City of Reno
Nevada

Staff Report
13027

Staff Report (For Possible Action): Update, discussion and preliminary direction to staff regarding a proposed Development Agreement between the City of Reno and Reno Real Estate Development, LLC and Reno Property Manager, LLC (together, the “Developer”) for an area that the Developer is calling the Reno Neon Line District, located within an area bounded by Keystone Street to the west, I-80 to the north, West Street to the east, and West Third Street to the south.

Information

Department:Community Development - PlanningSponsors:
Category:Agreement

Recommendation and Proposed Motion

Recommendation:  Staff recommends Council provide policy level guidance to staff regarding the proposed Development Agreement.

Proposed Motion:  I move to approve staff recommendation with the following direction [insert Council direction].

 

Staff Report Formal Body

Summary: The proposed Development Agreement (Attachment A) would provide a suite of financial subsidies and special design allowances for a mixed-use entertainment area in the western portion of downtown Reno, which the Developer is calling Reno’s Neon Line District (the “District”). Staff is seeking preliminary Council direction regarding key policy decisions, including proposals for:

·         Sale prices for City owned properties discounted from ±$3,060,000 to $50,000;

·         Creating a new redevelopment district (and removing properties from existing districts) with 40 percent of future tax increment earmarked for the Developer;

·         Additional financial subsidies related to building permit fees, sewer connection fees, sewer credits, pedestrian amenity requirements, and residential construction tax; and

·         Design allowances related to area identification signs, streetlights, Regional Transportation Commission (RTC) projects, artwork, skyways, and street closures.

As submitted, the Development Agreement does not have a proposed construction schedule or other mechanism to ensure significant redevelopment would occur if the requested subsidies are provided.

Background: The Developer has purchased numerous properties extending from the Downtown Reno Entertainment Core to Keystone Avenue (Attachment B). Significant investments have been made to remove blighted improvements, remodel the Sands Regency and Gold Dust West, complete a housing project known as Renova Flats, relocate the Nystrom Guest House, create an outdoor event venue, complete streetscape enhancements, and install public art. The Developer has also processed numerous alley abandonments to prepare the property for large scale redevelopment projects.

Preliminary plans for the District include 2,000-3,000 residential units, renovation of the Sands Regency Hotel Casino, a 6,000 seat open-air amphitheater, artwork, and other as yet undefined commercial, retail, plaza, green space, convention and entertainment venues.  The term of the agreement is proposed to be 20 years, with possible extensions. 

Discussion:  The Developer is requesting the City enter into an agreement providing Developer with a suite of financial subsidies and special design allowances. The proposal involves a number of legal, financial, and policy considerations with potentially long term consequences.

Potential benefits of the proposal include increased viability of redevelopment projects in the District, which could result in a transformation of a blighted area into a vibrant urban center with quality public facilities, new urban housing, increased economic activity, and additional tax revenue to the City over time. Potential impacts of the proposal include reduced and deferred revenues to the City from a variety of established programs, redirection of property sale revenue from planned public facilities to the Developer, and potentially significant impacts on redevelopment district revenue available for other projects.

Initial suggestions from staff include:

·         General support for the Neon Line District concept and a Development Agreement that enhances the feasibility of coordinated redevelopment in this important area;

·         Establishment of a timeline and milestones for phased project development over the next 20 years, whereby the subsidies would phase out if incremental redevelopment of the area does not materialize;

·         Removal of provisions for the subsidized sale of City-owned properties, or a clear definition of projects and development timelines demonstrating that the subsidies are legally permissible and would be offset by public benefits resulting from near term development of the sites;

·         Removal or refinement of the Tax Increment Financing (TIF) proposal to address existing obligations and prevent negative impacts on other portions of Redevelopment Districts 1 and 2;

·         Removal of provisions addressing matters that cannot be modified by this Development Agreement, or do not require a development agreement to implement; and

·         Other refinements as necessary to conform to applicable legal standards.

Due to the significance and complexity of this proposal, staff is seeking preliminary Council direction for these topics and other topics to address in future negotiations with the Developer.  

Significant elements of the proposed Development Agreement and related policy considerations are outlined in the table below.

Proposed Neon Line District Development Agreement

Section

Topic

Summary of Proposal

Policy Considerations

2.02

Project Elements

Preliminary plans for the District include 2,000-3,000 residential units, renovation of the Sands Regency Hotel Casino, a 6,000 seat open-air amphitheater, artwork, and other commercial, retail, plaza, green space, convention and entertainment venues. 

Plans are conceptual at this time and could be built any time in the next 20 years. Staff recommends a generalized schedule of improvements, whereby financial subsidies would expire if incremental redevelopment of the area does not materialize.

3.02(a)

Streetlights

Approval of distinctive streetlight designs for the Neon Line District.

This would create a unique look for the Neon Line District. Any concerns about deviating from the standard Downtown streetlight design should be discussed. Staff is generally supportive, although increased maintenance costs for the City should be expected.

3.02(a)

Transit and Parking Improvements

City to agree to collaborate with Developer and RTC to identify two bus locations, a parking garage, and a visitor center on West Fourth Street.

This collaboration is ongoing and may not need to be part of the Development Agreement.

3.02(b & c)

Pedestrian Amenity Credits

City will credit Developer for the cost of existing and future concrete pedestals, landscaping, fencing and art installations along West Fourth Street toward the pedestrian amenities requirement, set forth in RMC Section 18.08.301(a)(6), for any development that occurs on the Property. 

