$80 million bet on development is risky

By Jon Ralston

Wednesday, Jan. 28, 2009 | 2:01 a.m.

It somehow seems fitting that every time city residents flush their toilets they are helping to build Mayor Oscar Goodman’s dream of a redeveloped downtown, complete with his pet project extraordinaire, the mob museum.

Yes, Goodman and the Six Dwarves at Roundheels Central are so desperate to give away tax breaks and land downtown while erecting a new government monument that even in this sinking economy, they have put at risk $80 million in sewer funding to help pay for the mob museum and other projects, possibly including that Oscar Goodman Memorial City Hall. Yes, $80 million.

I wonder how people looking for jobs, how public employees having their salaries and benefits slashed and how, as Goodman would say when anyone criticizes his vanity city hall project, “any thinking person” would react to that revelation.

How did this happen? Very quietly.

In November, in a little-noticed agenda item that spoke in fittingly opaque bureaucratic language of “an interfund loan … for the purpose of certain public improvements in and around the City’s Redevelopment Area,” the council voted unanimously (Steve Wolfson wasn’t there) to approve the $80 million.

“The interfund loan will serve as a temporary funding source for development projects,” the agenda item said. “The loan will be repaid as land or bonds are sold.”

As lands or bonds are sold? Not much of that going on these days.

The transaction is considered very unusual by government finance experts and apparently has raised eyebrows at the state Taxation Department, which must approve the loan. Put it in context: Clark County, a much larger government, rarely does these kinds of transfers and when it does, it’s to help the financially strapped county hospital. These types of loans are usually for much smaller amounts; the largest in county history is $30 million.

But this is for the mob museum and casinos and that gleaming new city hall, a city within a city, the very future of Las Vegas. (How does Goodman say all of that in one breath?) Isn’t it worth the risk? You don’t mind, do you?

The money came from something called the Sanitation Enterprise Find, which is money for the “City’s sewage treatment plant, sewage pumping stations and collection systems and the wastewater distribution system.”

So why go to these questionable lengths? Because the city has had trouble selling the redevelopment bonds, Goodman & Co. have looked for other revenue sources, whether it be the stimulus package that caused a torrent of ridicule or this risky and unusual transaction from the sewer fund.

I had a number of questions about this scheme, which the city has yet to answer.

For instance, if the city can loan $80 million from that fund, doesn’t it seem a little, ahem, flush? “A sufficient amount of money is available ... and (it) will not compromise the economic viability of the City’s Sanitation Enterprise Fund” the resolution reads in part.

The resolution further states that the council “finds and determines that the public interest requires” the loan to “finance the costs of the project.”

Really? Public interest? An offer the public couldn’t refuse — if it knew about it?

And if you didn’t know how important the redevelopment projects, including the mob museum, are to you, the resolution declares: “There is a need to acquire, improve and equip the Project and to develop the Union Park area of the City for the health, safety and welfare of the City’s residents and visitors.”

Really? So not just public interest, but we need this for our health and welfare? Speaking for my fellow residents, I say to Goodman and Co.: Thank you.

As one financial insider familiar with these transactions pointed out, “A lot of stuff the city has been doing lately is best characterized as ‘mortgaging the future.’ This is another example. There is a reason the city can’t access the credit markets. Its financial future is in doubt. But unlike the federal government, they can’t spend their way out of a financial crisis because they can’t print money and don’t have unlimited debt capacity.”

The mob museum may be the most compelling La Cosa Nostra attraction since Coppola’s 1970s magic and it may well lure many tourists downtown, as its boosters seem to believe. But that is hardly the point.

I hate to be a wiseguy here, but it seems to me that if the city borrows money from the sewer fund and can’t pay it back, the words come to mind of a man whose lips should have been read with the same caution as Goodman’s. To paraphrase George Herbert Walker Bush, the city will be in deep doo doo.