy.

What would be something when you're looking at policy that you'd have a hand in?

What are some examples?

- Well, let me give you two real quick ones and one of them, I can give you some financial law kinda benchmark in there.

When the city was doing updating its building code, normally they take the International Building Code and just kind of adopt it as is.

When they were about to do that, I think to get into the 2012, I believe, we sat down and noticed that there were a couple of requirements in there that they weren't life safety issues and they added significant cost to development.

So one of those was a requirement to put it in a mechanical ventilation unit in every dwelling unit type thing.

The idea is get fresh air into the building.

Well, if your building's got windows, you can open the window and get some fresh air, right?

So we talked to developers and they felt that that would be, that's just an added expense.

So for example, if you take the Murray Place building, they did not have to make those improvements but if they did, it would've added $500,000 to their redevelopment project.

That's a lot of money- - [Matt] Which may turn someone off.

- Exactly.

- [Matt] Okay.

- So anyway, that's one example.

We were able to convince the construction commission to support leaving that component out of the building code when Peoria adopted it and based on their advice, the city council accepted that.

So that one little change, it can save significant money for a developer which helps the development move forward.

Another example is in the Warehouse District, the zoning allows for zero lot lines.

So in other words, one building can be built right up to the property line and then another building can be built right up to their wall on their property line.

And building code does not prevent or does not allow you to put an opening in that side lot wall, they call that, because obviously somebody could put a wall right next to it and block it in.

So what larger cities do that are faced with that problem is they sell what's called air rights.

What that means is when you typically buy property, it's expected that you own the land and then everything above it, all the air above it up to a certain height and then of course you got planes and everything else.

So the process of owning air rights and recognizing that property right is something that needed to be changed in the Peoria building code so the developer who was buying a let's say, a five story building right next to a one story building could actually put windows along that side lot wall which would allow for the building to be converted into a different type of use, specifically residential.

- Okay.

What's the best definition of a TIF district?

- Well, first thing is to tell everybody what TIF means.

- [Matt] Yeah, what does that mean?

- It means Tax Increment Financing.

What does that mean?

It means that when, let's say a property is underutilized and when the assessor values that property, they'll give it an evaluation, right?

So for an example, let's say your building's worth $100,000 and the property assessor comes in and he says, "Well, it's worth 50,000 because it's vacant "and it's not generating any revenue "so we're going to tax you on $50,000, okay?

So you're paying taxes on a $50,000 building.

So somebody buys that building and then renovates it and all of a sudden it's generating a lot of income and it's been improved.

That building might now be valued by the assessor at let's say $500,000.

Well, the difference in tax revenue from a $50,000 building to a $500,000 building, that $450,000 worth of taxable valuation is called the TIF, the tax increments.

So it's the difference between what it was and what it is now.

And typically what happens is when a TIF district is established, the developer still pays tax on that now $500,000 building but the city gets to keep that incremental increase in property taxes.

And they use that for a number of purposes.

It's for infrastructure improvements like building a parking deck to serve the new development or taking some of that money and rebating it back to the developer to incentivize additional development.

So typically what the city of Peoria has done is kind of try to hit that balance where it's 50/50.

The city keeps 50 for infrastructure improvements and they give the developer back half of that incremental value.

The original tax rate when the building was valued at 50,000.

That still gets divided up among all the taxing authorities.

So nobody's losing any money.

We're gaining because of the investment that has gone up.

- That might be the best definition I've heard of that because I thought I knew what it was but I knew about 60% of it.

That is crazy.

So Michael, I heard this once; "Oh, Michael Freilinger, he's a great guy "but he's just the Warehouse District guy."

We're talking way more than just Warehouse District.

- [Michael] Certainly are.

- So what are we talking about?

- I wanna answer your question but I want to give you another one of the initiatives.

People, if we're gonna attract people downtown, and we have warehouse and we have central business district, you have two distinct areas plus the riverfront, there's another.

If you're gonna attract people downtown, you've got to make it attractive to walk.

I can't get in my car and drive a half a block because I'm afraid to walk.

Well, the city has a budget which they are giving us $650,000 for wayfinding within the city.

How do you get to here?

QR codes, what will I find there?

A restaurant, what kind of food do they serve?

