Vampire Redevelopment Agency

A topic rarely explained

Happy September!  Let’s hope that all our mountain neighbors are safe and that September=No Smoke in our Truckee Meadows. This is an edit to the first posting- I’ve been told by a few people that I probably could have taken a little more time or had a proof reader for this newsletter. I’ll endeavor to do better in the future and was under deadline pressure to post in advance of the Council meeting.

Ward 1 Update

Speeds Around Parks

The City Council adopted a program to reduce vehicular speeds near parks as we recognize that parks attract a lot of neighboring pedestrians.  One speed reduction is on Skyline Boulevard at Cashell Drive near Mary Gojack Park.  The limit is lowered from 30 MPH to 20 MPH and goes down the hill to the ditch path crossing at Horseman’s Park.  Speed limits only work when there is good driver compliance and compliance is often nudged by visual cues.  Hopefully the increased activity levels in the area including that of park use, the newish commercial businesses and more residential housing will be helpful. It is becoming a more interesting neighborhood node.  

Messing up a Freeway Interchange

Like many, I’ve been awaiting the next iteration of the former Cue and Cushion shopping center at the the northeast intersection of Fifth Street and Keystone Avenue. Some SoCal investors bought the land high in the mid-2000’s and it took them awhile to swallow their losses and let the property go. Now it is under construction and that is good thing; some of the tenants will be national food chains that are missing in the downtown area.

However you can imagine my surprise as I started to realize that the project involved an access driveway from Keystone Avenue just south of the eastbound on-ramp. Everyone likes to play traffic engineer because we all drive. I am no exception. However, this will be a complete cluster and is counter productive to roadway safety measures as those described above.

My first step was to reach out to Nevada Department of Transportation engineers because more often than not, they do the right thing. The driveway is just out of the highway limits so they have no role in the permit. Next, I brought my concern to City Manager Doug Thornley. I reminded him of the City Master Plan policy related to driveway accesses that reads, “Plan and implement incremental improvements (e.g., phasing out obsolete driveways) as opportunities arise as a means to improve safety”

Upon inquiry, he learned that a decision was made to allow the driveway locations because, there was one there before. This was a discretion call that I asked him to consult with others about and reconsider. There is no property right to street access from any particular property location. Usually driveway placements are governed by adopted guidelines and I’ve inquired if this new driveway meets those but I’ve not been shared with a reference.

At this writing, the driveway entrance has been newly painted so it look ready to go. It will be access to a Starbucks and now Keystone Avenue users will have two Starbuck driveway clusters to navigate as the one on the north side of the freeway has been a problem for years. Keystone Avenue is the border between Ward 1 and Ward 5 so this is technically not a Ward 1 update. However, it looks like Nevada Highway troopers will be cleaning up the the resultant crashes on the Keystone Avenue median as coffee goers use this driveway to head west on the freeway.

I’ve realized that part of my purpose in writing these newsletters is to have references to direct people to information or positions/issue I’ve addressed. I am sure I’ll be referring back to this post when the inquiries about this nuisance start coming my way.

Change Up to Homeless Services

Washoe County that funds the majority of the area’s homeless services (from state and federal allocations) finally agreed to also be responsible for those services.  In the past, Washoe County passively flowed those dollars to the City to manage this regional service.  I’ve object to this arrangement for years and backed that objection up with a series of votes.  While others have been more involved in the nitty gritty of this new arrangement, I am also going to also take some credit because sometimes being an objector is a way to move the needle.  I still am not happy with the large Supershelter (aka known as the CARES campus) on East Fourth Street as I think it was the wrong model but now it will be the County government with a legion of social workers to figure out how to address this issue of our times.  This new arrangement does free up the City to be more focused on issues in its wheelhouse including the creation of more housing that is both government subsidized and market rate.  

Stuck in Downtown with a Vampire Redevelopment Agency

I keep writing about downtown because it is of critical importance that our community have a successful one as the center of regional gravity.  Secondary commercial centers like Midtown or a Victorian Square are important and even sometimes a community will have an uptown, but if downtown is not performing a region is troubled.  

