An already risky bet on downtown redevelopment is turning into a reckless gamble. And City Hall’s lack of openness smacks of an alarming contempt of legitimate taxpayer concerns.
A Las Vegas City Council majority, led by recently re-elected Mayor Carolyn Goodman, decided last month to move forward with a tax-funded parking garage in city-owned Symphony Park, despite the collapse of the subsidized soccer stadium that was supposed to create demand for the structure. Supporters reasoned that constructing the garage first would help attract replacement development partners and projects to draw people downtown. Never mind that the 1,200-space garage might sit unused and underutilized for years, serving only The Smith Center for the Performing Arts.
As if the $25 million garage wasn’t controversial enough, the council decided to go into debt to fund it. The city will use Sales Tax Anticipation Revenue, or STAR, bonds to build the garage. Sales taxes collected from a tourism district that includes an expansion of Las Vegas North Premium Outlets and vacant land throughout Symphony Park will be used to repay the bonds.
But no one can be sure how much sales tax revenue will be generated by the tourism district because the businesses that will comprise it don’t exist. And instead of working from conservative estimates, the tourism district’s revenue projections are wildly optimistic. The city-commissioned study that was presented to the Nevada Tourism Commission, which approved the creation of the sales tax district, said Symphony Park would have three new casinos, 1,800 residential units and 257,000 square feet of retail space by 2016 — about seven months from now. Work on any new development might not start until 2016.
So instead of dialing back the garage, the city is prepared to borrow even more money against those inflated sales tax district projections. As reported by the Review-Journal’s James DeHaven, the council is expected to vote May 20 to grab an additional $20 million in STAR bonds — on top of the $25 million for the garage — for more infrastructure.
The currently barren “tourism” district would have to repay $45 million in debt, plus interest. The more sales tax revenue that’s poured into Symphony Park, the more essential city and county services are squeezed. And if the district doesn’t generate enough money to repay the bonds, taxpayers will be on the hook for the balance, leaving even less money for public safety and parks.
“I don’t think there’s an end to the city’s capacity to spend money in Symphony Park,” said Councilman Bob Beers, who has opposed the garage funding plan. The city already has spent $100 million on Symphony Park infrastructure and site preparation over the past decade, but has so micromanaged the development of the site that few projects are moving forward.
City residents have two good reasons for alarm here. First, the possibility that the city is so overleveraged that it will have to use general fund revenues to repay the STAR bonds. Second, the fact that the city didn’t propose taking on $45 million in STAR bond debt when it first pitched the soccer stadium, and then sought Tourism Commission approval of the sales tax district. Indeed, Mr. Beers wonders whether the city intended to boost its borrowing all along. The council appears to be in need of credit counseling.
At a minimum, the council shouldn’t borrow beyond the $25 million intended for the garage — although we wish council members would back off that plan, too.
The public has put more than enough money into Symphony Park. It’s past time for the city to get out of the way and let market forces, not central planning, guide downtown redevelopment.