My statement at the last City Council meeting:
I will be voting against extending this contract, but I’d like to put some of my reasons on the record.
I want to lay my personal philosophy on the table: government should never muscle taxpayers into starting businesses to compete with taxpayers. Not because I want to protect the private sector, but because government is the least efficient way of getting things done. That’s why our three current private sector arenas compete so successfully with our two current public sector arenas. Government business enterprises fail to successfully compete with taxpayers, costing taxpayers even more. Don’t get me wrong: there’s plenty of stuff for government to do, stuff in which there is no profit to be made. Our city is all about this activity, ranging from creating parks to repairing roads to clearing sewers to funding Metro. We build and fund government to provide those functions: law enforcement, common defense, the protection of individual liberty. Competing head-to-head with Mandalay Bay, the Orleans, MGM is not appropriate.
Setting aside that personal philosophy of mine, I hope to address the council from a purely financial analysis perspective.
First, we are not contemplating changing some long-planned masterminded facility. That masterminded plan had the stadium where Zappos is now. We paid Cordish two and half million dollars and this EDA, years ago, to give up its original stadium location and settle for this one. It was important, at the time, for the City to build this new City Hall, which was contingent on selling the old one to Zappos, which was contingent on moving Cordish’s arena to a new location. That two and a half million bucks is why I am comfortable that Cordish will not suffer if we turn down the extension today. You got the best of us. Thanks, civic partner.
Second, you may be tempted to say that there’s no harm in extending Cordish’s contract. That’s not true. Here we are at the end of their contract, where we hoped they’d have performed years ago, already. In fact, City taxpayers are coughing up about a half million dollars a month in interest on the debt for Symphony Park.
You see, the City borrowed a hundred million dollars to spend prettying the old railroad acreage up, planning to quickly sell all the lots to developers, pay back the debt and ride happily into the sunset having enhanced the Las Vegas city revenue stream so we can fund recreation programs in our neighborhoods, and feed the homeless. Instead, hardly any lots were sold, no debt was paid back, and City taxpayers hold the bag. Lloyds called these bonds last year, apparently due to our non-performance, and we were forced to hurriedly refinance at higher rates.
Today, Las Vegas taxpayers are still paying about a half million extra dollars per month, just in interest payments to the folks we borrowed this latest money from. The government properties (like the Smith Center) don’t pay property taxes, and the private property owners have had their property taxes abated until my children have grandchildren. No revenue, and lots of costs, in addition to the debt service.
This offer before us today is deficient in several ways:
1. The revenue projection is wildly unrealistic (see Downtown Joe). It suggests that we’ll take all of Thomas and Mack’s business away, a preposterous premise. Thus, this project is likely to fail, leaving taxpayers holding the bag.
2. Without pre-selling a bunch of expensive corporate luxury boxes, Cordish is not likely to be able to borrow the money to finance its portion. It has not yet produced a single such luxury box contract. Four months is not enough time to put together and execute an adequate sales campaign to satisfy the requirements of Cordish’s lenders. A stadium proposed for the same area of town in 1999 failed in large part because it could not sell luxury boxes.
3. If Cordish already has this cash on hand and unencumbered, we’d already be watching our new Pro Hockey team in our new arena. They don’t.
4. Yesterday’s decision to eliminate the SID from the sources of funding leaves an eight-digit hole in an already spectral financing plan. Most recently, the remaining source of taxpayer funds appears to have been invalidated (see Ben Spillman).
5. Cordish will tell you that the NBA or NHL really want to come here, but need an “independent” arena. Actually, these leagues don’t care about “independent” – they want a “public-sector” arena because governments are such poor business people, and the teams are able to keep a much higher percentage of the money. That usually means taxpayers come out of pocket even more.
In conclusion, City taxpayers are shelling out a half million a month on interest for our Symphony Park borrowings. Chasing this patchwork dream, built in a different economy, by a different City Council, does our taxpayers a severe disservice. Adding four months delay will cost $2-million bucks – half of what we need to get City Workers back up to 40 hours a week.
I believe the current Cordish proposal – last second, with a way-wobbly revenue forecast, two-thirds paid for by taxpayers – is the wrong way. The right way is to move forward recognizing the new economic environment in which we find ourselves. For heaven’s sake – for taxpayer’s sake – let’s at least start listening to some new ideas in this new era.