Private partners help city develop

Doing more with less is the new mantra in today’s economy.

Necessity is fueling more creative problem-solving and out-of-the-box thinking. Cash-strapped municipalities, for example, are increasingly partnering with private sector partners to build critical infrastructure. Deals can be packaged in a variety of ways.

"Public private partnerships are growing because of severe financial constraints," Las Vegas-based economic analyst John Restrepo said. "It’s a very effective way to get projects started. These are the wave of the future."

Depending upon the deal, municipalities can get a new building with little initial capital outlay, while minimizing the chance of construction cost overruns, delays and lawsuits. The private partner assumes those risks. Municipalities essentially pay for the project by layaway; the arrangements often come with a long-term lease and balloon payment.

"A private party can sometimes do it at a lower cost," Las Vegas chief urban redevelopment officer Scott Adams said. "We can use exactly what we need. There are some strategic advantages."

Those advantages include circumventing prevailing-wage rates, or the pay required on public projects. Public pay rules don’t apply on private projects, even if the tenant is a government entity. The Nevada Labor Commissioner determines public construction pay annually based on statewide surveys. Prevailing wages are higher than private-sector pay. Reduced labor costs can lower a project’s total tab.

"At the end of the day, our eye is on balancing the city budget and trying to maintain a high service level, which is a real challenge in this day and age," Adams said. "The taxpayer will get an equal benefit at lower cost, which is what we are trying to achieve."

Private builders like partnering, too. It’s much easier getting project financing in a hypersensitive, recession-racked credit environment when the tenant is a public agency. Banks know the city or government department won’t skip town without paying. Deals usually have 10-year to 20-year commitments, which means private builders don’t have to scramble to find new tenants every few years. It means less expense when fixing up the space for a new occupant. It also creates a steady, predictable income source.

"People have many different places to build," Molasky Group of Cos. President Rich Worthington said. "But public-private partnerships create an incentive that attracts those people."

Molasky was attracted by the city of Las Vegas’ offer to develop two downtown parcels. It built the four-story, 93,846-square-foot Internal Revenue Service building at Grand Central Parkway, between F Street and U.S. Highway 95 that opened in early 2005. The city owned the five-acre lot valued at $2 million. Molasky spent about $15 million for the development, known as Molasky Corporate Center I. The city, in exchange, provided tax increment financing. Molasky’s investment produced an improved property with a higher taxable value; the company received a portion of the property taxes for a while as reimbursement. Molasky also agreed to develop the adjoining parcel as part of the pact.

The 2.3-acre property became the $107 million Molasky Corporate Center II. The center, like its neighbor, used tax increment financing. The 17-story, 852,000-square-foot tower at Grand Central and City parkways opened in 2007. The Southern Nevada Water Authority signed a 20-year, $63.3 million lease to occupy the building’s first seven floors. The agency has an option to buy the building at the end of the lease.

The two buildings bring an estimated 1,100 employees and 200 visitors daily to downtown.

The city is hoping for a similar reception with its latest public-private venture — City Hall. Cleveland-based Forest City Enterprises broke ground on the $146.2 million development earlier this year at the northeast corner of First Street and Clark Avenue. The eight-story, 308,990-square-foot complex, on 2.71 acres, will have 250,000 square feet of office space and a 500-seat chamber council.

"The new City Hall is the linchpin in a downtown redevelopment plan that will create thousands of jobs, bringing billions in private investment and millions in new tax revenue to the city," said Las Vegas Mayor Oscar Goodman in a statement. "(It’s a) catalyst for four major mixed-use redevelopment projects that will bring 13,441 new permanent jobs to the city of Las Vegas, $4.1 billion in private investment and $16 million to $20 million in new tax revenue."

Forest City is developing City Hall for a 5 percent fee; it also assumes the risk of construction cost overruns, building defects and litigation. The city is using lease-purchase financing, borrowing $188.3 million from investors, and repaying the debt starting in fiscal year 2013; it will eventually own the building. City Hall is expected to finish construction in 2012. Forest City has committed to building other projects downtown as part of its arrangement with the city.

