Another city business loan deal goes south

Buses behind the Davis Transportation office at 1040 Wesley Ave. on Tuesday.

Another business to which the City of Evanston has loaned money is going out of business -- leaving the city's prospects for recovering its loan funds uncertain.

In response to an inquiry from Evanston Now, Paul Zalmezak of the city's economic development staff says Davis Transportation has failed to make its two most recent loan payments.

Davis had negotiated a new, more lenient payment schedule on its $140,000 loan earlier this year after falling more than $44,000 behind in payments on the old schedule, according to city economic development reports.

Zalmezak says the city has received notice from an attorney for the business that it is closing and that buses the firm leased as part of an expansion plan funded by the city loan are being repossessed by the leasing company.

Davis Transportation owner Jared Davis says a lot of potential business deals to support the expansion just didn't pan out, and that after waiting as long as he could for them to come through he decided he had to shut the charter bus service and a related courier service that also operated out of the office at 1040 Wesley Ave.

Davis, who at the time had just completed a term of service on the city's Transportation and Parking Committee, sought the loan in July 2014, to fund more than half of the planned expansion to add at least three new buses to the company's charter fleet.

He had initially hoped to receive some of the funds from a Cook County economic development loan program funded by the federal government, but according to a city staff memo, after Davis inquired to U.S. Rep. Jan Schakowsky about delays in approval of that plan, the county declined to go forward with the deal.

On Aug. 11, 2014, the City Council approved the $140,000 loan on its consent agenda.

The loan to the company was secured by a personal guarantee from Davis, and Zalmezak says, "We are evaluating our options for collections now."

Davis says he hopes to eventually be able to pay the city back, but doesn't have the financial resources to do so at this time. He says he's occupied for now with the steps needed to shut the business and hasn't determined what his next career move will be.

Just last month aldermen were forced to write off $154,000 in principal and interest from a $200,000 loan the city had made to the Chicago's Home of Chicken & Waffles restaurant in 2012. The restaurant went out of business a little over a year ago. That loan was secured by a second mortgage on the restaurant building.

Of nine loans to eight businesses the city has made since 2012 that are still listed on the city's books, officials say the other seven are up to date on their payments.

(This story was updated at 12:20 p.m. to add comments from Jared Davis.)

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Comments

Let's remember this when there is "no money" for public transit

This money went to a company that describes itself on its website as a purveyor of "Luxury Charters."

At the same time you had some Council members voting against Divvy expansion into Evanston because it is "too expensive."

Thankfully, Divvy is going to come to the city. But because they are only working with 10 stations, many parts of the city are going to be underserved and the functionality of this cheap form of public transportation will be undermined.

If the city had invested this money in PUBLIC transportation instead of a company pitching itself to the 1 percent, we would have been better served as a community.

Hopefully we can recover the full amount and invest in public infrastructure instead of "luxury" businesses for a small minority of the population.

UH-OH

Whoops, you did it again.

bus loan?????

And how, exactly, did loaning all this money to private busing benefit the majority of Evanstonians???? What a bunch of suckers the council people are...( aka.....our bank is your bank!)......wake up and smell the coffee! Vote these people OUT.....

When is the deadline to submit a candidacy?

My one and only platform position could be: no more business loans of public funds.

If none of the many banks in the area are lining up to lend to a company (in a zero-interest rate environment) - there must be a reason. How hard is that to understand?

Free Market

The City of Evanston needs to get out of the loan business and let companies succeed or fail on their own.

Corporate cronyism in Evanston? Say it ain't so.

So our wise city councilmen with the advice of the Evanston Economic Development Committee has so far pissed away almost $300,000 in bad private business loans. More than a quarter of a million dollars in taxpayer money, gone. Nice.

What alarms me is the fact that Jared Davis served on the city's Transportation and Parking Committee. Did his political connections help him secure a six figure loan that even the county denied him?

Maybe there needs to be an outside audit investigation of these loans. Ya think?

You get what you vote for.

Happy taxing, Evanstonians!!!

More Failure ...

So the highly compensated part time City Council makes yet another bad loan and but wants a raise. That's the spirit that has made the Chicago Area Public Sector the laughing stock of the rest of the US. City Council loves using tax money for bad loans...that is why IL leads the US in debt and worst return on taxes paid.

City is going to have to raise taxes just to cover the bad loans..call it the Evanston Bad Loan Tax.

Example of why the city

Example of why the city shouldn't be in the business of financing a start-up business, or any business, with taxpayer money. There are already many incentive programs available to encourage investment. If this company could not find a commercial lender or private financing, it likely wasn't qualified for such funding. Results seem to clearly bare this out. And the "Citizen's of Evanston Private Equity Fund" has lost another $140K. The city should not be in the business of funding individuals or companies, especially based on favoritism or connected status. An independent party review of the "loan portfolio" should be conducted so that we know the real status of these loans.