As I’ve mentioned in my last newsletter, there have been many efforts to revitalize Reno’s downtown. One such effort is the mysterious legal entity known as the Redevelopment Agency.  Redevelopment agencies are creatures of an involved Nevada State law.  Reno’s is the granddaddy of all Nevada agencies and by most accounts a failure.  Edit to the first version - I’ve since learned that Sparks adopted the first Redevelopment Agency in 1978.

I base this on the fact (that was recently echoed by a Reno city attorney at a Council meeting) that Reno’s Redevelopment Agency is a “debtor entity.”  It is an entity that has more debt obligations that incoming revenue to pay outstanding debts.  If only this was true. I believe that the Reno City Council could be poised to set up the Agency for decades of more failure in the form of siphoning off tax revenue needed for essential government services to pave the way for deal making with private interests.

But for those who don’t want to read the involved Redevelopment law here is a few fundamentals:

-The Redevelopment Agency is a shadow government entity of the City of Reno.  Its Officers are the Mayor and other Reno City Council members.  The chief officer is the City Manager.  This explains for those who follow City Council meetings, why the City Council regularly concludes its business and stays seated for a new roll call and meeting of the Agency.

-The primary purpose of Redevelopment is to eliminate blight conditions.  The findings of what is blight are prescribed in the law.  Reno has two Redevelopment Areas.  The older encompasses most of downtown and the other is a non-linear geography that includes Boomtown, portions of South Virginia including the old Park Lane mall and the Grand Sierra Resort.  This post is about the downtown area but the other area is a story for another time that does not shine brightly on redevelopment.

-The heart of Redevelopment is Tax Increment Financing (TIF).  This is an arrangement in which the property tax revenues of the area are set at a monetary level at the time the area is formed.  Any increase in that set level over the life of the area is eligible for a wide array of blight prevention expenditures by the Agency Board.  The clincher is that these increased property tax revenues that in theory are the fruits of investment in the area go to the Agency AND NOT to the established taxing entities that include the City (Reno’s general fund), Washoe County or the school district.  An exception to this is that if areas are extended, the school district gets its cut.  

Before I became a jaded cynic of redevelopment (but consider myself in the good company of former California governor Jerry Brown who found it ripe with abuse), I was a fresh face city planner starting in my career with Albuquerque’s redevelopment agency.  I’ve found redevelopment in Nevada’s low tax/low services framework particularly problematic because the property tax revenue diversion is not easily replaced by other sources.

-During the run up to the Great Recession the former Redevelopment Agency/City Council spent widely utilizing debt financing.  This debt is a multi-faceted mess, but some of it funded downtown’s streetscape fixtures, portions of the Riverwalk, the baseball subsidy deal, and the under-perfoming ballroom, events center and bowling stadium that are all public facilities.  

-The projections for debt repayment were based upon on property tax revenues continuing to increase in the pre-Great Recession hot real estate market.  But the lived reality is the great property value collapse from the Great Recession brought down tax revenues below the base level.  This lack of tax revenue generation was complicated by a legislative tax fix that is a little too complicated to go into and a lot of bad luck like increased vacancies and the closing of some casinos.  Then there was just poor fiscal strategy of buying the current city hall and making that valuable office property non-tax paying as a public facility.

-So fast forward to 2021 and the Redevelopment Agency cannot pay its indebted nut.  Hitting the general fund for this area (as happened during the Great Recession in some form) is not an option because there goes public safety officers or park improvements.  So, what is the fix?  

The fix is to extend the life of the Redevelopment Agency to continue to get TIF to pay the debt.  This concept was conceived in 2017 when the City of Reno convinced the Nevada legislature to allow the Agency to continue for an additional 30 years beyond the sunset date of existing law for a total of 60 years.  Under existing law, agencies may only be set up for 30 years initially and then extended for another 15.  Representations were made that this was necessary to pay off existing debt.  But is this really the plan and are safeguards being put into place to ensure future Agency failure?  I am skeptical.  

If you are still with me, congratulations.  A part of the problem with the Reno Redevelopment Agency is the complexity of the storyline over decades.  This allows the issue and understanding of how the public interest is or is not being serviced, to fly below the radar.  

Redevelopment Law is prescriptive about a Plan for the area because it is a big realignment of tax revenues.  Reno’s downtown redevelopment Plan was adopted in 1983, and substantially amended in 1990.  It expired in 2014.  