So that part of how to get around downtown is there but also with the two-way streets, with work we're doing on sidewalks, Michael has had the initiative on a development to move the parking deck back from the street to the lot line 30 or 40 feet.

So that when you wanna walk the 180 feet from here to here, you're not walking by a scary garage that you, oh my gosh.

So by moving it back and by providing space for little shops for little restaurants, for pop-up places, now you've got something that people like to walk by ergo attraction to downtown.

- That's interesting.

And I never really, and I think the average person when you think about it, they don't think about those things.

- No, they're not supposed to, we are.

- Well, that's a good point.

So when you're talking about strategy, Michael, like how do you put together a strategy for this?

Or is it just a constant fluid document?

I mean, I was thinking about this probably more than any question that I was gonna ask you is a business will put together a strategic plan.

But the business here is probably, there's probably many goals involved but one of 'em is to get people to live downtown, right?

But how do you put together a strategy?

- Well, the first thing you do is you look for best practices and what has worked in other communities and the interesting thing about developing or redeveloping a downtown is the model is the same, no matter where you look.

Everywhere you go the strategy is the same.

You have to have people living in the downtown in order to revitalize the downtown.

So you start with residential housing.

How can we make it possible for people who want to live in a urban neighborhood, a dynamic urban neighborhood, even in Peoria, how can we make it possible for that to happen?

So you focus on a way to bring residential units, apartments, condominiums, into the downtown.

And once you are successful in that, then you've increased the number of people in a very densely small compact area.

So for example, Michael alluded to a development project and the parking deck that the city's working on in the warehouse district.

Imagine this, one city block that has five buildings surrounding it.

Each of those buildings has a hundred apartments in it.

And each apartment has about one and a half occupants.

So 500 apartments, that's 750 people living on one city block.

That type of density provides opportunities for businesses to go in, for activities to be done.

So that's how we plan on redeveloping the downtown.

So we do have a strategic plan and even though it's on paper and we're trying to follow it, it doesn't mean that we don't evaluate it every year and adjust as we need to.

And then to respond to the question you asked Michael about are we just working in the Warehouse District?

We are not, but the Warehouse District is where we've seen the most improvements and the most activity because it just happened to be the right environment to spawn development.

We had the street improvements that were funded with the Tiger Grant that gave us the two-way streets.

It gave us those nice sidewalks and the brick inlay parking.

When the developer comes into Peoria and I drive them around all of downtown, they look at those street improvements and they say, "That's the neighborhood I want to be in "'cause I can envision my tenants "walking up and down those streets."

And then the other thing is, we're talking about large scale buildings that are basically open up, they're warehouses.

So you can go in and you can put up walls and you can put in your utilities very easily.

And so it's relatively inexpensive to convert that into apartments or condominiums.

And the value of those buildings is much lower because they're not generating income.

So you can come in and buy a building for let's say a million, $2 million, put $40 million or $20 million into renovating it.

And you've got a property that can generate some income.

Now because our rents are low, a developer isn't making as much money as they would with the same number of units in Chicago.

So to attract those developers and be competitive with other areas, that's why we need incentives.

Incentives help offset some of those costs so that the developer can make some money.

Nobody's in business to lose money except not-for- profits, I guess.

So you've got to be in a situation where you can attract developers who wanna invest up to $20 million, some of these buildings are costing.

- [Matt] That's crazy.

- So it's a lot of money which creates a lot of jobs, which creates the right environment.

And the big thing that Peoria is going for it is there's a lot of demand for people to live downtown.

Not everybody wants to live downtown but there are a lot of people that wanna live downtown.

And we do a housing study every two years and it shows consistently that we have a deficiency in the number of apartments in the downtown.

Demand is greater than supply which means that every one of those apartments is full on leased up and all those buildings have waiting lists.

And so there's room for us to grow and we try to make sure that we don't get an oversupply because then that will push down rental amounts so it makes it harder to make money.

- Right, and let's just talk business for a second.

So you look at what, I look at a building like what Becky and Darren Fry did at Water Street and they take that building and if you walked in there you'd sit there and say, "This might be one of the most beautiful buildings "I've ever seen."

Then you take a look at Lee Graves and what he's done with his building at ELM.

