A story that appeared on our website this past week about the Elgin Hotel — “City to issue bonds for Elgin purchase” — was a corrected version of a story in our May 4 print edition titled “City to buy Elgin, lease to Enseys.”
We revised the story and made the switch online immediately because the city of Marion isn’t buying anything, nor investing any money in the Elgin Hotel project.
Industrial revenue bonds, we discovered, can be perplexing to those not used to working with them.
We studied the city’s resolution and saw this: “The Issuer (city of Marion) is hereby authorized to proceed with the acquisition, construction, renovation and equipping of the Project (hotel).” It looks pretty straightforward — city acquires hotel. In common parlance, acquire and buy are synonymous. We also noted the phrase “to be leased by the Issuer (city) to The Historic Elgin Hotel LLC.” In general, a lease gives someone the right to use something owned by someone else.
We also talked with city officials and a public finance attorney, and looked at background material on IRBs.
Somehow, we still missed the mark. Welcome to the strange world of IRBs.
In subsequent conversations and e-mail with Tammy Ensey, it turns out there’s more than one way to deal with IRBs.
“While the issuance of IRBs requires the city to have a legal interest in the property, there are a number of ways to satisfy this,” she said. “The Historic Elgin Hotel LLC will continue to be the owner of the property and will be indebted to the lenders until all loans are satisfied.”
City-issued IRBs benefit businesses by allowing property and sales tax exemptions. A flourishing Elgin Hotel should offset those breaks, Ensey said, through such things as increased sales tax, transient tax, increased utility utilization, out of town visitor expenditures, and additional jobs. We reported more detail about the projected value to the city and community in the article.
We learned a lot about IRBs in about 48 hours, but not enough before press time to avoid inaccuracies in our reporting. Asking more questions of more people could have prevented that.
It’s a tough lesson that we won’t soon forget, and we’ll all be better off for that. We hope those who were in some way distressed or upset about the errors will accept our most sincere apologies.
— david colburn