I have been resolute in my conversations with Reno staff (now on my third city manager) that any extension of the Agency’s life must involve the preparation of a new Plan in accordance with the steps outlined in the law.  I was told at the August 25 Redevelopment Agency meeting that staff is not recommending a new plan NOR is the Agency required to create one.  

I am often reminded at City Council that I am not an attorney and while my argument that follows is based on a reading of the law, I rely more heavily on a policy argument.  Nonetheless I feel well positioned in challenging the legal rationale being put forth by city attorneys that a new Plan is not required.  You can also watch the August 25 meeting to see how the attorneys responded to my inquiry.  The Council has not received any supporting memorandum to these questions.  

First of off, logic falls apart that a new plan is NOT required.  At next week’s September 8 Council meeting, we will consider an ordinance to Amend the existing Plan.  How does one amend a Plan that has terminated?  

As mentioned above, a Redevelopment Plan’s preparation is laborious.  It involves a lot of participation with those whose taxes will be siphoned off for increment.  Including:  

NRS 279.566  Property owners’ participation and assistance in redevelopment; agency’s rules; provisions if nonparticipation.

      1.  Every redevelopment plan must provide for the participation and assistance in the redevelopment of property in the redevelopment area by the owners of all or part of that property if the owners agree to participate in conformity with the redevelopment plan adopted by the legislative body for the area.

      2.  With respect to each redevelopment area, each agency shall, before the adoption of the redevelopment plan, adopt and make available for public inspection rules to implement the operation of this section in connection with that plan.

      3.  Every redevelopment plan must contain provisions for redevelopment of the property if the owners fail to participate in the redevelopment.

      (Added to NRS by 1959, 661; A 1985, 2074; 1999, 3614)

Remarkably, the Council is on the path to find:  

I’ve been involved in more public hearings than I care to remember, and it is not unusual for members of the public to give testimony that they were not noticed or that others did not receive notice of a proposed action.  I’ve often found that someone’s claim of lack of notice fails because: 1) they are in attendance at a meeting to speak about notice so somehow, they found out; and 2) notice was given but for some reason often related to getting mixed in with the junk mail, someone did not actually read the notice they were sent.  

I have never seen anything like what the Council is saying in this resolution. It is most likely drafted by one who thought they’d be covering some bases, but to me it interprets as dismissive to the public we serve.

One positive downtown trend since 1990 is the conversion of former hotel rooms to permanent housing. These include the old Riverboat, the Montage and hopefully soon some of the Harrah’s towers. Shouldn’t these property owners be at the table to discuss the broad range of issues and powers of the Redevelopment Agency as its life extends?

As of late, some of these residents have appealed to the Council about the need for a more nuanced and fine grain analysis of uses and activities in their neighborhood. For example, they’ve voiced concerns about special event road closures, bar and nightclub hours of operations and public amenities. Here is what the current Plan says about those concerns:

 Wouldn’t it only be fair to these residents to use the Plan amendments exercise to put some flesh on the bones of this Plan provision? Why is the Plan amendment more about the so-called rights of bondholders to get paid than the expressed needs of downtown taxpaying residents and property owners?

Another reason why I believe that a new plan needs to be created is that the Redevelopment law requires:

      NRS 279.568  Conformance to master or general plan for community.  A redevelopment plan must conform to the master or general plan for the community as it applies to the redevelopment area. The agency shall consult with the planning commission of the community in formulating redevelopment plans.

      (Added to NRS by 1959, 661; A 1985, 2074)

The City of Reno adopted a new Master Plan in 2017 as an updated analysis of the community’s current conditions, projected growth and direction for the future.  The Master Plan before that one was adopted in 1997.  The Agency as proposed will extend to 2043 and possibly two more Master Plans will be adopted in that timeframe.  All without any analysis of conformity to the Master Plans spanning generations.  

But from a public policy perspective, I can’t understand how the public interest is served with a guiding document that is decades old.  Just think about how much our city, society, economic and land use conditions will have changed from 1990-2021 and will again over the next 22 years.  I used an analogy at the prior meeting that if someone participated in the 1990 Plan’s preparation when they were 30 years-old they would now be 61 years old.  Many downtown area residents and property owners simply were not around in 1990 to have a say in the deployment of Redevelopment Agency tools.  