"The main challenge in these projects can be financing," said Restrepo, who serves as chairman of the Nevada Economic Forum. "Most banks don’t lend when you can’t get a long-term lease, but they look at it a little differently with a public agency."

Not all public-private pacts are instant successes. Clark County, which has numerous partnerships with private builders on airport land, recently hit a snag with the Bali-Hai Golf Club. The 18-hole golf course along Las Vegas Boulevard, just south of Mandalay Bay, is losing money. The Walters Group wants to build a 2 million-square-foot industrial complex on the county-owned land. Per the lease arrangement, Walters used the property rent-free during the last decade because no golf course profits ever materialized. The proposed industrial park would pay a portion of profits to Clark County under a deal that already received a preliminary OK in July.

"We’re not just turning the keys over to the private sector," Adams said. "We’re looking at public-private partnership very strategically. We don’t just build to build." 

Contact reporter Tony Illia at tonyillia@aol.com or 702-303-5699.

Business Videos
Former Starbucks CEO Howard Schultz at Las Vegas convention
Former Starbucks CEO and potential presidential candidate Howard Schultz spoke at the Epicor Insights user conference at Mandalay Bay Convention Center Wednesday, April 17, 2019. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Drew Las Vegas to open in the second quarter of 2022
The 67-story Drew Las Vegas is slated to open in the second quarter of 2022 at the north end of the Las Vegas Strip. (Michael Quine/Las Vegas Review-Journal)
NAB Day 1 (Time Lapse)
NAB kicked off at the Las Vegas Convention Center on Monday, April 8, 2019. (Mat Luschek / Review-Journal)
National Association of Broadcasters Show shows 1mm thick 8K TV with 22.2 channel digital sound
Japan’s NHK Science & Technology Research Laboratories booth featured a 1mm thick 8K TV system used in conjunction with a 22.2 channel digital sound system at the National Association of Broadcasters Show at the Las Vegas Convention Center. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Nevada shoppers react to Smith’s no longer accepting Visa credit cards
On March 1, Smith’s announced that it would no longer be accepting Visa credit cards at any of its 142 supermarkets, including the 45 in Nevada.
Massachusetts Gaming Commission asks how long Wynn executives knew about misconduct
Business reporter Rick Velotta gives an update on the adjudicatory hearing on the suitability of Wynn Resorts to retain its gaming license in Massachusetts.
Henderson app developer part of Startup in Residence
Henderson based developers of the app On Point Barricade are taking part in Startup in Residence, a North America program dedicated to pairing tech companies with governments. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Sam's Town employees and customers talk of their love for the iconic casino
Longtime Sam's Town employees and customers love each other and love their casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Las Vegas apartments rents
Las Vegas’ apartment market has accelerated in recent years. Developers are packing the suburbs with projects, landlords are on a buying spree, and tenants have filled buildings.
William Boyd talks about the birth of Sam's Town
On the eve of the 40th anniversary of Sam's Town, William Boyd, executive chairman of Boyd Gaming and son of hotel namesake Sam Boyd, talks about how the casino became one of the first local properties in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
High Roller observation wheel turns five
The world’s tallest observation wheel celebrates it’s fifth year on Sunday, March 31, 2019. (Michael Quine/Las Vegas Review-Journal) @Vegas88s
Escape Room Industry Growing In Las Vegas
Escapology employees discuss the growing escape room industry in the U.S. and Las Vegas. (Bailey Schulz/Las Vegas Review-Journal)
Impact of parking fees on visiting the Las Vegas Strip
There are no data showing a relationship between Strip resort and parking fees and the number of out-of-state visitors to Las Vegas. But there are data showing a relationship between Strip parking fees and the number of local visitors to the the Strip. ‘’As a local, I find myself picking hotels I visit for dinner or entertainment, based on whether they charge for parking or not,”’ said David Perisset, the owner of Exotics Racing. ‘’It is not a matter of money, more of principle.’’ A 2018 survey by the Las Vegas Global Economic Alliance found 36.9 percent of Clark County residents reported avoiding parking at Strip casinos that charge for parking. 29.1 percent reported avoiding using any services from a Strip casino that charges for parking.