Independent review

An independent party review of the "loan portfolio" should be conducted so that we know the real status of these loans.
How might this be pursued? I would like to see something like this be conducted.

to loan or not to loan

I'd like to know the procedure that these loans get approved.....who reviews them..who gets the final say-so on giving out money, and is it a council vote? SOMEONE needs to take responsibility for these horrible business deals. It wouldn't surprise me a bit, if there is something "funny" going on with all this money getting passed out, when there are banks to do that.

Thank you Bill

Bill,

I would like to thank you for the work Evanston Now does to bring transparency to Evanston residents.  I wish more Evanstonians would pay attention to the how our city doles out money to any business they wish without any thought of the risk it poses to the tax payer.

At some point, people are going to ask the question, "is the city negligent as a fiduciary and are there any legal actions that the tax payers can take outside of an election?"

Good question

At some point, people are going to ask the question, "is the city negligent as a fiduciary and are there any legal actions that the tax payers can take outside of an election?"
Now that you mention it, I find myself wanting to know this. Does anyone have the answer to this?

Pleased to see the silent masses stirring on these boards

The  City has  been  run  by  the  few with their  select and  costly agendas for  far too long. As they say  ,  a  bull market  covers  up a  lot of mistakes. Unfortunately  our   City  finances  have been in a  bear  market  for  years and  the  administrative sloppiness, if not  outright negligence, has to come to  an  end. Many of  us  do not  have the time to  appear  at council meetings and be  a watchdog so perhaps it is  time to  put  a referendum on the  ballot  to  limit this reckless and  capricious city  spending.

Ethical or popular?

The city needs more ethical members of the council and not ones who need to be popular/political.  Please educate yourselves and VOTE in the next election.

ethics???

LOTS of cronyism going on, as usual. Let the council members take THEIR own money, and pay the city back for all these losses. It's quite evident that they don't care...and YES, they DO have ulterior motives for money lending.....again...EVANSTON is NOT a bank......Shame on all of them!

How many more deals like this are coming?

As a resident and taxpayer, I am very interested in knowing what kind of relationship the recepients of the loans have with city officials in general. City officials are using public money and have no skin in the game -other than being scolded by public during public meetings- leaving taxpayers to foot the bill. Why are those recepients not getting loans from banks? If anything, banks are great are due diligence...we should know why banks rejected them in the first place, or ask them to apply there first before asking for public loans. For business owners who default, can we at least report those defaults to their credit agencies? Something smells fishy...

Can the city keep the buses?

Does the city at least get to keep the buses, and use them for the Levy Center, or for camp transportation?....or any other good use?

Another gift down the drain---Council have no shame ?

These loans and gifts to ‘favored’ companies must stop. If their business is sound and the purpose profitable, a bank will make the loan---and do due diligence beforehand. If not the loan and project should not be undertaken unless the owner funds it out of his pocket—wholly.

All this city money that is being given away is not the “Cities” like some dis-embodied entity, or the Councils, but the taxpayers! Then the Council and groups clamor for other money---that is not there. The money is not “free.” It comes from the taxpayers.

The same is true of “grants” or other money from the county, state or federal government. It is the taxpayer’s money that government loves to play around with. Instead of sending so much to the county, state or federal [only to have them take their cut and “out of their good graces” send a little back, Evanston should keep more and any projects be approved by voters and the Council more directly be held responsible.

As it is the city does not even seem to spend this grant money well. Every failed loan or useless gift to “favored” projects, means taxpayers foot the bill and “unfavored” businesses are hurt by the city helping their competition---and increasing their taxes. Has the city government no shame ?

This needs to stop

No, they don't! Too bad they get free reign, when they are all self-serving. This needs to stop.....how about a Coup?????

Cook County Turned Down

Why did the Evanston Economic Development Committee think handing out $140,000 was OK when he was rejected by Cook County Economic Development?

committees

Because people on committees aren't required to take an IQ test, or possess any form of logic, common sense or impartiality.

Why does the City think it's smarter than the private sector?

One has to wonder why City of Evanston thinks they can make better business decisions than the private market. If a business cannot get a loan from a bank or commercial lending source, there is probably something wrong with the business plan. All we here from City Council is that there is no money for anything. Clearly, that's not true. There is plenty of money to waste. Now the tax payers are going to be asked to finance a $5 million theater on Howard Street? Really? How many people are going to use it. Where is the money going to come from? Oh, let's just use TIF funds to pay for another Alderman's pet project. Too bad parks are not anyone's pet project.

Another city business loan deal goes south

I believe that our city council is made up of good people trying to do good things for good people and our community. Mistakes are made of course. From what I understand the majority of loans have been good. It is easy to criticize from the sidelines and much harder to serve the public. A minority opinion indeed!

The Road to &#@@ is paved with good intentions

Indeed, City Council is comprised of "good people trying to do good things." They do have good intentions. But when they don't have the expertise and they get involved with programs outside the scope of their appropriate role, they create other problems. They should stay away. Making loans is not the business of city government. As others have pointed out, there are numerous other places to get a loan. 


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