The Problem Facing the Crystal Lake Civic Center Authority – Part 2 “The Rat’s Nest”

The Crystal Lake Civil Center Authority Board was reconstituted after a long period of inactivity at a meeting on August  2, 2016.

Whoever took the minutes did a splendid job, so you can take the same journey of discovery that I did by reading them.

The Raue Center marquee for  theMay 5, 2017.

Oaths of Office

Mayor Shepley administered Oaths of Office to each member.

Call to Order and Roll Call:

Crystal Lake Civic Center Authority Board Members present were: Pete Affrunti, Greg Danielson, Tom Hayden, William Mack, Jr., Tom Ormsby, Gary Reece, Mike Splitt, Lisa Waggoner, Fred Wickham. None were absent.

Mayor Aaron Shepley, City Manager Gary Mayerhofer, Finance Director George Koczwara and Special Counsel Vic Filippini were also present. Review of Open

Review of Open Meetings Act/Freedom of Information Act Online Training

[This part is just a review of what state law requires of any board member.]

Basic Business and Organizational Issues – Bylaws

[Again, pretty standard, except that the Board apparently had not adopted by-laws previously.]

Relationship between the City and the Civic Center Authority

Aaron Shepley

Mayor Shepley thanked the Civic Center Authority Board (CCA) members for their willingness to serve.

He stated that each member of the CCA had been selected by him because of their longstanding commitment to the City of Crystal Lake and the Crystal Lake community.

Mayor Shepley advised that the Civic Center Authority Board, because it was created by an act of the Illinois State Legislature, is a completely separate body from the City of Crystal Lake, with the only exception being that  the Mayor of Crystal Lake has the authority to appoint members to the

CCA Board of Directors. Background Presentation of Civic Center Authority Board and Relationship to the Raue Center for the Arts

In providing background information, Mayor Shepley stated that the mission of the CCA was primarily about the Raue Center for the Arts, explaining that many years ago the State Legislature had enacted a specific grant of authority which enabled communities to create Civic Center Authorities for the purpose of having a civic center or a civic enhancing entity, and when that statue was about to “sunset”, Crystal Lake’s Mayor at the time, Carl Wehde, saw it as a potential benefit for the future, even though there were no plans to use it at that time. The CCA was created but it was never convened, and it was dormant until a few years later when the Lucille Raue estate made funds available to purchase and renovate the El Tovar Theater in downtown Crystal Lake. Mayor Wehde then put out a “call to action” and community leaders such as Bill Dwyer became involved and took the CCA forward.

Discussion of Possible Issuance of Revenue Bonds

Mayor Shepley stated that based on the money provided to the CCA for purchase of the property, the CCA has only one asset, the Raue Center for the Arts building.

The CCA owns it, but a separate corporation, the Raue Center for the Arts, was created to actually run it, and the CCA executed a long-term lease with the Raue Center for the Arts for a nominal annual sum.

Mayor Shepley stated it was a simple, long term land lease, but it became complicated when it came time to invest in renovations and the total cost was more than original Lucille Raue Estate bequest.

Funds were raised by the community and an $8 million loan from Home State Bank was taken out, which were all used to make the Raue Center for the Arts what it is today.

He stated that the CCA had entered into a “mortgage” with Home State Bank for that they would have a secured interest for the loan, which remained at $2.4 million still due today.

The problem was that the CCA did not have statutory authority to give a mortgage or borrow in any way.

He stated that if that is true, Home State Bank does not really have an interest in anything, but it was not their fault. Mike Splitt asked if there was a clear title.

Mayor Shepley stated that the CCA holds the title, but did not have the authority to give a mortgage.

Prefacing his next statement, Mayor Shepley urged the CCA Board members to only do what they believe is right and not do anything else, noting that was why he had chosen them.

He advised the CCA Board members that their mission going forward was to evaluate and execute a plan to issue revenue bonds to pay down the loan and straighten out the paperwork, because bonds were the only way the CCA could borrow money according to State Statute.

He advised that if the CCA Board decides to issue the bonds, it would not affect taxpayers because they would not be General Obligation bonds issued under the full faith and credit of the City of Crystal Lake.

He stated that they would be “risky” bonds because of the nature of arts organizations, but the only risk would be to those who purchase them, which would most likely be Home State Bank and the bonds would be paid over a 30 year.

Mayor Shepley advised that at the next meeting, the CCA could adopt bylaws, get information from a Bond Counsel and from Attorney Vic Filippini regarding the bond issuance, and then identify the next steps to be taken.

He stated that if the CCA decides to not issue the bonds, there would be consequences, but not to the CCA because they are still owners of the property and the Raue Center owes Home State Bank.

He stated that keeping the Raue Center as a valuable asset is in the best interests of the community, the downtown and all of the people who have invested blood, sweat and tears into the Raue Center over the years.

He stated that it had taken him weeks to unravel the “rat’s nest” to determine relationships, responsibilities, and what would happen if CCA is dissolved. Mayor Shepley also advised that although he will attend future CCA meetings, he will not run them.


The Problem Facing the Crystal Lake Civic Center Authority – Part 2 “The Rat’s Nest” — 12 Comments

  1. What a bunch of crooks.

    This is why I would never show my face in that place.

    I always knew the place was iffy.

    Thanks, Cal.

  2. Is King Aaron really telling the “independent” CCA Board how to do their job?

    Sounds like they will issue the bonds the Mayor is telling them to do.

  3. Looks like somebody(s) (as in taxpayers) are about to be fleeced.

  4. Conservative values espouse responsible business and right now Mike Splitt has realized the historically conservative HSB owns a fraudulent mortgage note.

    Aaron has pointed this out to avoid law suits against persons and entities who had only good intentions.

