Redevelopment staff had role in independent study

By J. Patrick Coolican, Michael Mishak

Sunday, April 19, 2009 | 2 a.m.

Las Vegas had a problem last fall — two of them, actually.

The city had not yet persuaded state legislators to vote to extend the life of the Las Vegas Redevelopment Agency, which was scheduled to sunset in October 2009. And the powerful Culinary Union had decided to oppose the city’s plans to build an expensive new city hall in that redevelopment zone.

Worried Las Vegas officials hit on an idea. They would commission an independent study to answer one question: How effective is the city’s redevelopment agency in bringing new businesses downtown with a combination of tax breaks and other incentives?

A positive report would boost the chances for the new city hall, with its cost of up to $267 million, and aid the city’s cause with state legislators, some of whom were questioning the amount of money that has gone to lure businesses at the expense of education and other government services.

To conduct the study, Las Vegas hired Applied Analysis, a leading Nevada economic consulting firm.

Applied Analysis delivered its verdict two months ago: The Las Vegas Redevelopment Agency was “arguably among the nation’s most successful,” fostering $2.7 billion in new development and more than 24,000 jobs over the past two decades.

City Council members were overjoyed. At a Feb. 4 meeting, Councilman Steve Ross called the agency a “magic machine.”

Councilman Gary Reese said, “I hope it helps us out to further our efforts. I hope it makes it easier for us to sell” redevelopment, including the new city hall.

Mayor Oscar Goodman described the study as the work of an independent firm. “Applied Analysis has no connection at all with the City of Las Vegas, other than, of course, having their place of business here,” Goodman said.

E-mails between Applied Analysis and the city, however, tell a different story.

The correspondence, obtained by the Las Vegas Sun through an open records request, reveals a tight relationship between city staff and Applied Analysis as the firm worked on the study, for which the city paid $19,500.

The e-mails show that at the request of redevelopment agency staff members, Applied Analysis made a number of changes to the draft report. The agency’s seven-page list of requested revisions asked Applied Analysis to provide “a clear analysis that the RDA is beneficial to the community and not taking away from it.”

Municipal government experts interviewed by the Sun say the city’s role in editing the report meant that it should no longer have been considered independent. The report should instead have been billed as a joint effort produced in part by the agency that was being evaluated.

Asked about Applied Analysis’ role in the report, Scott Adams, chief operations officer of the redevelopment agency, said the city sought the outside consultant for the report because “if we did our own, nobody would believe us.”

“We asked for an independent study and we wanted the tone of the study to appear to be that,” Adams said.

The agency was satisfied with Applied Analysis’ work, he said. “Any time you do a study like this there’s a risk that their conclusion would not be what you expect. Obviously we wanted it to be positive, and the risk is it might not be positive.”

Adams added: “If it wasn’t positive we would never have published the study.”

That is not the way studies of this kind are supposed to work, experts say.

Outside firms asked to review a city’s performance must have complete independence and their reports must be released to the public, regardless of the conclusions, said Vicki Elmer, former city manager in Eugene, Ore., and former redevelopment director of Berkeley, Calif., who now teaches ethics in research at the University of California, Berkeley.

“Usually you don’t edit the consultant’s report,” Elmer said. “That’s why you hire a consultant.”

City staff does typically comment on a consultant’s draft, said Elmer, who also served as a research director for the U.S. Housing and Urban Development Department. But the criticism should be limited to factual errors, she said. If city staff has other objections, they should be noted separately in a memo on city letterhead.

Elizabeth Deakin, a professor of city and regional planning at UC Berkeley, said that when a city seeks evaluation of a redevelopment agency, it typically engages an independent review committee, made up of real estate experts, economists and think-tank analysts. “You want an arms-length, dispassionate review,” she said. “That gives you distance.”

Applied Analysis won the contract through competitive bidding. But the firm was given just two weeks to complete its work.

Pushing ahead under that timetable, Applied Analysis completed a draft of the report and sent it to the city. E-mails show that a half dozen city staff members offered a laundry list of changes.

The e-mail exchange reflects a good-faith effort at times by those employees to ensure that the firm was using correct data. But some of the suggestions were more substantive.

Staff members complained about the frequent attribution of data to the redevelopment agency itself, which was in fact the source of the information.

“I think the report loses credibility if the source of the information quoted about the RDA is our own RDA,” city staff member Scott Carter wrote.

Steve van Gorp, deputy director of the Office of Business Development, described his concern this way: “I wish this could be resolved to be an independent economic analysis, setting this RDA into a favorable context, and therefore, why redevelopment is good for the community,” he wrote.

Applied Analysis revised its language. The initial draft had noted that “a significant share” of information came from the redevelopment agency. The final report said the firm’s information was “collected from various third parties, including the RDA.”

