Guest View: To bond or not to bond
As an early advocate for the convention center, I feel responsible for the position Randy Lane is in today. I remember well the day that we voted to move the project forward.
The city had been struggling with the idea for several years and prior developers had fallen by the wayside. We were down to the last 30-day extension, and Hal Cole introduced the motion to abandon it. Mike Weber was absent, and with Kathay Lovell’s second, the issue was squarely before us. Both myself and Council-man John Upton voted “no” and the motion failed. At the time I enjoyed the recognition as the guy who saved the convention center, so I feel it’s only appropriate that I share in the upset for its current status.
With that said, I would have voted to support the bonds that the council dismissed last week. Why? I think that there are several factors that have not been fully discussed. First is the fact that Lane removed 29 parcels that were occupied by ’60s-era motels, falling down, cockroach- and asbestos-infected.
Their occupancy was less the 25 percent and the owners were begging to be taken out. Elimination of that blight, in my view, single-handedly justified the action, and keep in mind, at the time, money was readily available and partners were anxious to take part in this environmentally and aesthetically pleasing project.
Secondly is the fact that we faced the opening of the Red Hawk Casino at Shingle Springs and intense competition for tourist dollars from all over the country. Convention business was a natural goal, to bring to town 2,000- to 3,000-person events every week, with the millions of dollars they bring to our local economy, the jobs they create, the overflow to existing local business, and the thousands who would be introduced to Tahoe and return.
I spent four years asking people the question, “Would you come to Tahoe for your next meeting?” Overwhelmingly they said “yes.” This included more than 60 state agencies that must meet in California as well as the trial lawyers, various medical groups and a group of CPAs. It was like: Fresno or Lake Tahoe, choose.
I do not think Randy Lane or the city of South Lake Tahoe is responsible for the world’s financial collapse. Projects much bigger than ours are in bankruptcy, Las Vegas is estimated to be in the billions. No, the question is who is smart enough and bold enough to come out of the crisis on top, to hit the ground running when this disaster is behind us. I promise you it will not be the meek or those who insist on guaranteed success. It could have been the city of South Lake Tahoe.
First of all, the city would have no financial responsibility for the bonds, none. Second, the bonds are secured by the real estate, 29 parcels for $25 million, that’s less than one million dollars each; in a good market that’s about 70 to 80 per cent of their value, hardly junk bonds. The council seems to lack any real understanding of the junk bond business. Junk bonds are just that, no security.
Under the restructuring the city was to get two parcels. If Mayor Birdwell was actually interested in protecting the bond holders, he could ask that the city’s interest be second to that of the bond holders. Why do this? Because the project is that important.
In addition, the bonds’ interest for the first two years was to be deducted from the proceeds thereby giving the developer two to three years to get the project back on track. I know it’s fashionable to suggest filling the site with water or making it giant skate park, but this is no joke. Not only are millions of dollars at stake, but also the lives of some very decent people and the economic future of our city.
There is risk in everything, but that must be balanced against the gains. A working convention center would be more than enough to take the risk, with a steady source of year-round business, and the best business: conventioneers with expense accounts. Obviously there are a lot more issues that need to be discussed. Unfortunately there is not space to do it here. But, before one reacts, I suggest you consider all the facts.
Those of us who have considered the facts see risk for sure, but the rewards are worth it. Remember the city’s parking garage controversy? Well it’s still here and paying its bond holders a very nice return. The meek may inherit the earth, but only the bold will profit in these economic times.
– Ted Long is a former South Lake Tahoe City Council member.
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