LVCVA bond sale delayed

Gary Thompson

Friday, July 9, 1999 | 11:22 a.m.

A double-barreled assault on the planned expansion of the Las Vegas Convention Center prompted an investment banker to delay issuance of bonds to finance the project Thursday.

Morgan Stanley & Co. postponed next Tuesday's scheduled sale of $150 million of tax-exempt municipal bonds the Las Vegas Convention & Visitors Authority wants to issue to fund the 1.3 million-square-foot expansion of its convention facility.

The postponement follows the filing of a lawsuit Thursday by Sheldon Adelson's Venetian hotel-casino, which asked a district judge to declare the financing plan to be illegal.

The sale delay also was caused in part by Morgan Stanley's concerns over a bill introduced last week by House Majority Whip Tom DeLay, R-Texas, that would prohibit the use of tax-exempt bonds to finance construction of facilities leased to private businesses under certain conditions.

DeLay specifically mentioned the LVCVA expansion plan in his remarks on the House floor, making some of the same arguments offered by Adelson in his opposition to the project. But an Adelson aide said today there have been no contacts between DeLay and Adelson or any Venetian officials.

Adelson's Sands Expo Center is a director competitor with the Las Vegas Convention Center for the lucrative trade-show business that brings millions of conventioneers to Las Vegas each year. And Adelson's $93 million of cash "equity" investment in the Venetian was derived in part from $140 million of loans secured by the Sands Expo Center.

But many convention promoters have supported the LVCVA expansion plans because they have to pay up to three times as much to stage trade shows at the Sands Expo Center.

Adelson needs to keep the Sands Expo Center booked with trade shows to help fill the 3,000-room Venetian. In addition, his plans to finance construction of another 3,000-room tower -- the Lido -- could hinge on his ability to book new shows at the Sands Expo to replace others that have left the facility.

The delay in the bond sale could leave convention promoters with just two options -- book shows at the Sands, or leave Las Vegas -- and could result in a higher cost if interest rates rise further.

"Legally, they have no case," LVCVA spokesman Rob Powers said of Adelson's lawsuit. "Their tactic was to file a lawsuit to delay the issuance of the bonds for the expansion.

In its lawsuit, the Venetian asked that the project be delayed until taxpayers can vote on the bond issue.

The lawsuit, filed through attorney Stephen Peek, contends the LVCVA board and Clark County misused a legal loophole to issue the bonds directly when voters should have been the ones to make the call.

Voters can be circumvented when "revenue bonds" are repaid with profits from a governmental operation.

But when "general obligation bonds" are issued -- requiring repayment with tax dollars -- a vote of the people is necessary.

While the convention center makes money from the rental of its space for trade shows and conventions, the lawsuit states that those revenues don't cover the operating costs and that room tax monies are required to keep the convention center running.

"The bonds effectively pledge the full faith and credit of the taxpayers of Clark County as additional security for payment of the 1999 bonds," the lawsuit states.

"In its attempts to push through the South Hall Expansion as quickly as possible the LVCVA has engaged in a continuous and deliberate pattern of conduct designed to avoid voter and taxpayer scrutiny and to avoid accountability to the citizens of Clark County," the legal action alleged.

The lawsuit also charges the expansion -- south of Desert Inn Road between Paradise road and Swenson Street -- is being pushed through primarily to benefit eight trade show exhibitors who already have been guaranteed prime dates through the year 2009.

The lawsuit asks District Judge Stephen Huffaker to order the LVCVA to submit the funding scheme to the Debt Management Commission and, if approved, then to a vote of the people.

The Venetian also asks in the lawsuit for a court order that the expansion plan be put on hold until there is an updated master plan, an environmental impact study and provisions for parking and traffic flow.

In his remarks introducing HR-2398, DeLay said he'd developed his proposed legislation after reading "press reports" about the LVCVA expansion plan.

"My concern isn't with that community per se," DeLay said, "but rather with the potential implications for all American taxpayers and the potential precedent which could be established should financing of this facility go forth in the face of statutes and regulations which suggest it should be ineligible for tax-exempt treatment."

DeLay also noted that "the new facility financed with the use of these federally tax-exempt bonds will both compete with convention facilities in Houston and 'lock-in' to Las Vegas through 2009 these trade shows, effectively denying Houston and other communities the opportunity to attract these conventions to our region."

Neither DeLay nor his press secretary could be reached for comment. Venetian executive Andy Abboud said there'd been no contact between Venetian officials and the Majority Whip's staff regarding the legislation.