New city hall bonds have given project stimulating effect

By Sam Skolnik

Tuesday, Nov. 17, 2009 | 2 a.m.

President Barack Obama’s federal stimulus bill might bail out Mayor Oscar Goodman’s new city hall project.

In recent weeks each of the three major rating agencies, Fitch, Moody’s and Standard & Poor’s, gave the city hall financing plan their fourth-highest rating — increasing the likelihood that the city will be able to raise the $179 million needed for the project.

The rating agencies cited the city’s plan to use stimulus-funded Build America Bonds.

“Given the state of the economy, we’re very pleased with all three credit ratings,” said Las Vegas Chief Urban Redevelopment Officer Scott Adams. They’re “very, very important” to securing an interest rate on the deal the city can actually afford, he said.

The financing plan is a “lease-purchase” arrangement, which would give the city the option of buying the building after leasing it for a period. The city would amass major long-term debt — a fact that prompted the Culinary Union to criticize the project and attempt to kill it, and which more recently has caused several council supporters to question the financing plan.

But that debt would be lowered by the city’s use of the Build America Bonds, a part of Obama’s American Recovery and Reinvestment Act designed to increase spending by state and local governments on large capital projects. The federal government pays 35 percent of the interest cost on projects funded by such bonds, allowing state and local governments to sell the bonds at rates that are competitive with corporations.

According to city officials, the subsidy would save Las Vegas as much as $82 million over 30 years.

Though the city has secured approval to borrow up to $267 million to complete the new city hall, the latest construction estimates put the project’s costs at $145 million.

Goodman and other project backers say a new city hall on the site bordered by Lewis Avenue, Clark Avenue, Main Street and First Street is integral to Las Vegas’ overall downtown redevelopment efforts — including more than $1 billion worth of projects in Symphony Park, on the site of the current City Hall and at the nearby old post office, which is being renovated into the mob museum.

The city recently signed an exclusive negotiating agreement with the Cordish Co. of Baltimore to evaluate building a sports arena, entertainment district and casino resort on the current City Hall site.

According to top officials with Forest City Enterprises, the Cleveland company developing the new city hall, the project appears to be coming together.

The Build America Bonds provide a key financial incentive. And the agreement with Cordish — which does not bind that company to proceed — gives an added push, they said.

Goodman has described the new city hall as part of a series of interlocking projects, some of which will depend on others to move forward.

Eric Louttit, Forest City’s vice president of finance, said the developer is as committed to Las Vegas as ever. That includes the scope of the project, which includes a mixed-use and office building development of the surrounding three blocks.

“At this point, we haven’t changed the plans for the other three blocks,” Louttit said. “We have a serious investment in this property. We can’t scale it back too much without getting an unacceptable return on investment.”

Louttit is in town for Wednesday’s City Council meeting, at which the new city hall financing package will be introduced.

The crucial vote on the project is slated for the following council meeting, on Dec. 2. City officials will attempt to sell the financing package earlier that morning.

If the bond sale goes through and the project is approved, Louttit said, preconstruction work, including demolishing structures on the new city hall site and removing any asbestos discovered there, could begin as soon as January. Construction is slated to take from 24 to 26 months, he said.

Louttit said he couldn’t predict whether the council ultimately would approve the deal, especially given the skepticism shown by several council members whose previous support might be wavering.

“Of course we’re concerned about it,” Louttit said. “Until we see those yeas and nays, we won’t know how it will come out. But we’re hopeful.”