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Gaming Guru

J.M. Kalil
 

Downtown Deal: City to Consider Exchange

18 January 2005

LAS VEGAS -- In 1994, Las Vegas city officials sold Boyd Gaming 3.4 acres of land for $1 in exchange for the gaming giant agreeing to build a 900-space parking garage on the property.

After 11 years and six deadline extensions, the garage has never been built, and officials with Boyd and the city say the need for parking downtown is not as dire.

Meanwhile, the former city land has appreciated dramatically because of downtown's investment boom and the property's proximity to a vacant 61-acre parcel now considered one of the most valuable pieces of urban real estate in the nation.

Although the city's agreement with Boyd allows city officials to seek return of the land should Boyd not meet its contractual obligations, such a move is not being contemplated. Instead, members of the Las Vegas City Council on Wednesday will consider amending the city's contract with Boyd for the seventh time.

Under the proposal, Boyd would provide $1.68 million toward design and construction of a proposed performing arts center downtown. In exchange, the city would relieve the company of its obligation to build a garage and confer clear title to the land, located next to Boyd's Main Street Station.

Clark County officials assess the taxable value of the land at a little under $6 million. By state law, taxable value must be set below market value.

Mayor Oscar Goodman acknowledged the city could, if it chose, move to reclaim the now-valuable property. But he said this would be the wrong thing to do, given Boyd's status as a dependable partner in reviving downtown.

"Sure we could do it, but we have to get along with our neighbors," Goodman said. "The city, unlike the private sector, has to maintain relationships with our neighbors, and a good neighbor wouldn't do that no matter how much the land is worth now."

Goodman noted that Boyd piled money into the reopening of a failed city redevelopment project, Main Street Station, when other businesses were unwilling to invest downtown 10 years ago.

The 3.4 acres in question sit between Main Street Station and Union Plaza, which the company does not own. The land is just over the Union Pacific Railroad tracks from the site of several planned developments that are expected to rejuvenate the area.

Besides a new IRS building and a massive furniture market, numerous projects are planned on the city-owned Union Park, a 61-acre parcel that Goodman calls "the jewel of the desert." Among the proposals for the vacant site are a baseball stadium, a high-rise condo development, an academic medical center and the performing arts venue.

Clark County officials say the taxable value of the former city land, which Boyd is using for valet and handicapped parking, will escalate when it is reappraised this year.

"I expect to see a huge increase in the next evaluation period," Leon Maj, a property appraiser in the Clark County assessor's office, said of all commercial property in that area. "It's actually kind of scary: land values are starting to double downtown."

As developers scurry to assemble downtown parcels to construct a wave of high-rise condo towers with million-dollar units, property is selling for about $4 million an acre in the area.

A parcel about one-twentieth the size of the Boyd land recently changed hands downtown for $1.6 million, according to the assessor's office.

Despite the assessor's valuation, Boyd defended its plans to acquire clear title to the land for $1.68 million. Company officials said they did not believe the property would fetch much of a price on the open market.

"It's a very unusual shape of land. There's a very narrow piece of frontage (on Main)," said Blake Cumbers, Boyd's vice president of development. He added that part of the property's frontage is eaten up by Ogden Avenue, which bisects the property before running underground beneath a railroad track overpass.

However, the company acknowledges the land could be developed into a more lucrative use in the future.

"There are not specific plans. We're going to have to see what happens with the 61 acres," Boyd spokesman Rob Stillwell said.

Key city officials said last week they were unaware that Boyd's $1.68 million pledge for the performing arts center was rooted in the 1994 land deal/parking garage agreement.

Instead, Goodman and City Manager Doug Selby said they were only familiar with the most recent amendment of that contract, which called for Boyd to partially fund the development of an events arena. Both noted their predecessors handled most of the dealings involving the property.

The unusual history of how the city's contract with Boyd to trade land for a new garage came to involve an arena and now a performing arts center is told in hundreds of pages of city documents generated over 15 years of redevelopment efforts.

In the late 1980s and early 1990s, the city's redevelopment agency pumped $18.4 million of public money into Florida developer Bob Snow's Main Street Station.

As part of its agreement to partally fund the project, the city mandated that Snow build a parking garage and "festival marketplace" on the 3.4 acres.

But the property filed for bankruptcy only four months after it opened in 1991. About two years later, Boyd struck a redevelopment agreement with the city to take over the property. Later, Boyd in January 1994 contracted to build the garage in exchange for the 3.4 acres.

Only one month earlier, the city used eminent domain to seize property at Fourth and Fremont streets to make way for the Fremont Street Experience garage downtown, sparking an acrimonious dispute that resulted in lawsuits from the Pappas family and other land owners.

City Attorney Brad Jerbic said the city needed Boyd to build a 900-space garage because officials felt the Fremont Street Experience garage would not be sufficient for the flood of visitors who were expected to visit the giant canopy.

Much of what is now the Fremont Street Experience garage was initially going to be used to house and maintain floats that were to sail through the air along wires below the canopy before that idea was scrapped.

"When they switched to a light show, that freed up all that space for parking," Jerbic said.

Throughout the mid- and late-1990s, Boyd sought and received contract extensions from the city on its garage obligation.

"For years we extended and extended," Jerbic said. During that time, more parking became available downtown at Neonopolis and a new City Hall garage.

A parking study presented to the city several years ago concluded there was no longer a need for a parking garage downtown.

Attorneys for Harry Pappas, who settled his property rights violation lawsuit against the city for $4.5 million last year, deposed Snow during the litigation.

"He said he told the city, `If I have to build (the garage) it's going to put me in financial straights,' " Pappas said Monday. "The city tells him, `Tough, you're going to build it.' He begged the city to back off the garage, but they said no way and held his feet to the fire. Guess they don't want to do that to Boyd."

The city's most recent amendment of its contract with Boyd, adopted in 2002, called for the company to either complete the parking garage by Dec. 31, 2005, or invest $1.5 million to $2 million toward the development of an events arena on Boyd-owned land on the northwest corner of Main and Stewart Avenue. That parcel is used as Main Street Station's parking lot.

About $320,000 of Boyd's money was sunk into pre-development costs for the arena. However, financing could not be obtained when a deal fell through for the Las Vegas Wranglers to be the anchor tenant. The team instead committed to play at the Orleans Arena.

Cumbers, the Boyd vice president, said this week's proposal to replace the parking garage and arena obligations with the performing arts venue funding is the best way to resolve an 11-year-old contract that has charted a curious course.

"It seems to be brought to a happy conclusion in that we've directed the resources for something that is entirely unnecessary and (are) dedicating it to something that would be of a great benefit to the entire community."

The performing arts center is a project Boyd officials have already demonstrated an interest in helping.

In what was perhaps the most notable announcement of his annual State of the City address last week, Goodman trumpeted a $1 million pledge to the arts center from Don Snyder.

Snyder, 57, has served as chairman of the Las Vegas Performing Arts Center Foundation and is also the president of Boyd Gaming.