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Las Vegas could arrange city hall construction financing by year's end
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LAS VEGAS REVIEW-JOURNAL
Updated: Oct. 7, 2009 | 6:27 p.m.
Las Vegas officials have found a less expensive way to finance a new city hall, and a schedule presented today has the city securing financing for the project by year's end.
City Council members took no action, but the report rekindled a long-running debate over whether the city should take on a large public works project and significant long-term debt in uncertain economic times.
A vote by the council to go forward could take place by the end of November.
“All this is based on a lot of uncertainty,” said Councilman Stavros Anthony, who has consistently opposed the project. “We have a city hall already in place that we’re not paying anything on, except to operate. It’s all based on a crystal ball.”
“Excuse me,” interjected Councilman Steve Wolfson. “Life is based on a crystal ball.”
The latest construction estimate predicts a new city hall would cost $145 million to build and equip. The city previously secured approval to borrow up to $267 million to complete the project, including financing costs.
That proposal was deemed too expensive, because the city couldn’t get a low enough interest rate.
It also was flawed because the city essentially wouldn’t have paid any interest for the first seven years of the 30-year term and 10 years in the city would still owe $251 million.
The city could refinance the debt at the 10-year mark, but it would be difficult to borrow against a building that’s worth much less than $250 million.
“It’s just not going to happen,” said Mark Vincent, the city’s chief financial officer. “That was never going to go to market.”
The city has other options, but the one that attracted the most interest today was a new federal program, Build America Bonds, that subsidizes borrowing costs for capital projects.
That would make the interest rate, effectively, 4.74 percent. Also, the amount borrowed would be less, $205 million, according to estimates.
After the first 10 years, the balance would be $187 million, which Vincent said could be refinanced and paid off in $10.9 million annual installments, which is close to the city’s original target.
The bonds must be issued by the end of 2010 to qualify.
There is still risk to the city.
Instead of general obligation bonds, which must have a revenue source pledged to them, the city wants to use “certificates of participation,” which can be paid off with any available city revenue. It’s described as a “lease-purchase” agreement, in which the city makes annual lease payments with an option to buy the building.
Proponents expect a new city hall to spur further development downtown. Forest City, which would build the city hall, would get access to a Symphony Park parcel when the building is finished and plans to build a hotel-casino.
City expectations for the 61-acre Symphony Park, formerly known as Union Park, include the Smith Center for the Performing Arts and Cleveland Clinic medical facilities.
The current city hall site at Las Vegas Boulevard and Stewart Avenue would be cleared away and sold for private development, and Forest City plans to build office space around the new city hall.
That’s a lot of ifs, Anthony said. He worried that the new development wouldn’t materialize as soon as expected and that the city might have to dip into operating expenses to pay the city hall debt.
Mayor Oscar Goodman, an unabashed booster of the new city hall plan, said the building is central to his vision of a renewed downtown Las Vegas and that delaying could derail that renewal.
“It’s easy to say no,” Goodman said. “People want me to say no. They want us to go backward. If we want to go backward, all we have to do is stay still.”
As proposed, the new city hall would be a 251,000-square-foot building at the corner of Main and First streets downtown.
The existing City Hall has 276,000 square feet, but the city shares space with the Metropolitan Police Department, which serves the city and unincorporated areas of Clark County.
In addition to furthering downtown development, a new city hall would be more energy and space efficient, boosters say, and would eliminate the need to spend money maintaining the existing building, which was completed in 1973.
Contact reporter Alan Choate at achoate@reviewjournal.com or 702-229-6435.
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There is a huge, nearly vacant, brand new high rise condo building next door to the El Cortez. Only a few of the condos have been sold, and now the building is owned by Corus Bank, which foreclosed. Soon after that foreclosure the FDIC seized Corus Bank. FDIC is trying to sell some of Corus Bank's assets to a private group.
However, it seems like the City might be able to get a very good deal on a brand new building, on the cheap, which could easily be used as an office building. Think how happy the employees would be, a kitchen in every department, to warm up the employees lunches!
why dosent the city loan Fountainblu money to finish that project. It would also put more people to work than a new city hall which we already have.