The Lucky Dragon Hotel & Casino is set to ask Las Vegas city leaders for tax increment financing (TIF) approval on Wednesday, November 18th. They say their lenders will not create additional loan facilities if they don’t get a break on taxes or other material credit enhancement such as raising an additional $25 million in EB-5 on top of the $60 million already raised.

A TIF is a public financing method or value capture strategy that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects. Municipalities can dedicate future tax revenues of businesses toward an economic development project in the community. However the subsidy is sometimes seen as a hand-out and can divert funds from city parks and other programs.

EB-5 capital is an alternative to traditional funds sourcing. The program was established in 1990 to encourage foreigners to invest in the United States and create American jobs in exchange for a U.S. green card. As noted, the developers have already raised $60 million through the vehicle and their lenders want them to raise an additional $25 million similarly if they don’t get the tax break. However, that path to “material credit enhancement” takes time and if restricted to EB-5 capital the project would likely shut down.

“Lucky Dragon has a Letter of Intent in place with First Foundation Bank for development financing of up to $30 million,” the company stated in information provided to the Redevelopment Agency, according to the Las Vegas Review Journal. “However, First Foundation will not issue any portion of the loan until the project obtains a material credit enhancement such as TIF financing, or raises an additional $25 million in EB-5 on top of the $60 million already raised. It has taken a significant amount of time, effort and capital to raise the initial $60 million in EB-5 funds for Lucky Dragon, and given the uncertainty and extended timeline required to raise EB-5 funds, Lucky Dragon will be forced to cease all development activity in the coming months.”

TIF are often used to redevelop or even gentrify urban areas of decay or stunted growth and there is no doubt in anyone’s mind that helping along new development on the South end of the Las Vegas Strip could only be good for the city overall. But it has been quite some time since the Redevelopment Agency has made any major investments in a casino-hotel property. It should also be noted that the current Redevelopment Plan doesn’t limit investments in any specific area of commerce.

According to the LVRJ, City Councilman Bob Coffin is not opposed to the plan. “(The TIF request) is of the ordinary, but how often do these things happen?” Asks Coffin. “It’s not an ordinary occurrence that people build casinos and hotels to employee people and brighten up a blighted area.”

EB-5 funding is not without its pitfalls and it’s unlikely the developers could raise money through that process with any expediency. A Homeland Security firestorm erupted earlier this year when the department inspector determined that in late 2012, now Deputy Secretary of the United States Department of Homeland Security, Alejandro Mayorkas improperly fast-tracked visas for investors in the $415 million SLS Las Vegas. He reportedly said he would “do it again” if it meant he could move along development and create jobs for Nevada. He called complainers  “a bunch of whiners at the Department of Homeland Security.”

 

Leave a Reply

Your email address will not be published.