As skilled construction workers at the Legends at Sparks Marina put their muscle into building a unique tourist attraction, city finance staff focused their brain power to draft a complex financing agreement.
Sparks gave the green light on Monday to pursue public financing for the Legends at Sparks Marina retail, entertainment and dining complex. It will include up to 100 attractions - including the T-Rex Dinosaur Experience and Restaurant, Scheels All Sports store, Corona Mexican Cantina, America's Roadhouse, the Hot Dog Hall of Fame, BCBG Max Aziria, a Hotel-Casino-Spa and convention center, and possibly an indoor area for minor league sporting events and concerts, among many others.
Sparks City Councilmen approved three means to finance the $1 billion project set to open in late September.
Councilmen established Local Improvement District (LID) No. 3 - an area encompassing the Legends development and Legends Casino-Hotel-Spa - where taxes will be collected to fund improvements on the property.
Councilmen gave the go-ahead for staff, finance and legal counsel to seek public financing through Limited Obligation Improvement Bonds funded by the LID, and Sales Tax Anticipation Revenue (STAR) Bonds.
"The LID bonds are like a super-mortgage; they involve a real estate transfer," said attorney John Murphy. "The STAR Bonds involve a revenue transfer. Investors ask, 'what is the value of the property today?', and 'What is liable to happen to the value of the property in the future?' Investors are interested in the enhancement to the value of the land."
The LID Bonds are funded by tax assessments on the Legends and Olympia Gaming casino properties in the new local improvement district (Legends at Sparks Marina.)
As the contractor puts in roads and utilities, they will be reimbursed by the city for these costs - estimated at $26 million. Since these are public infrastructure, they will be owned by the city.
Senior STAR bonds are issued by the city, said Greg Herrington, city financial advisor. The tax revenue collected from the development will pay off the senior bonds first.
Developer-issued subordinate STAR bonds will allow the developer to fund private construction work. In early June, up to $90 million in senior STAR bonds will be issued, and up to $40 million in subordinate STAR bonds will be issued.
"The STAR Bonds are to fund costs of the development, primarily within the retail and entertainment core, including support of the costs of construction of the Scheels All Sports store," according to a legal summary given to the council.
All bonds will be repaid through sales tax, because it is illegal to use property taxes in this kind of funding agreement, financial staff said.
The finance staff stated clearly that LID Bonds are different from General Obligation Bonds, in that the city and taxpayers will not be responsible for repaying the bonds, should the development fail to meet its high sales tax expectations.
"The fact is, there bonds are limited obligation bonds - not general obligation bonds," said Adam Mayberry, Sparks public information officer. "If the tax revenues fall short of projections, they taxpayers and the city will not be held liable for that. If the (tax) revenues aren't there to pay the bonds, they simply don't get paid, or the investors would have to wait longer to get paid. That's the bottom line."