Then you look at what Pat Sullivan's done over here and then you look what Huber's done over here.

And then you've got so many different people that wanna make change.

Now everybody wants to make money, I think that's business, you just said that.

But they're all talking too and I think that's important because I was on a committee with city council and one of the committees was that study you were talking about.

We were looking at like cities, I think at one time there's 20 like cities.

And you look at places in Iowa and Louisville and all these other cities and you sit there and you go, "Well, wait a minute, some of those cities "are kind of like cities but they're also bigger cities."

Peoria just seems a little tighter to me.

A little nicer, a little easier to get around in.

So when I look at a place like Peoria, I look at how do we create a buzz for the millennials or how do we create a buzz?

Because see, when you look at somebody, I'm 52 years old, and I still go eat downtown, I do all this and everything but I want this younger generation to come too.

And to come you have to have things.

And I know that's your goal but it's hard to sit here and like, I want more restaurants down there, right?

And so how do you do it?

And I guess it starts back to that strategy piece and that's where my mind kept going is because you have to have places for these people to live.

And then I guess if you build it, they will come.

- In a sense that's true.

People can't move downtown if there's no place for them to live downtown.

And we know that people wanna live downtown because our studies show consistently that, for example we could build 400 new apartments in the downtown and those will be full.

And once they were filled- - [Matt] That's crazy.

- Once they were filled, all of the business activity, the extra events, those exciting things that people come downtown to see, those will start to increase and be more frequent.

And do you know what that does?

That just means that more people wanna live downtown.

- Well, I'm glad you said that, that was gonna be one of my thoughts.

So here you go.

You take, when Rick Edgar was hired at Civic Center, you started seeing a different group of talent come in show-wise.

Let's just say a real diverse group of shows.

And it wasn't just country or it wasn't just this.

Now you're starting to see people come from all over the United States for some of these shows.

And I loved it because I had him on the show and I was talking to him and we've become friends now because I like his mentality of sitting here to say, if you bring in this, we get this group of people that come in from these towns.

If we bring in this person here, we do know that we will get people coming in from Chicago 'cause this band is popular, and you know I never even really thought of that.

I just thought from a national scale.

But if you think about that too, and I was talking to Michael earlier about people migrating out of bigger cities.

Well, what better place to come and cheaper place to live and things to do than Peoria, Illinois?

- You know, Peoria is a fantastic community.

I spent a lot of time in Des Moines.

Most of my working career before I came here was in Des Moines, Iowa which is one of our- - [Matt] That's one of those cities.

- That's what we call an aspiring city.

- [Matt] Yes.

- It's a little bit larger.

A comparable city would be something like, again, I'm from Iowa, so I'll use Cedar Rapids.

So Cedar Rapids is probably a pretty close example of where Peoria is as far as population.

And then those aspiring cities are the ones that are a little bit bigger in population because it gives us something to shoot for.

And so anyway, when I came to Peoria, what I saw was, I think a lot of people are lifelong Peorians kinda take for granted.

We have a beautiful city, we have a very dynamic and condensed downtown which is a nice skyline.

We've got a beautiful riverfront.

- [Matt] Love the skyline.

- Yeah, just coming in from East Peoria, you're coming down that hill and you're looking, it's beautiful.

And that inspires people.

We've got good public event spaces.

The Civic Center you mentioned, that's a fantastic building.

I think it's better than any of our comparable cities could have.

It's close to what like Des Moines would have, an aspiring city.

It's a great- - [Matt] The Chiefs.

I go to 10 chiefs games a year.

- Yeah, yeah.

So we can aspire to those things and we can achieve them.

They can be done but it takes focus.

- [Matt] All right.

- You mentioned the city council, when I was hired which is back in 2014, the city council really became focused on let's solve this problem of downtown.

And they've been good partners this past decade.

- Well, hold your thought for a second because I need to break the show.

I need to have you back on but I couldn't keep Michael here for show after show after show after show.

So thank you for coming on because I wanna continue this conversation.

This is very, very interesting.

Michael Maloof, thank you.

I'm Matt George and this is another episode of "Business Forward".

(bright upbeat music) (bright upbeat music) - Thank you for tuning in to "Business Forward" brought to you by PNC.