MGM's sports betting deals
MGM Resorts International signed a sports betting sponsorship agreement with the NBA in July It was the first professional sports league to have official ties with a legal sports betting house. The deal came just two months after the U.S. Supreme Court overturned a law prohibiting sports betting in most states. In October, MGM became the first gaming company to sign a sports betting partnership with the NHL. In November, MGM became the first gaming company to sign a sports betting partnership with the MLB. Financial terms of Tuesday’s deal and earlier partnerships have not been announced.
Faraday puts Las Vegas land on the market
Nearly two years after Faraday Future bailed on its North Las Vegas auto factory, the company has put its land up for sale. (Michael Quine/Las Vegas Review-Journal)
El Cortez owner Kenny Epstein on running the iconic property
Kenny Epstein, owner of the El Cortez Hotel in downtown Las Vegas, talks about Jackie Gaughan mentorship and answers rumors about bodies in the basement at the mob-era casino. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
LVCVA recommends construction of underground people mover
The Las Vegas Convention and Visitors Authority announced the recommendation for an underground people mover for the convention center. The system would have the potential to expand and connect Downtown and the resort corridor all the way to McCarran. (Michael Quine/ Las Vegas Review-Journal)
LVCVA/Boring Company Press Conference
The Las Vegas Convention and Visitors Authority announced a collaboration with Elon Musk's The Boring Company to develop and operate an autonomous people mover system for the Las Vegas Convention Center District.
International Pizza Expo includes green and gluten free
The International Pizza Expo at Las Vegas Convention Center included companies focused on vegan and gluten free, and plant-based pizza boxes. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
International Pizza Expo kicks off in Las Vegas
The first day of the International Pizza Expo at Las Vegas Convention Center is everything Pizza. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
T-Mobile program aids guests with sensory needs
A program at T-Mobile Arena is designed to provide a more sensory friendly experience for guests.
Photo Booth Expo
Danielle May talks about how Simple Booth transformed her Volkswagen bus into a business.
Nevada Gaming Commission's highest fines
The highest fines assessed by the Nevada Gaming Commission, according to commission Chairman Tony Alamo: 1) Wynn Resorts Ltd., $20 million, 2019 2) CG Technology (then known as Cantor G&W Holdings), $5.5 million, 2014 3) The Mirage, $5 million ($3 million fine, $2 million compensatory payment), 2003 4) Stardust, $3 million, 1985 5) Santa Fe Station, $2.2 million ($1.5 million fine, $700,000 compensatory payment), 2005 6) Las Vegas Sands, $2 million, 2016 7) CG Technology, $1.75 million, 2018 8) CG Technology, $1.5 million (also $25,000 in escrow for underpaid patrons), 2016 9) Caesars Entertainment, $1.5 million, 2015 10) Imperial Palace, $1.5 million, 1989 11) Peppermill Casinos, $1 million, 2014
Tiny Pipe Home vs Shipping Crate
A Tiny pipe home was displayed at the International Builders Show this week in Las Vegas.
Auto repair shortage affects Las Vegas
The auto repair industry is facing a national shortage of workers.
Franchising industry booming
Experts say Las Vegas is a hotbed for the franchise industry.
Africa Love owner talks about his store in Las Vegas
Mara Diakhate, owner of Africa Love, gift and decor store, talks about his store in Las Vegas. (Bizuayehu Tesfaye/ Las Vegas Review-Journal) @bizutesfaye
Developer gets approval to build homes at Bonnie Springs
The Clark County Planning Commission has approved a plan to build 20 homes on the site of Bonnie Springs Ranch. (Michael Quine/Las Vegas Review-Journal)
Dig This opens new location In Las Vegas
Remember when you were a kid and played with construction toys in the sand box? Dig This Las Vegas has the same idea, except instead of toy bulldozers, you get to play with the real thing. (Mat Luschek/Review-Journal)
Town Square developer Jim Stuart building again in Las Vegas
Las Vegas’ real estate bubble took developers on a wild ride, something Jim Stuart knows all too well. (Las Vegas Review-Journal)
TOP NEWS
Home Front Page Footer Listing