SUN FILE PHOTO
Friday, July 17, 2009 | 2 a.m.
- City Hall project gets support, leaders note risks (7-1-2009)
- For mayor, unusual disappointments (6-26-2009)
- Goodman: Economy could kill City Hall project (6-18-2009)
- Supreme Court sides with council in city hall battle (5-28-2009)
Taking a page from the city’s past, the laborers union has offered to finance as much as half of the cost of a new Las Vegas city hall — from its pension fund.
A spokesman for Laborers Local 872 said the union hopes to fund at least 30 percent of the beleaguered construction project, which could ultimately cost more than $250 million. The union has been the most aggressive advocate for a project the city describes as a linchpin to downtown redevelopment, and hopes other locals will follow its example.
“We decided to step up to the plate and put our money where our mouth was,” said laborers spokesman Tom Morley, who also serves as the union’s political director. “We’re willing to step up and make sure that this project goes through ... We want those jobs.”
In return for its investment, the union would require a labor agreement ensuring its workers would be employed on the project.
For the city, and Las Vegas Mayor Oscar Goodman in particular, the proposal could be a shot in the arm.
This winter, Goodman said the city would be “cheating our future” if it scrapped the city hall plan, comparing the development to Depression-era projects such as the Empire State Building and Rockefeller Center.
But after months of bullish assessments, city officials have started to acknowledge the harsh economic realities.
Last month, Goodman cited sluggish credit and bond markets as the primary obstacle to funding the new city hall. The city had planned to sell to investors special certificates of participation to pay for the project.
The city expected to offer the certificates at an interest rate of 5 percent. But potential investors balked because, unlike general obligation bonds, the certificates do not have a dedicated funding source. The city, which would decide each year whether to make payments, would have had to raise the interest rate to 7.5 percent to sell them, adding millions to the cost of the project.
In some ways, the laborers’ offer is not surprising.
The union’s members have packed City Council meetings, and its leadership spent $200,000 this year to sink the efforts of a rival union that sought to derail the project. The Culinary Union, the state’s largest and most powerful labor organization, lambasted the new city hall as fiscally irresponsible, especially at a time when the city faces deficits and has announced cuts in public services.
Labor experts said it’s not unusual for a union to invest in municipal projects, but the size of the union’s potential investment raised eyebrows. According to the city’s latest estimates, the new city hall will cost $157 million, which means the union would put up $47 million to $79 million, or nearly a quarter of its pension fund.
“That’s unusual,” said Ron Seeber, a labor and industrial relations professor at Cornell University. “To have a significant amount of chits in one basket like that seems to stretch the boundaries.”
The sheer size of the possible investment signals the acute desperation felt by the building and construction trades as Strip construction projects stall and dry up.
Like hundreds of other union pension plans across the country, the laborers fund recently notified participants that its plan was “endangered,” meaning less than 80 percent of the union’s retirement obligations are funded. The laborers fund also took a hit in the Bernard Madoff scandal: the plan joined a class action suit in April, alleging it lost millions of dollars because of a financial management firm’s investment in Madoff-connected funds.
Still, Morley, the laborers official, said the union’s pension fund weathered the economic collapse well and that the plan “made out better than 90 percent of trust funds.” He called the new city hall a sound investment. “We consider it a secured project,” Morley said. “We don’t see the city leaving and not paying the rent.”
Municipalities have traditionally been a safe investment. However, the city faces a $150 million deficit over the next five years. And for the first time, ratings agency Moody’s Investors issued a broad caution on investing in local governments, noting that cities relying heavily on tourism and gambling pose among the greatest risks.
Morley said that last month the union’s executive board voted unanimously to invest pension money in the new city hall.
Goodman on Thursday declined to comment on the talks surrounding the pension fund proposal, but raised the possibility during a City Council meeting July 1.
The plan recalls Las Vegas’ sordid history. Starting in the early 1960s, the Teamsters’ Central States pension fund, under the direction of James R. Hoffa, loaned tens of millions of dollars for investments in Las Vegas casinos, including the Desert Inn, Caesars Palace and the Stardust. The loans were made to people connected to organized crime.
The perception of engineering a union deal with Goodman, a former mob lawyer, wasn’t lost on Morley.
“People made comments,” he said. “I believe they mentioned the Hoffa days.”
Morley added: “That doesn’t bother us at all. Oscar Goodman is an honorable friend to Local 872. But more than anything, I want my members to continue to work and live decent lives.”
Reporter Sam Skolnik and Sun librarian Rebecca Clifford contributed to this report.