Consultants say bonding likely to be OK’d
The city should be in a good position to obtain bonding for the Park Avenue project.
That’s the report Katz Hollis will present to the South Lake Tahoe City Council tonight. The Los Angeles-based redevelopment consultants believe property tax and lodging tax revenues should be sufficient to cover the city’s debt, as well as to eventually return approximately $400,000 yearly to the city’s general fund.
Last year, the city was able to meet its debt with $310,000 remaining for the general fund. Katz Hollis estimates South Lake Tahoe will be able to transfer $122,000 back to the general fund this fiscal year.
But not everyone on the council is comfortable that the city has planned for all contingencies before increasing its debt. One wild card is Embassy Vacation Resort time-share sales, a necessary component for future city revenues. Admitting that time-share sales in the Ski Run area must live up to financial projects, Katz Hollis believes that while sales are lower than projected, the price per unit is higher than projected.
Bill Crawford, the newly elected council member who has been a strong opponent of redevelopment, said he plans to question Katz Hollis closely about Embassy Vacation Resort’s financial projections.
“What if they don’t (meet projections)?” Crawford asked. “These figures need to be challenged to see what the people who made the report will say.”
Council member Tom Davis, who supports city redevelopment, agreed with Crawford that questions should be asked.
“The bottom line is the city’s financial position must be protected,” Davis said.
Davis also agreed that Crawford’s example regarding property tax projections needs to be addressed. However, Davis said he expects to hear that Embassy Vacation Resort’s time-share sales have been above projections.
Davis, who sits as Redevelopment Agency chair, said he will do all he can to protect the city in the development agreement that will come after the financial report.
One idea Davis would like to pursue is the purchase of insurance bonds to guarantee the city will deliver on its debt, even if faced with unexpected or dire circumstances. Contingencies such as a disaster in the Bay Area, which accounts for a large portion of the Lake Tahoe tourism base, or the bankruptcy of a major local resort may be covered by such a policy.
The city already faced one bankruptcy with an essential partner in the redevelopment project after Embassy Suites Resort declared bankruptcy last summer. The hotel will emerge from bankruptcy court this month. But the potential loss of property taxes and transient occupancy revenues threatened the city’s ability to secure a favorable bond rating.
“Shame on us if we do the same thing twice,” Davis said.
Room tax funds, which used to go into tourism promotions, will now be funneled into the Park Avenue debt. Therefore, Davis hopes to get a provision in the agreement with American Skiing Company, the major private partner in the Park Avenue project, that the ski giant will kick in promotional funds for the city to offset the loss.
Davis acknowledges this may be a source of tension between the city and American Skiing in the future.
“Heavenly (Ski Resort, ASC’s local interest) and I are in the same direction, but I’ll do what’s best for the community, not necessarily what’s best for the project,” Davis said.
The Park Avenue Project is scheduled to begin this spring with the demolition of various properties on the Heavenly side of U.S. Highway 50 from the state line to Park Avenue.
The first phase will include the construction of a gondola leading to Heavenly Ski Resort and a luxury hotel to be called the Grand Summit.
An ice rink, parking garage, movie theater, more hotels and retail shopping will follow in the next phases.
Project 3, sponsored by Harveys Resort Hotel/Casino, is scheduled to break ground across the highway in 2000. This project will include much of the same as Park Avenue as well as a convention center.
“We have a lot of things to go over,” Crawford said. “It’s not a slam dunk by any means.”
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