Four out of five councilmen concluded that economic benefits of the development outweigh financial risks to the city.
The Sparks City Council and Redevelopment Agency approved a complex public-private financing and development agreement after five years of working with RED to lift their dreams from the dust.
The much-debated approval comes just one day after RED Development announced promising economic impact figures for the Legends at Sparks Marina - and just two days after councilmen began to review the agreement. City Attorney Chet Adams also reviewed the financing and development agreement.
On Tuesday, a study by Meridian Business Advisers and the University of Nevada, Reno Center for Regional Studies indicated that the Legends will create 4,400 jobs per year with an annual economic impact of $415 million for 20 years, or $8.3 billion. The study also claimed the Legends will generate 7,600 jobs over the construction period with an economic output of $789 million.
"The jobs created by this development, along with the new goods and services provided, will help to strengthen a weak economy as well as bring long-term economic benefits to Sparks," said Sparks Mayor Geno Martini.
Supporters expressed hope that the mammoth development would act as a catalyst for economic growth and tourism, while critics said city taxpayers will take on too much financial risk through the public financing part of the agreement.
"I'm appearing here in support of your analysis of this project," said Sen. Randolph Townsend. "I believe very, very strongly that this project, for Sparks and all of northern Nevada, is a huge investment. You will be the catalyst on which this community will build."
Sparks Marina resident Don Young expressed concern about the level of financial risk the city is taking on.
"This could break the city of Sparks," Young said.
Only time will tell.
Construction of The Legends will stretch across six years, and 600,000 square-feet of unique stores and restaurants are expected to attract more than 800,000 new visitors per year to the region. All told, the Legends features 1.3 million square-feet of total developed area.
The three methods of financing will be a mix of Sales Tax Anticipated Revenue (STAR) bonds, which bank on bringing in more tourist dollars; funds collected from a local improvement district; and Tax Increment Financing (TIF) bonds, which some councilmen previously called a potential risk to the city's finances.
For the Legends, the Redevelopment Agency and Sparks staff have been forced to use their best educated guesses to weigh financial risk versus the benefit that could be received.
At a redevelopment agency meeting on Feb. 11, Sparks finance director Tom Minton presented information about the project's possible financing arrangement. At that time, the Sparks Redevelopment Agency was considering issuing $13 million in TIF bonds. The bonds are issued based on taxes collected within the redevelopment district for improvements within that district.
Minton said the most significant factor - "the 800-pound gorilla" - in determining the value of The Legends development is Legends Bay Casino Resort Spa. The size and value of Olympia Gaming's 1,000-room casino-resort will determine how much in property taxes Olympia can be charged.
In turn, if a large amount of property tax is collected, then the city-issued $13 million in TIF bonds would be paid off sooner. The sooner the financing is paid off, the more time the redevelopment agency can collect taxes to use on other redevelopment projects, such as combating blight on Oddie Boulevard.
There is a risk that city taxpayers could be on the hook financially if Legends does not meet high expectations for bringing in tax revenue. Staff has been working diligently to address these concerns and protect the city should the project fail to meet its goals, Minton said.
In 2011, if the casino can't issue sufficient senior and "mezzanine" STAR bonds, the city may be asked to finance an additional $10 million in TIF bonds, said Sparks city manager Shaun Carey.
Under the agreement, the city agrees to issue $9.25 million in TIF bonds now and $13 million in mezzanine STAR bonds in 2012. All told, the city will issue $156 million in STAR bonds on behalf of RED Development, in addition to the TIF bonds.
If RED fails to meet its financing obligations, under a best-case scenario, the Sparks Redevelopment Agency would be required to fund $22.9 million. Under a worse-case scenario, the redevelopment agency would be on the hook for $92.7 million, said Carey and a financial consultant with RED Development.
"Our goal is to repay the bonds as quickly as possible, because interest is not our friend," Carey said.
Steve Graham with RED Development said in the last eight months, government bond interest rates have risen from 6.25 percent to 8 percent, creating a $40 million funding shortfall for the Legends, making it necessary to change the agreement.
The move would secure the developer's $156 million pledge, according to Minton.
"I got the packet on Sunday, and after studying it for many hours, I boiled it down," said Councilman Mike Carrigan. "It's my understanding that the biggest change to the development agreement is the issue of putting up taxpayer money in TIF bonds to cover the developer's short-term debt obligation."
The agreement also allows RED Development to sell the property as early as Sept. 15, 2009, although Graham said RED typically maintains ownership of its shopping centers for long periods of time.
Carrigan was the sole dissenting vote, but it did not stop the council and redevelopment agency from approving the financing and development agreement for Legends.
"This is about vision. Legends will set a new bar for the entire West Coast for tourist destinations," said Councilman Ron Schmitt.
If all goes according to RED's plan, the development will be anchored by a 250,000 square-foot Scheel's All-Sports store, set to open on Sept. 28, as well as the 1,000-room Legends Bay Casino Resort Spa and possibly a sports and special events arena.
The Legends complex is set to also include a 14-screen, 3,000-seat IMAX theater, T-Rex: A Prehistoric Adventure restaurant and dinosaur experience, Target Greatland store, Jazz: A Louisiana Kitchen, Corona Cantina Mexican restaurant, Adidas, Stanford & Sons Comedy Club, BCBG Max Azria women's clothing, BCBGirls, Brooks Brothers, Chili's Grill and Bar, Saddle Ranch Chop House, Forever 21 fashion and accessories, Harry and David gourmet gifts and fruit baskets, Lane Bryant, SegaWorld Sports Grille, Sunglass Station, Off Broadway Shoe Warehouse, American Roadhouse-Bikers, Blues and Barbecues, Yard House restaurant, Chili's Grill and Bar, and the Hot Dog Hall of Fame.
The development will be home to Olympia Gaming's Legends Bay Hotel-Spa-Casino with convention center, private beach and waterfront amphitheater, as well as an indoor arena. Plans call for the Sparks Redevelopment Agency to purchase the arena site and arrange construction and leasing agreements with RED at a later time. This arrangement is tied to the TIF financing by the city, needed for the overall project.
Carey said the project has already transformed a corner of the city from large expanses of open land where the dilapidated outlet mall sat with a property value of $6.9 million. Carey said today the same land is now worth $55 million, and he expects that strong upward trend to continue.