Ethanol plant goes bust

A lot of farmers in west-central Illinois just lost a grain cart-load of money.

Hype about anticipated ethanol production has played a significant role in the run-up in farm prices in west-central Illinois over the past few years. Hoping to capitalize on this hype, many local farmers made considerable investments in a new ethanol plant outside of Canton.

But the $40 million plant just went bust.

Brenda Rothert of the Peoria Journal Star has the story:

The minimum lost by the farmers who spoke with the Journal Star was $29,000 each for investing in just one share, not including the value of the corn they delivered. Farmers who purchased more than one share lost much more, and some farmers say they might lose their farms.

"It makes us all look so stupid," said one. "I'm trying to explain to my wife and son why I did this, and it doesn't make any sense."

A group of farmers from Fulton and McDonough counties who invested in the project recently talked to the Journal Star on the condition that their names not be used.

A good idea

When they were first approached in 2001 about the plan to build a $40 million ethanol plant, the farmers said it seemed to be a good idea.

"The community's been good to us," said one. "It would create some jobs."

They had to invest the money by March 2002, and projections from project planners called for the plant to be making alcohol by July 2003. Farmers had to commit $5,000 per share, plus pledge in writing to deliver 5,000 bushels of corn annually for five years.

One farmer said he supported the idea but was unsure about whether he could afford it.

"I really didn't have the $5,000 to put in," he said. "But I came up with it and put it in."

Since his farm lacks storage facilities for his corn, he figured it was a good decision, because he's close to the plant and would be delivering corn there.

But then board members came back to the farmers and asked them to double their investments: $10,000 and 10,000 bushels of corn annually for five years. Not all of the farmers agreed to double their investments. Those that did lost twice as much, plus the value of the corn.

"I swallowed hard," said the farmer who had struggled to invest the initial $5,000. But again, he did it.

Then board members came to the farmers again and asked them to sign letters of credit for the project. For each $5,000 share, they wanted a $24,000 letter of credit. Farmers went to their banks and signed paperwork for a $24,000 loan to the plant. The farmers would have to personally repay the loans if the company called them in.

"They kept saying that the creditors wanted to make sure we as investors delivered the corn," one farmer said.

"There was pressure put on," another said.

"I didn't want to be the one guy who messed things up," a third farmer said. "Almost all of us signed this thing."

The farmers' troubles may continue. Many fear that they'll be forced to honor their contracts and deliver corn to the ethanol plant for several more years.

New housing underway for WIU students

There's been a lot of dirt getting pushed around lately at the corner of South Ward and West Grant streets in Macomb. A company called O.C. Communities is creating a new complex of WIU student housing with 100 homes, each with two, three or four bedrooms. If all goes as planned, the new units should be fully constructed and ready to rent by the start of the fall 2008 semester.

As of Tuesday, January 22, the scene at South Ward and West Grant looked like this:


What will the finished units look like? The company recently set up a model home in a lot over at the 500-block of West Jackson Street:


The Macomb Eagle's Laura Black reports that a major component of the new housing complex will be its community feel. Students will have access to an on-site computer lab and exercise facility; there will even be advisers available to help with things like resume writing.

United Campus Housing, the company planning to handle the day-to-day management of the complex, has already launched a new website with floor plans and other information. No word yet on how many students have already signed leases for next school year.

More about the new radon law

Time to continue the discussion about radon from my last post.

Shortly before Christmas, I wrote about the new radon-related law set to take effect January 1, 2008. I lamented how I hadn't found a single article in the mainstream press about the law -- just a brief mention on one agent's blog.

But I should have dug deeper. Mere hours after my post went live, I got a message from Mr. Calvin Murphy of Allied Radon Services in Mt. Vernon, down in southern Illinois. He directed me to his blog, which has an impressive chronicle of how the new radon requirements went from bill to law as they wound through the state legislature last year, before finally being signed by the governor. Murphy's detail is more thorough than the stuff you find on most Congressional members' websites. Through Murphy's postings, I learned that the bill made it through both chambers of the statehouse without a single "nay" vote. That's the sort of bipartisanship you don't see much in Springfield, especially the way Illinois state politics have been this past year.