    In order to convert the fraudulent behavior of the borrowers to lawful borrowing Aaron has gotten out in front of very costly legal wrangling to attempt to make HSB whole while helping Raue Center remain a viable entity.

    This, once again, isn’t a political issue so much as a legal issue.

    The only political hay made might be the Left saying a private business(HSB) has now defrauded the Federal Reserve and Treasury Department by misreporting their assets to loans thereby making them potentially insolvent which allows their forced takeover by a larger less community driven bank.

    If one blindly just hates everything the real message of proper governance gets lost to ignorance.

  5. Stop the “fraud” nonsense.

    The CCA and HSB will find a way to work this out from a legal perspective.

    At the worst HSB does not have a security interest in the property, but there are other ways to secure their position.

    All of the citizens mentioned have given hundreds of hours and more to their community.

    Their reputations are sacrosanct!!

  6. I used to be a major donor to the Raue Center.
    Crystal Lake City Hall has been so repetitively harmful to me, my business, and my family that I can no longer support any Crystal Lake supported endeavor.

    Crystal Lake needs to be supportive of her citizens is Crystal Lake wants support from her citizens.

  7. CLM? Absolutely! The time has come to put the evil one’s backs against the wall. We are draining the swamp and the progressives like anotherwatcher and Priest don’t much like it. The pompous are on there way down. Priest has already been exposed as the foul-mouthed self-important bloviator that he really is. Way to go, Cal. Nice digging getting these rats outed, too.

  8. Blindly Just Hates @ McCindycountyblog.conspiracies everywhere

  9. Daily Herald

    Can Metropolis Survive? How Other Suburban Theaters Do It

    October 2, 2014

    by Melissa Silverberg

    “The Raue Center for the Arts in Crystal Lake, a nonprofit, rents the facility from the Civic Center Authority of Crystal Lake, a government agency, and gets grant funding from the Crystal Lake hotel-motel tax that must be reapplied for each year.

    Annual funding has ranged from $41,000 to $150,000, said Richard Kuranda, executive director.”


    The Crystal Lake Civic Center Authority (CCA), as a unit of government, is subject to FOIA requests for its annual financial report, budget, and other documents.


    The Raue Center for the Arts (RCFA) is a 501(c)3 non-profit organization, so it is not subject to FOIA.

    However, the IRS issues an EIN number to 501(c)3 non-profit organizations.

    The EIN number for the Raue Center for the Arts is 36-4147140.

    One can use that as a starting point to research Raue Center for the Arts financials.


    The Crystal Lake Civic Center Authority (CCA) Board engaged with PMA Securities regarding financial advisory services relating to proposed revenue bonds.

    One could FOIA any documents, presentations, and emails, the Crystal Lake Civic Center Authority (CCA) has received from PMA regarding revenue bonds and the Raue Center for the Arts (RCFA).

    For transparency purposes any Powerpoint presentations and reports which PMA presented to the CCA board should be on a website.


    The City of Crystal Lake could have a fact sheet on its website about the Civic Center Authority, to explain and clarify the above information and any other details they deem pertinent, since:

    – the board meetings for the Civic Center Authority are on the City website;

    – the Crystal Lake mayor appoints all of the board members of the Civic Center Authority, per state statute “with the advice and consent of the Crystal Lake City Council”;

    – the City of Crystal Lake has provided financial support to maintain the exterior of the building and grants from revenue derived from the City hotel-motel tax.


    City of Crystal Lake

    Board Meeting Minutes

    June 21, 2016

    22. Civic Center Authority Board Appointments.

    Councilman Hopkins moved to adopt a Resolution authorizing the Civic Center Authority Board (CCA) appointments of Pete Affrunti, Greg Danielson, Tom Hayden, William Mack, Jr., Tom Ormsby, Gary Reece, Mike Splitt, Lisa Waggoner and Fred Wickham to one year terms expiring on June 20, 2017.

    Councilman Hubbard seconded the motion.

    Mayor Shepley provided a brief history, noting that in the past, the same people had been appointed to the Raue Center Board of Directors and the CCA so that any “housekeeping” issues could be addressed by the CCA which might be a conflict of interest for the Raue Board.

    He noted that the CCA was created by State Statute without any purpose in mind due to the refforts of former Mayor Carl Wehde because the Illinois Statute for CCAs was about to expire.

    The plan was to have it available for a future use, and later on Lucille Raue bequeathed the money to Downtown Crystal Lake, which made possible the purchase of the theater building, and the CCA then leased it to the Raue Center for 100 years at $100 a year.

    Since that time, there has not been much for the CCA to do and that was the reason that he had not made
    any new appointments in many years.

    He stated that over the years, the City has contributed money for improvements and upkeep on the assumption that the building was owned by the CCA, as an entity of the City.

    He stated that now there is “housekeeping” work that needs to be done and he had contacted all of the proposed members and asked if they would be willing to serve, noting that there is no requirement that members be residents of Crystal Lake.

    He advised that one of the appointees, Tom Hayden, is also on the City’s Planning and Zoning Commissoin, but there was not conflict with that.

    Councilwoman Ferguson asked about powers of eminent domain and if the CCA’s powers would supersede the City’s.

    Councilwoman Brady asked how the CCA could even pay for the eminent domain and Mayor Shepley stated that they could generate cash through revenue bonds that would be backed by identifiable source of revenue; i.e. the proceeds of the Raue and if there were a default, that would be reflected in the interest rate.

    He added, however, that such a situation would not be an issue because he had the power to appoint and remove any members if they were to do something like that.

    On a roll call, motion passed.”

  10. Home State Bank “not really having an interest in anything” would be extremely problematic for state/federal regulators and the bank’s auditors.

    They’re carrying this loan on their books.

    Which means their financial statements have been reported incorrectly.

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