But is something other than debt payment at play here? In presenting the Plan amendment and justifying lack of public participation, City staff wrote “no property owners in the Downtown Project Area will be directly affected by the proposed amendment.”  This statement was not supported by explanation, and I reject it.  First of all, I don’t know who has a crystal ball about the future use of property taxes over a 22 year timespan.  I subscribe that the past if the strongest informant to the future. Certainly as evidenced by the Agency’s indebtedness, past tax property projections have been historically inaccurate.

It is a generally been held by city manager and fiscal officers that the Agency should be extended to provide a revenue stream to pay off these bonds.  I could get along with this workout because I appreciate that stain (that may be more perception than reality) if the Agency defaulted on bonds.  But this workout should include: 1) a creation of a new Plan that addresses the new dynamics of downtown and how Redevelopment tools will be deployed; or 2) if the goal is really to extinguish debt, adopt a Plan that prohibits any new TIF from going to any other use than paying debt or going back to the taxing entity to provide essential services.

Without a Plan as outlined above, I believe more redevelopment private dealing will happen and is likely waiting in the wings.  One of the redevelopment trends that I’ve observed since my Albuquerque days that I think soured California on the concept, is that sometime the TIF goes back to private hands as support for their investment. I was taught that TIF goes back to the agency to make additional public investment particularly in infrastructure like parks, plazas or other amenities that are for all to enjoy.

As example of my concern about direct private subsidy happened in 2018 or so. I was stunned when City staff came forward said we have some unexpected TIF revenue even though we are debt loaded. They asked that Council to contribute about $70,000 to the Reno Orthopedic Clinic to help in their expansion.  I objected to this on philosophical grounds and also because I believe that any particular subsidy should be outlined in the Plan and this was not. If money was able to be found for this support contribution, it will be found again.

One scenario where Agency participation could be extended is to the Jacobs Entertainment development effort. It is well known that Jacobs Entertainment has a large land footprint and that City Council gave City Manager Thornley direction to enter into a Redevelopment Agency development agreement with Jacobs.  Respected local historian Alicia Barber wrote about that this recently.  Here is also a plug to subscribe to her excellent Substack newsletter that also offers a perspective about city issues. 

I opposed the Agreement in part, because I want the Redevelopment Plan updated to delineate through a public process, the contours of the use of any Redevelopment Agency powers and involvement in private endeavors.  Manager Thornley has twice told me that in the Jacobs negotiations, TIF is off the table. But this is not adequate and the framework of the current Plan that is broad and unspecific could lead to later subsidy.

While I stated above that TIF is the heart of redevelopment and a perverse use is to plow increment back into private hands rather than into the Agency coffers for public investment, there are additional substantial tools at the Agency’s disposal. The existing Plan extensively contemplates the use of eminent domain, including the use of eminent domain for the transfer of acquired property to another private interest.

This is problematic because the Plan conflicts with the Nevada state constitution that voters amended in 2010 to limit eminent domain powers. Nonetheless, having this language remain in the Plan could have a chilling and intimidating effect to property owners who read the Plan in an effort to understand City’s redevelopment efforts. When a big player like Jacob comes along who seems favored by the City, it can make one wonder if eminent domain by the City is in the playbook.

In conclusion, in my view the most financially impactful decision the City of Reno has made over the past 25 years, was a series of votes re-finance the railroad train trench debt. Those votes extended the life of that debt that is paid for by a regional 1/8-cents of sales tax paid for by all Washoe County purchases for nearly a hundred years.  I remember those votes and recall no public involvement and that it was explained in City Council materials as a routine matter.  

Now years later, the Reno City Council without much ado is extending the Redevelopment Agency and the tax revenue siphoning that comes along with that for possible private subsidy to the likes of Jacobs Entertainment (or other future influential players). Meanwhile, the Council pronounces that it does not even need to give the courteous of notice to current taxpaying property owners.  This is not a political leadership move that positions our downtown for success.  

Jenny Brekhus is the Ward 1 Reno, NV, City Council Member.  When opinions and views expressed, without other attribution, they are those of Jenny Brekhus and do not reflect official views or positions of the City of Reno or the Reno City Council unless otherwise noted.   This publication and any response it generates communicated through any channel, may be subject to disclosure under Nevada Public Records Act if it substantively refers to City of Reno business.