So the legislature obviously made itself clear regarding radon. What does the real estate community need to do? There are a couple things, required of anyone who sells "residential real property" (a housing structure with one to four units):

1.) A seller must give a buyer a special pamphlet/fact sheet called "Radon Testing Guidelines for Real Estate Transactions," published by the Illinois Emergency Management Agency. This pamphlet/fact sheet explains how to test for radon and notes that the IEMA "strongly recommends ALL homebuyers have an indoor radon test performed prior to purchase or taking occupancy" of a property.

2.) A seller also must fill out a special radon disclosure form, indicating whether the property ever has been tested for radon. (This disclosure form looks a lot like the lead paint disclosure, a form that's already been in use in real estate for a number of years.)

I should probably pause here if (like I did, until I took a helpful continuing ed course a couple years ago) you need a quick chemistry lesson on radon.

Practically all soil on the planet has at least trace amounts of the element uranium, and when this decays, it gives off gas in the form of radon. Normally this isn't a problem, because the radon gas disperses into the atmosphere, where it's greatly outnumbered by other, benign elements. But when you put a manmade structure -- say, a house or office building -- over a spot with high radon levels, the gas no longer has a direct route to the atmosphere. The radon now has to travel through the building first, and depending on how well or poorly insulated this structure is, that could take a while. The longer the radon gas stays in the building, the more the humans who breathe that air are at risk.

The risks are real. The gas is the second-leading cause of lung cancer in the United States. (Smoking, of course, is still #1.) Researchers think radon probably kills, or helps kill, about 21,000 Americans a year.

You might reasonably conclude that if we know where the uranium is in the first place, we can expect to sleuth out that the radon should be in that same area, too. And that's true, to a certain extent. Researchers have developed extensive radon "maps," taking into account soil types, geology, and other factors. As this map shows, Illinois has a range of radon levels, with high levels throughout central and northern Illinois, average levels in Chicagoland and much of southern Illinois, and low levels at the southernmost tip of the state.

But of course these are simply averages. In McDonough County (where our RE/MAX office is located), 41% of the homes that were tested had high radon levels, according to a pamphlet I picked up at the local health department. Meanwhile, the town of Chillicothe (north of Peoria) is alleged to have high radon levels in nearly 100% of its homes. And then there stories any inspector will tell you about how he's seen a house on one side of the street test high for radon and a house across the street test low. There's that much variation.

At our monthly Lamoine Valley Board of Realtors meeting in December, we had two guest speakers: Randy Stufflebeem, owner and operator of B-Sure Home Inspection and Environmental, and Jere Paradis, owner and licensed radon mitigator for Midwest Radon Reduction. Stufflebeem talked about how to test for radon; Paradis focused on how to solve a radon problem once you've identified it. (Because it's an obvious conflict of interest for the same person to perform the test and mitigation on the same property, dividing up the tasks ensures a check-and-balance system that protects consumers from dishonest radon experts.)

Stufflebeem said that when he tests for radon, he places an electronic monitoring device in the lowest livable space in the house. (Crawl spaces don't count, but a basement with the potential to be finished does.) This device remains in place for a period of time, usually at least 48 hours, and monitors the radon level over an hour-to-hour period. Some individual hours might see a spike in the radon level, but the inspector cares most about the 48-hour average. If that average is higher than the magic number of 4.0 picoCuries/liter, the inspector must recommend that the problem be treated. (Apparently, this 4.0 pCi/L has been documented by health researchers as the threshold level for a human's risk to radon gas.)

Fixing a radon problem is pretty simple, said Paradis. The homeowner simply installs a ventilation system (I think of it like a bathroom vent for your whole house) that sucks the air from the lower level and disperses it outside. The cost for a system like this in west-central Illinois is usually around $1,000, said Paradis. That covers the equipment and installation.

Stufflebeem and Paradis also noted something I found surprising: Radon can be found in water and rocks, too -- not just soil. Granite countertops can be sources of radon. Paradis even told a story about a school in his home state of Massachusetts that had radon pouring out of granite walls located inside the building.

Failing to address a radon problem -- or failing to know you have a problem in the first place -- doesn't mean you'll immediately drop dead of lung cancer. Like most health-related dangers, mere exposure to this one doesn't guarantee you'll get sick at all. But it does increase your risk. As the state government has tried to make clear with this new radon law, Illinois residents who ignore that risk may be gambling with their lives.