Other revisions included:

• The draft noted that the agency had improved 516 acres of the redevelopment area’s 3,900 acres — a total of 13 percent.

Staff members, fearing the numbers showed underwhelming results by the agency, asked Applied Analysis to remove the acreage reference. The firm complied.

Applied Analysis principal Jeremy Aguero said in an interview with the Sun that “after further discussion” with the city, he came to believe acreage was not a true measure of redevelopment. He substituted capital investment, which was $2.7 billion.

• In an introductory paragraph that discusses how the recession has heightened discussions about the “relative value” of redevelopment zones, city staff suggested a framework for subsequent sentences: “Ask the question, ‘Is this the story we want to tell?’ ”

• The draft had acknowledged limitations that Applied Analysis faced given the city’s request to conduct the study in just two weeks. (A competing firm that bid on the study had argued that “a study of this magnitude typically requires six to eight weeks.”)

At the request of city staff, the final report made no mention of the tight timetable.

• Staff asked Applied Analysis to make clear that the redevelopment agency is funded “mainly through the incremental increase in property taxes” that it generates. The firm adopted the language verbatim.

• The draft originally stated that without the redevelopment agency, $2.7 billion in investments in downtown “might never have materialized.”

The city asked Applied Analysis to change “might” to “would.” The firm complied.

The statement was accompanied, however, in both the draft and final report by a counterpoint written by Applied Analysis: “On the other hand, the argument has been made that Las Vegas’ Redevelopment Area was simply the right place at the right time and that most, if not all, investments would have taken place in the absence of the City’s efforts.”

Aguero said the revisions his firm made to the report were done as part of “typical internal quality control procedures” in the time between submitting its initial draft and the final report.

“It is not uncommon to have communication going back and forth with a client on any number of analyses,” he said. “The fact that a client provides some input on a draft is not unusual. It’s customary.”

He added: “Did they change the content of the report? Did they influence what our conclusions were? Absolutely not.”

Aguero acknowledged that different clients have different agendas, with some, such as the city, “looking for it to be more persuasive than analytical.”

He said Applied Analysis resists any attempt to interfere with the firm’s analytical conclusions, however. “We don’t change the report to take away from the analysis,” Aguero said. “There is a pretty bright line as to which side you are on.”

Aguero said the firm’s integrity is an asset it protects fervently. “From an ethical standpoint, we go to work every day, and we look at the facts. We’re objective and reasonable.”

Adams, the redevelopment agency’s chief operating officer, explained the city staff’s role in the study. The agency wanted the report to have “some level of independence,” he said. “We’re providing facts and we want to make sure the facts are correct. If they have the wrong facts and the conclusions are wrong, we’re going to tell them. There is a role for editing in an independent analysis.”

Aside from the revisions, e-mails show that some city staff members were skeptical of the report’s conclusions. For example, van Gorp, of the business development office, wrote to Adams and other city employees saying the consultant’s finding that the agency was one of the most successful in the nation was “flattering, but like wholly untrue.”

Aguero said the conclusion was accurate, based on industry standards for public-private investment ratios. The redevelopment agency reported $15 of private investment for every $1 of public incentive, he said — well above the industry standard, which is from $8 to $12.

In the months since the report was released, the dispute between the Culinary Union and the city has become increasingly acrimonious. The union wants the city hall proposal put to voters. The city does not. The two sides are now battling in court.

Although the Culinary argues that its reason for fighting the project is that it is a guardian of the public interest, the union has a strong self interest to protect. The union sought the city’s support for trying to unionize any future businesses within the redevelopment zone. After negotiations collapsed, the Culinary began to oppose the projects, including the proposed city hall.

Asked by the Sun about the Applied Analysis report, Chris Bohner, research director of the Culinary Union, questioned the legitimacy of the study, given the firm’s client list.

Applied Analysis has represented several firms that have received redevelopment money and thus would benefit from seeing a new city hall built, including the primary developer, Forest City Enterprises.

Aguero said his firm had no conflict of interest.

“We are analysts, not advocates,” Aguero said. “We are not representing a client, but rather answering a question or series of questions presented. Our approach and conclusions were transparent, and would be the same irrespective of the client.”

Adams said the city did not consider possible conflicts Applied Analysis had with other clients. He noted that the other two bidders for the study, Restrepo Consulting Group and Kaiser Marston Associates, also had clients that have benefited from the redevelopment area.

He said Applied Analysis’ bid was lowest. Restrepo’s was “extremely high” and the firm did not commit to the stated two-week time line, he said. Kaiser Marston’s bid was “reasonable” but failed to commit to the time line as well.

“You get down to a small universe of groups who can do this,” Adams said. “Our hands are tied when it comes to who has the capability of doing a study like this.”

Sun reporter David McGrath Schwartz contributed to this story.