Vegas nears uneasy alliance

By Sam Skolnik

Wednesday, July 16, 2008 | 2 a.m.

The Las Vegas City Council is poised to hand $10 million to former Councilman Michael McDonald for a low-income senior housing project, acknowledging his checkered past will cause some to question the deal.

Members of the council and city staff say they’re willing to weather any controversy that might accompany today’s vote because of the dire need for affordable senior housing.

The council will consider a development agreement for a proposed 11-story complex at Decatur Boulevard and Vegas Drive that would include 416 housing units and about 70,000 square feet of retail space.

Two bills would approve grants to McDonald’s company, Alpha Omega Strategies, totaling just more than $10.4 million.

In a July 1 letter to a manager in the city’s Neighborhood Services Department, McDonald explained that his project has a $10 million “gap” in funding. Without a complete budget, he wrote, he would not be able to present the deal to the state Housing Division for approval.

“Since the projected cash flow from the maximum rents allowed for this project will not cover its projected expenses, Alpha Omega Strategies is requesting that the city consider allocating the $10 million as a grant rather than a loan,” McDonald wrote to Tim Whitright, manager of the Neighborhood Services Department.

Recent history indicates McDonald will likely win approval for the project, to be called The Residences at Village Square.

During a June 2007 meeting, the council agreed to sell Alpha Omega the 13-acre site for $6.5 million — $2 million less than the city had acquired it for, and a full $2.7 million to $3.1 million less than it was appraised for soon before that meeting.

City officials acknowledged then and now that doing business with McDonald might prove controversial. “Only an idiot would say this transaction would not be looked at closely,” Mayor Oscar Goodman said at the time.

But officials said there was an overriding reason to approve it: The low-income senior population in the valley badly needs affordable housing. And in this weakened economy, it’s not as though developers are lining up around the block to build on that site, in what the city calls a blighted area.

“Low-income senior housing is desperately needed,” said Councilwoman Lois Tarkanian, who said she likely will vote to approve the deal. “I know that there is a very, very significant need.”

Tarkanian said council members were told during recent briefings that 41,600 seniors in the region are either spending more than half their income on housing or living in substandard housing.

The councilwoman also said that although she did not serve with McDonald on the council, she knew him through his work as president of the Palomino-Pinto neighborhood association in her Ward 1. She said that in all her dealings with him, McDonald showed “such great care and concern” about his neighborhood.

“All that I’ve seen of (McDonald) is a totally different side” from what the ethics scandals of his past would indicate, Tarkanian said. “I feel that he’s been an excellent citizen of the ward.”

Before he was handily defeated for reelection in 2003, the city’s Ethics Review Board twice determined that McDonald had broken the law — by supporting a bill that enriched friends and by trying to sabotage another council action that would have hurt other friends.

That’s not to mention the prosecutorial probes into McDonald’s business dealings with star bribe-scandal witness Mike Galardi, and his friendship with strip club owner and convicted felon Rick Rizzolo.

City officials were quick to point out that McDonald never was charged with or convicted of a crime. They also noted that in one instance in which he was reprimanded by the Ethics Review Board, a federal judge in 2001 said his actions did not rise to the level of malfeasance, thus allowing McDonald to keep his job.

A business associate of McDonald’s, Rick Henry, said the former councilman was attending to a family medical crisis and could not respond to questions Tuesday. Henry said any questions about the project would be answered at today’s council hearing.

City officials note that the $10.4 million they may grant McDonald today — added to $16.4 million in bonds already reserved for the project that Alpha Omega would be responsible for repaying — make up about 40 percent of the project’s current total cost of $67 million.

That’s on par, officials say, with the average funding the city provides to subsidize construction of affordable housing developments, 43 percent of the total cost.

The $10 million, if approved, would be pledged through medium-term obligation bonds.

The state Housing Division will provide 49 percent of the costs for the project, and Alpha Omega Strategies will pledge the remaining 11 percent, according to city officials.

Tarkanian acknowledged there will be questions about Alpha Omega’s development history, specifically whether it has a track record showing it can complete such a project.

She said she was encouraged to hear that Alpha Omega had enlisted more experienced financial partners, the details of which will be released at today’s hearing.