Following a contentious three-hour debate, Douglas County commissioners voted 4-1 to spend $24.7 million in redevelopment funds for a new commercial development in north Douglas County.
Commissioner David Brady cast the dissenting vote during a commissioners' meeting Thursday.
The justification for approval of this project, which could bring another 600,000 square feet of commercial space to the county, was straightforward.
Douglas County's revenue base is flagging as its population grows and the county needs the revenue from sales and property taxes, officials said.
"The only real flexibility we have with our revenue stream is sales tax," said Commissioner Jim Baushke. "That means more stores."
Three Douglas County ballot questions that could have brought revenue for services, including parks, a new senior center and museum, failed in November's election, commissioner Doug Johnson noted.
"You (the voters) told me we need to find other sources of revenue and you don't want to pay for them with taxes," he said. "That's been the mantra for many years."
Douglas County revenue sources, like sales taxes, have increased only marginally in recent years and tourism dollars from South Lake Tahoe's casino corridor have been flat, he said.
"In my opinion, at least we'll have some sales tax coming in," Johnson said.
Calling for more scrutiny, Commissioner David Brady opposed the move at Thursday's meeting.
"There is an absence of due diligence," Brady said. "(Jay) Timon and (Dan) Holler worked diligently on this project, absent involvement from the outside. This project should be scrutinized by an independent third party, knowledgeable in these types of projects."
Meridian Business Advisors, a Reno consulting firm, estimates that Douglas County could receive $35.4 million to its general fund alone when this development is fully built out, over the 20-year life of their study.
The money from Douglas County's Redevelopment agency would be paid incrementally over a 16-year period, the bulk in the last eight years. The funding would be paid only if developer Riverwood Redevelopment LLC meets the requirements of the owner participation agreement approved Thursday.
Developer Jay Timon must complete a 30,000-square-foot building on just five acres. The bulk of that property, or 25,000 square feet, must be leased.
Douglas County residents argued that the Meridian study is speculative and the new commercial development could divide the market in an economy where, in recent years, sales taxes have increased only marginally.
Douglas County resident David Nelson said the risk is huge.
"There is no tie in this owner-participation agreement between the taxes received and the money being spent," he said. "Once the 30,000-square- foot buildings are completed and the property leased, the money goes. Period."
By his own admission, Timon said no one else is looking at this project, Nelson noted.
"That means it's a huge risk," he said.
Resident Carl Malkmus said the report from County Manager Dan Holler failed to exercise due diligence. He documented no evidence of venture capital with respect to the developer, a one-family private company.
"If I were a bank examiner looking at Jay Timon's development, I would have all of these documents before me," he said. "This is a bad, bad deal."
Malkmus, who said he is very familiar with these types of deals, said developers first form a private limited liability company. Then they look for the "easy pickings," projects that reduce risk and increase their leverage.
He said there is no information in Holler's report concerning the market, including the number and types of shoppers, the disposable income and type of shopping, that could give commissioners a significant picture with respect to feasibility.
"Why should the county be a $24.7 million partner in a questionable venture?" he said.
Holler said Douglas County's general fund would have seen a $500,000 shortfall were it not for the existing commercial development east of Highway 395.
Riverwood Redevelopment LLC is private and as such, is not obligated to any type of financial disclosure.
There are ongoing discussions concerning a joint venture with landowner Michael Hohl, but that deal was dependent on approval of this redevelopment deal.
Douglas County is not putting money down before development of the property and the county can make the payments with just a 50-percent buildout on the project.
"Some developers have been interested in a partial development, but we said we weren't interested," Holler said. "We want a complete development. That's Riverwood's desire, too."
There is some risk. The development could be limited to the 30,000 square feet of commercial space and Douglas County would be obligated to provide that funding, but the deal includes the same arrangements that built Carson Valley Plaza.
"The worst case would be no development at all," he said.
n Susie Vasquez can be reached at svasquez@recordcourier.com or 782-5121, ext. 211.
