Editorial: Nugget Project: No new answers. Only more questions.

Editorial by Dave Morgan

An article in the Nevada Appeal this morning attempts to get new information from the Nugget Project’s “go to guy,” Steve Neighbors. Neighbors, who is now the owner of the Nugget, is quoted as saying that the project still lacks a developer to shoulder the “private industry” half of the project. That’s about all that’s new from Neighbors, that they STILL don’t have a private partner.

The Skinny:
City part: City builds new library, economic incubator, digital media lab, transit hub, public square and a high-rise parking garage. Price: $41 million or more.
Developer part: High rise retail, professional office and condo complex. $46 million or more.
Possible Funding:
City part: 1/8th cent increase in sales tax, new property taxes generated by the high rise complex and $1 million a year from the city’s “capital funds” account.
Developer part: Developer’s own money, if we’re lucky. More likely it will be a private bank loan with substantial city guarantees that the loan will be paid back and that the developer is given a “reasonable” rate of return on his/her investment, or (a very long shot) a developer who needs a massive tax write off and can take the loss as a bonus.
Bottom Line: The city’s 1/8th cent sales tax, new property taxes from a new retail/office/condo high rise and even an annual million dollar taxpayer capital funds infusion probably still won’t fund the city’s half of the project. In addition, income projections from a new economic incubator and digital media lab are completely unproven. Now, add in the land lease fees that the Nugget will charge (because ALL of it will be built on Nugget owned land) and we’ve still got a bunch of “known unknowns.” Neighbors claims he’ll give the city “good lease deals” while spreading funds around town for “good causes.” Casinos always say “show me the money.” The taxpayer’s should say “show us the plan, in writing.”
Any project as ambitious as the Nugget’s should be taken seriously only AFTER a final plan is on paper and then thoroughly evaluated by a wide variety of experts. But after months and months of rah-rah promotions by certain city staff and Supervisors and no small amount of behind-the-scenes machinations, we still don’t have one. But maybe we only have to look north to Reno to see a possible scenario of how the Nugget Project might play out.
The Reno Aces Ballpark redevelopment project is being funded by a combination of standard downtown redevelopment property taxes and sales taxes. Not only redevelopment funds from the ballpark district, but from OTHER downtown redevelopment districts. PLUS a nice pile of sales taxes that are paying off STAR bonds…bonds that are floated with promised increases in sales taxes within the ballpark district. But, even with all that financial “firepower,” the city of Reno is, in its first year, already behind on their payments! Reno City officials say they’re not worried because in three to five years the project should grow its own revenue base and take Reno taxpayers off the hook. They contend they’re still hopeful that the financial benefits of the Ballpark district will make money for the city. (And even if it doesn’t, the development agreement erases Reno’s debt after 20 years.)
Well, down here in little ole Carson City, whatever revenue shortfall may befall the Nugget Project could force the city into tapping all of the downtown’s redevelopment property tax, including redevelopment property taxes from the old K-Mart building at the north end of town, the Carson Mall and points south around the Eagle Station shopping center and the Fandango. Also revenues from the old Carson Tahoe Hospital which was also recently conscripted into the redevelopment pot. We don’t pretend to know what that revenue flow might be, but that needs to be revealed by the city, and a debate pursued on whether redevelopment taxes collected far away from the downtown should be funneled exclusively to the downtown.
In short whether businesses not in the downtown should be subsidizing their downtown competitors. Ideally, redevelopment districts are created to benefit businesses within those particular districts. Although it may be legal, it is categorically unfair to bankroll a “favored project” clear across town just because of insider politics.
The situation with Carson City sales tax revenues is different from Reno’s. STAR bonds are not an option for Carson City, we’re told, because the town’s sales tax pot is already being tapped for redevelopment projects at a state-law-limited 15%. So, no STAR bonds for Carson City…no easy STAR bond financing like Reno and Sparks enjoyed.
