LVCVA drops plan Adelson attacked

The Las Vegas Convention Center will expand next year, but the project won't be financed by prepaid rent from a consortium of customers.

Venetian owner Sheldon Adelson's tenacious criticism of the consortium agreement wasn't the determining factor in the Las Vegas Convention and Visitors Authority board of directors' decision to go with a more conventional financing plan, LVCVA executives said.

But Adelson, who coordinated a 1 1/2-hour presentation to the board at a special meeting Tuesday, said he got some satisfaction out of seeing the board change course on the prepaid rent plan involving a group of trade show operators. The group planned to pay about $50 million in advance rent payments to pay for a portion of the proposed two-story, 1.3 million-square-foot south hall expansion.

Most of the building would rest just south of Desert Inn Road, with a 300-foot-wide section of meeting rooms built over the six-lane road.

Adelson had called the prepaid rent plan a "sweetheart deal" that allowed the producers of events like the Consumer Electronics Show and the Men's Apparel Guild in California to get preferential treatment at the Convention Center and keep them away from his Sands Expo Center.

Adelson said he "absolutely" still plans to sue the LVCVA for predatory pricing practices, although he wouldn't spell out specific legal plans.

In Tuesday's four-hour session, Adelson's team of accountants and attorneys made a case for why a consortium financing plan was not in the city's best interest, how the LVCVA had not done its homework on devising the cost of the expansion, why the consortium plan was going to be scrutinized by the Internal Revenue Service and why the 1.3 million-square-foot expansion still might not be enough to keep up with competing convention cities.

When the LVCVA followed with its own presentation, laying out a financial plan dependent upon the issuance of general obligation bonds, the consortium issues were quietly defused. LVCVA President Manny Cortez said executives reached the conclusion last week that bond financing was superior to what the consortium rent plan offered. It was the advantages of the bond financing plan, not Adelson's pressure tactics, that led to the decision, he said.

Cortez explained that it appeared the agency was waffling on the financing plan because details of the consortium proposal kept changing last week. That frustrated Adelson's team, which said it kept getting conflicting information from the LVCVA as late as Monday.

The board ultimately voted 10-0 with two abstentions to approve three key steps in getting the expansion going. Las Vegas Mayor Jan Laverty Jones abstained, saying she did not want it perceived that her vote was influenced by potential future employment options. She did not elaborate on those options.

Also, Mesquite Mayor Ken Carter abstained, saying his city had philosophical problems taking sides on a Las Vegas construction issue.

In their votes, the convention board approved a project labor agreement, entered contracts with Domingo Cabeiro Corp. as project architect and G.C. Wallace for engineering and authorized permission to bond for $100 million.

The cost of the hall, according to LVCVA estimates, will be $150 million, including the cost of bonding, but the board received authority from the Debt Management Commission to issue $130 million in bonds in June 1996. Only $80 million of that authorization has been used, giving the agency $50 million in commission authority that will expire in June.

The bonds would be secured with pledges of LVCVA revenues, which come from a 5 percent tax on rooms.

While there were several pleas from board members for a truce between Adelson and LVCVA administrators, it was clear the two remain philosophically apart on several issues.

The LVCVA contends it doesn't use tax dollars because the revenues come from tourists, not local residents; Adelson says because not all the room tax money goes for LVCVA purposes, the agency has a responsibility to spend it more responsibly, or even give up some of it to solve education and transportation problems.

Adelson asked the LVCVA board to place a stipulation on approval of the financing plan that executives develop an "alternating dates" system to keep hotel rooms full all the time instead of providing room occupancy peaks and valleys. That occurs, he said, because the LVCVA doesn't schedule shows back to back to take advantage of the large volume of convention space in the city.

LVCVA spokesman Rob Powers said the agency does schedule trade shows back to back, taking advantage of new space that came on line last fall with the opening of new exhibition halls northwest of the existing convention complex.

Adelson and the LVCVA executives also sparred on parking issues. Sean Clancy, an attorney with the Washington D.C. law firm of Patton Boggs, which was hired to review legal issues pertaining to the agency's action, said a facility the size of the south hall expansion would need a parking area capable of holding about 11,000 vehicles.

Cortez said there is no new parking planned. In fact, the location of the new building will knock out about 350 existing parking spaces, he said. Because the government center is in a public facility zone, there are no requirements for additional parking and board members reasoned that keeping parking down will encourage more people to use mass transportation when attending trade shows.

Adelson also repeated his threat to file a lawsuit against the LVCVA for pricing practices that undercut his Sands Expo Center facility. Trade show operators pay about three times the rate to exhibit at the Sands as they do at the Convention Center.

"Their predatory pricing behavior is against the law, as is tortious interference," Adelson said a week ago when he first mentioned he was considering a suit. "You're not supposed to go after someone else's customers. There are legal remedies for people who try to destroy business relationships.

William Weidner, president and chief operating officer of the Venetian and the point man in the presentation before the LVCVA, said his company doesn't object to the expansion plan -- just the way it's being carried out.

"Expand if you like," Weidner told the board. "Just do it right."

He said he was concerned that the LVCVA board has underestimated expenses on the expansion.

A Price Waterhouse Coopers facilities analysis Adelson commissioned for the presentation said the LVCVA may be underestimating the cost of the proposed expansion as well as the city's facilities needs.

A 1993 master plan estimated building costs of $125 per square foot based on 1993 dollars. Adjusting for inflation, the current cost should be closer to $145 per square foot, the analysis says.

The analysis says the LVCVA's estimate is closer to $96 per square foot.

Adelson's group also said the agency may not be building enough meeting space in proportion to exhibition space.

Based on the discussions with event planners and the characteristics of competitive facilities, the analysis says that assuming support exists for 1 million square feet of exhibition space, the city actually needs 300,000 square feet of meeting and ballroom space and a total gross building area of 2 million to 2.6 million square feet.

"This may suggest that the planned expansion may not be adequate to meet the needs of non-consortium events, particularly if such expansion is envisioned to compete for more professional association conventions (rather than just trade shows) with destinations such as San Francisco, San Diego, Denver, Dallas, etc.," the analysis says.

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