Staff generally supports the concept. Some of the completed work is temporary in nature. Staff recommends a system so that pedestrian amenity credits would be granted only if there is a mechanism to ensure that the qualifying amenities and art installations will not be removed without qualifying replacements.

3.02(d)

Sewer Connection Fee Credits

City will extend the life of Developer’s sewer connection fee credits under RMC 12.16.155 for the duration of agreement (20 years or more) as opposed to the existing expiration of five years from demolition; and will allow credits to be used anywhere in the District.

The proposal would likely reduce sewer connection fee collections to help incentivize project development. Staff recommends the Developer prepare a phasing plan with milestones, so that financial incentives from the City would phase-out if incremental redevelopment of the area does not materialize.

3.02(e)

Skyways

The City will execute easement agreements to provide the Developer with exclusive and perpetual air rights for three skyways, to be executed concurrently with the Development Agreement. The three proposed skyways would connect the Sands to the south over the ReTrac corridor, to the East over Arlington Avenue, and to the West over Ralston Street.

Easements are typically granted following approval of Conditional Use Permits for Skyway projects. Granting of easements prior to project approval appears premature.

3.02(f)

Area Identification Signs

City will issue sign permits for two area identification signs for the Neon Line District.

Staff supports the concept. Further legal review is needed to identify sites and confirm the proposed signs would not be subject to Off-Premise Advertising standards.

3.02(g)

Street Closures

City will close West Third Street between Arlington and Vine at Developer's request, subject to review and approval of a traffic control plan.

Staff recommends some type of closure schedule or administrative review process rather than pre-approval of street closures at any time. Use of the planned Cycle Track (once developed) along Third Street (or a detour) should also be addressed.

3.02(h)

Deferred building permit and sewer connection fees

Use of the 1000 Homes model to defer building permit and sewer connection fees for 5 years for the construction of any residential unit located on the Property.

This is part of the incentive suite. The five-year timeframe appears reasonable.

3.02(i & j)

Discounted Property Sales

Developer has a purchase option for 290 Keystone, which expires April 30, 2021.  City will reduce the purchase price from the greater of $13/sf or appraised value as of the date a notice of intent to exercise option is given ($620,000 minimum) to $25,000, and revise the Proposed Project from a 100-unit residential project  to state simply "construct an economic development project."

 

Developer also has a purchase option for 0 Second Street, which expires July 31, 2021.   City will reduce the purchase price from the appraised value ($2.44 Million) to $25,000.

This would be a major subsidy for project development, as it would discount purchase prices from market value (about $3.06 Million) to $50,000.

The proceeds of the sales of 290 Keystone and 0 Second Street are tentatively earmarked to satisfy required matching contributions required by grants for the Public Safety Center, Moana Pool and the City Hall earthquake retrofit, which funding plan will be before Council soon.

Council should weigh the impacts of not having that funding against potential benefits of steeply discounted property sales for economic development purposes.

If Council supports the proposal, the $3 Million in reduced City revenue would need to be replaced with other City funds. In addition to policy direction from Council, staff recommends a clear definition of qualifying projects and construction timelines demonstrating that the subsidies would be offset by public benefits resulting from near term development of those sites.

3.02(k)

Residential Construction Tax

All residential construction tax collected for construction of any residential unit in the District shall be expended only in the Neon Line District, and the expenditures and improvements are to be selected by the Developer, with approval by the City in its reasonable discretion.

This would be another element of the project subsidy package. The request requires additional detail to conform to NRS 278.4983 and ensure that the funds will be used for park improvements and will not need to be refunded to the Developer.

If the Developer includes a park in its design, the money could be used for the specified park improvements.

3.02(l)

Tax Increment Financing

The City will initiate the process to create a new tax increment financing district pursuant to NRS 279.676 for the benefit of the Developer, and the Developer shall be entitled to 40% of the TIF generated in RDA #2, in its entirety, not to exceed $20,000,000, for the duration of the Development Agreement. 

Staff seeks direction as to whether Council seeks to explore tax increment financing as an option for this Development Agreement. 

There may be a legal impediment to the request to create a new redevelopment area, as the Property lies primarily in RDA #1, with only two parcels in RDA #2. Tax increment for RDA #1 is already pledged to pay existing bonds. Tax increment in RDA #2 would be subordinate to outstanding bonds and the Baseball Stadium. The proposal would need to be weighed against the benefits of other projects in RDA #2 that have also requested tax increment financing, as diminished funding would likely be available for other purposes.

Council should also provide direction on whether the facilities proposed, such as a 6,000 seat outdoor amphitheater, are facilities for which the Council wants to invest the requested resources.

Financial Implications:  The City needs a more detailed development plan with a development timeline in order to more accurately assess the financial implications of the proposed Development Agreement.  The request to reduce the purchase price of 290 Keystone and 0 Second Street to $25,000 each would eliminate the option to sell those properties at appraised value and would impact preliminary funding plans for the Public Safety Center, the Moana Pool and the City Hall earthquake retrofit by approximately $3 Million. If approved, the City would need to identify alternative funds for matching contributions required by grants for those projects.

Legal Implications:  Further review will be needed to assess whether certain requests will comply with law, based on the direction provided by Council.