Developers of the Lucky Dragon Hotel & Casino, under construction near the north end of the Las Vegas Strip were denied their request for a chance to come back to city leaders with a specific plan that would include financial assistance from the Redevelopment Agency in the form of Tax Increment Financing (TIF). Yesterday City Council members rejected the unusual request for subsidies that may have diverted city funds from parks and other improvements. In a most basic sense a TIF would have allowed the developers a break on future property tax increases.
Developers of the Asian-themed property have so far raised over half of the estimated $139 million price tag with $60 million of that coming from foreign investors who can receive permanent residency for their contributions (EB-5 funds) in addition to more than $24 million in their own equity. They also have a letter of intent for up to $30 million in financing from First Foundation Bank. However the bank told them that they wouldn’t provide “any portion” of those funds unless developers raise an additional $25 million from foreign investors or lock down a “material credit enhancement,” such as tax increment funding.
In their request for consideration the developers noted that, “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.”
One of the casino’s developers pushed back against the idea that their request would take funds away from the city, noting that completion of the casino would actually add tax dollars that don’t currently exist. Andrew Fonfa said, “There’s a misconception that we’re trying to raid the city coffers,” Fonfa noted. “That’s not the case.”
Former Nevada governor and U.S. senator, Richard Bryan represented the casino at the meeting and stated he understood their resistance to provide public assistance to a private development, but noted that it was a special case as the new development would bring jobs to the depressed area. The casino site is just off Las Vegas Boulevard (The Strip) on Sahara Avenue, and many people consider the area approaching The Stratosphere to be blighted and in dire need of development.
Opposed to the proposal were representatives of the the Nevada Resort Association, the El Cortez, the Culinary Union, and Boyd Gaming, some of whom conveyed their feeling that the break wouldn’t be fair when others have had to support their projects privately.
The move would have been a sea-change and set a precedent others may want to follow. As such it would change the way the city has done business in the past. Voices are divided on whether that would be a good thing or not. Councilman Bob Coffin who represents the ward where the project is located was the sole dissenting vote in the 6-1 denial.
The request was dismissed without prejudice however as reports indicate that Coffin receive assurances from city staff that the idea would be brought up again in the future.
Where this leaves the developers who include former Las Vegas Sands president, William Weidner and real estate developer Andrew Fonfa is unclear, but some are suggesting they look to their own fortunes and increase their equity share in the project.