So, let’s get this straight. The city is being asked to do financial back-flips to accommodate the Nugget on what appears to be Steve Neighbor’s goal of getting a huge Nugget tax write-off by “undercharging” land lease rates while not risking a penny of Nugget money. The city is asked to build a new library, economic incubator, digital media lab, high rise parking garage, transit hub and public square UP FRONT, in hopes, IN HOPES of attracting a private developer who will build the retail/office/condo high rise complete with a guarantee rate of return on investment for the developer and for the payback to the bank which is financing the project. This guaranteed rate of return is clearly suggested in a report issued by Nugget Project consultant Mark Lewis, who is also the author of the Reno Aces Ballpark redevelopment project.
Many wonder why it should be necessary for the city to go into hock for $100 million (two or three times that amount after paying off loans, bonds and 99 years of land lease payments) just to get a library, an economic incubator, or a digital media lab. By clumping all three together creates a package that maybe we don’t need. If we want a library, let’s analyze our needs and proceed from there. Now, an economic incubator is an odd one for Carson City. Economic incubators really do work. But they work almost exclusively in large urban areas with tons of local university research and development power coupled with big name venture capitalists and individual “angels” who get behind new and creative products and/or services. We don’t have any of those high-powered academic or funding resources in Carson City. UNR and UNLV don’t even know if they’re going to keep their doors open. Also, economic incubators are NOT funded by small cities, which in our case is asked to risk funds that properly should be dedicated to cops, fire departments, streets, parks, recreation, etc. Economic incubators are funded mostly by federal and state matching funds and those financial bulls mentioned above.
As for the digital media labs, they work too. But go ahead and “Google” 3-D animation studios and schools and you’ll see the earth is smothered with them. The U.S. may be the top dog country creating the “ideas” for high-end animation movies, but after the “ideas” are laid out in a comprehensive story-board, the actual animation work is exported to India or China where they’ve got more honor students and hot-shot math whiz’s than we’ve got young people, period. And they work CHEAP compared to U.S. labor market standards.
As for the retail/office/condo high rise, we’ve got closed stores all over Carson City. Condos are going at near give-away prices, and office buildings lie empty from one end of town to the other. There is a moral question as well. Local business developers and contractors have built a lot of commercial office and industrial space in Carson City that now sits vacant, through no fault of their own. If the city subsidizes an out of town developer to come in an make them bleed more via the Nugget Project, how should they feel? They’re our neighbors, friends and oftentimes family members. Don’t they count?
The high-rise parking garage. With all the development on the Nugget property east and south of the casino, somebody’s got to provide parking for the casino. Again, the city builds that.
Transit hub and public square. Do we really need them? That’s $7 million alone.
And finally, Nugget owner Steve Neighbors has been quoted as saying he’s not going to be pinned down on any commitment as to the Nugget’s future. He’s said “I may sell the place.” Really?! Well, isn’t that just downright interesting? The possible financial and legal consequences for the city boggle the mind! What if a new buyer wants to purchase the Nugget and the land around it. What if the buyer doesn’t want to inherit a “city partnership?” What if the Gaming Control Board (which controls casino sales, to whom, and under what conditions) has enough heartburn on the deal to make the new buyer demand City Hall buy the Nugget Project properties or simply tell the city, “the leases are canceled, get off the property!”
This Nugget Project has been portrayed by Supervisors Robin Williamson, Molly Walt, and Office of Business Development staffers Joe McCarthy and Tammy Westergard as the economic salvation of Carson City. The Library Board of Trustees has also chimed in claiming that Carson City’s economic future looks grim without it. Really?! Do any Library Board members have a PhD in Economics?
Carson City residents should be aghast that a small group of Nugget Project fans are portraying themselves as the sole “keepers of the truth.” It’s time that the Board of Supervisors slam on the brakes, get out and do a good walk-around and more objectively see what the heck they’re riding in.
We agree with Supervisor Pete Livermore and his calling for a public vote on the project. He points out that we have had public votes on issues far less costly than this one. Yet we’re told by the other three Supervisors and Mayor Bob Crowell that there will be no public vote because “we’re elected to make decisions and we will decide this one.”
Mr. and Mrs. Carson City, what’s wrong with this picture?