Westin bankruptcy plan approval could help Lombard's finances

Posted3/16/2018 5:06 AM

Bankruptcy sounds like a bad thing, but Lombard's finances actually could benefit from a restructuring plan recently approved for the Westin hotel.

The village could see a boost because the plan calls for the agency that owns the hotel to stop asking the village every six months for help making up shortfalls in bond payments.

The village does not own the 18-story Westin hotel at 70 Yorktown Center, but the village board appoints members to an agency created in 2003 to be the owner, called the Lombard Public Facilities Corporation.

The corporation fell behind on bond payments as the hotel's revenue fell short of pre-recession projections.

In December 2011, the corporation first asked for village help making a bond payment, and the village board issued its first denial.

The board declined to use taxpayer money to help pay hotel debt every six months until July 2017, when the public facilities corporation filed for Chapter 11 bankruptcy protection.

Originally at AA-plus before hotel issues cropped up, Lombard's credit rating now stands at B, according to Standard & Poor's.

The repeated bond-assistance denials look bad to the ratings agency, Village Manager Scott Niehaus said.

But as part of bankruptcy restructuring agreements approved in federal court March 6 and approved by the village board last week, the requests will stop.

In exchange for $6.7 million the village will contribute toward physical improvements at the hotel -- $3 million on Friday as the bankruptcy restructuring plan is set into motion and $3.7 million by 2027 -- Niehaus and Finance Director Tim Sexton said the public facilities corporation has agreed to no longer ask for help paying off bonds.

"This is a necessary first step," Niehaus said.

Without constant debt-payment pressure, the village could be able to take on new bonds, which it hasn't done since 2013, Sexton said.

Village President Keith Giagnorio said Lombard will build up credit like a new consumer getting a low-limit credit card -- slowly, and one step at a time.

"To get this behind us and start building up our credit again is top-priority," Giagnorio said. "It's amazing what we've accomplished and where we are without having any credit, without being able to borrow a penny, really."

While Lombard looks to rebuild its credit, the village plans to make the first $3 million payment on Friday under the debt restructuring plan.

The payment will come from money already in the water fund.

Sexton said the village had been saving in a reserve, so paying back the $3 million, which initially was used for water main improvements at the Westin site, will not result in any service cuts, water rate increases, tax increases, layoffs or project delays.

All money from the village will be put toward upgrades at the hotel, which is now 11 years old -- not toward repaying debt.

The village's second payment of $3.7 million will come from a tax-increment financing district created late last year in the Butterfield/Yorktown area to help spur redevelopment of the former Northern Baptist Theological Seminary property.

When an area is designated as a TIF district, property taxes paid to local governments are frozen for up to 23 years.

Any extra property tax money collected within the area goes into a special fund. The money in the fund then can be used to help pay for certain improvements.

Sexton said estimates show the Butterfield/Yorktown TIF could generate $100 million. If the fund does not create $3.7 million by 2027, the village still must pay $1.5 million toward hotel improvements, village attorney Tom Bayer said.

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