In 2003, the Nevada Legislature enacted, and the Governor signed into law, Assembly Bill 205.  This legislation, subsequently codified in Chapter 432, Statutes of Nevada, Sec. 6.6 to 6.9, imposed an additional tax at the rate of two and half percent (2.5%) on the gross receipts from the rental of transient lodging in the City of Sparks (“Lodging Tax”).  The Lodging Tax is paid to the Reno-Sparks Convention and Visitors Authority which distributes the proceeds to the City Council of Sparks.  The City Council may expend these proceeds after obtaining the “advice and recommendations” of the Sparks Tourism Facility and Revitalization Steering Committee (“Committee”), which is created per Sec. 6.8 of Chapter 432.

The Committee’s current membership is as follows:

-  Charlene Bybee, Sparks City Council, Chair

-  Ed Lawson, Sparks City Council, Vice-Chair

-  Jennifer Cunningham, Executive Director of Marketing, RSCVA

-  Kevin Winters, Vice President and Assistant General Manager, Harrah’s Reno

-  Mark Sterbens, General Manager, Nugget Casino Resort

The Committee is required, per Sec. 6.9 of Chapter 342, to develop a master plan that identifies:

• Proposed projects or capital improvements in Victorian Square, or that would provide a direct benefit to Victorian Square, that the Committee has determined would be advisable to promote tourism in Washoe County.
• Method(s) pursuant to which the proposed projects and capital improvements identified in the plan will be financed.

The Committee first adopted a master plan in 2004 and amended it in 2008.  On June 10, 2016 the Committee again amended the master plan, referred to as the 2016 Victorian Square Master Plan (a copy is provided as an attachment to this agenda item). On that date the Committee also adopted Resolution No. 2, which advised the City Council that the Committee:

• determined that all projects and capital improvements identified in the 2016 Master Plan are advisable to promote tourism in Washoe County (Section 3 of Resolution No. 2),
• recommended to the City Council that it expend up to $400,000 of Lodging Tax proceeds during City fiscal year 2017 for Section 1 of the Victorian Square Infrastructure Improvement Project (Section 4); and
• recommended to the City Council that it expend up to $150,000 of Lodging Tax proceeds beginning in City fiscal year 2017 for Public Art for Victorian Square (Section 5).

The City Council accepted Resolution No. 2 on July 11, 2016.

Among the other projects and capital improvements identified in the 2016 Victorian Square Master Plan as advisable to promote tourism in Washoe County are incentives for substantial upgrades to existing privately owned entertainment venues and facilities that increase the regional appeal of such facilities.  The 2016 plan did not identify specific private retail or entertainment projects for funding but requires a Committee recommendation, in the form of a resolution, for future expenditures of Lodging Tax proceeds for such purposes.

The Victorian Square movie theater closed in September of 2016 after Cinemark, the company previously leasing the cinema property from Syufy, ceased operating and vacated the premises after removing all the fixtures, furnishings, and equipment.  In late 2016 Syufy Enterprises, which owns the real property, submitted a request to the City for Lodging Tax proceeds to fill a financial gap in the cost of renovating that property as a state-of-the-art 14 screen movie theater.  Syufy now intends to enter into a lease with Galaxy Theatres, which operates the Galaxy Imax Luxury+ Theatre in the Legends shopping center, to renovate, re-open and operate the Property.  Per Syufy’s proposal to the City, the remodeled theater would feature luxury recliners and state-of-the-art digital projection and sound systems; the lobby entrance and concession areas would be renovated with finishes comparable to the quality found at Galaxy’s Legends cinema.  Syufy estimates the costs of the upgrades at approximately $7.6 million and has informed the City that, but for the provision of $1.5 million of financial assistance by the City, Syufy and Galaxy do not find it financially feasible to undertake the project.

On January 31, 2017, the Committee considered and approved, by a 4-1 vote that exceeds the required two-thirds majority, Resolution No. 3.  This resolution formally advises and recommends to the City Council that it expend up to $1,500,000 of Lodging Tax proceeds, beginning in City fiscal year 2017, to incentivize substantial upgrades to the Victorian Square cinema property.

The Committee’s recommendation is consistent with its adopted 2016 Victorian Square Master Plan which defines the proposed projects or capital improvements in the Victorian Square area of the Sparks Town Center Redevelopment Area that the Committee has determined would be advisable to promote tourism in Washoe County.  The applicable section of the plan provides that:

“Investment or Incentives for Private Victorian Square Retail and Entertainment Facilities.  The goal of the Redevelopment Agency’s Victorian Square Development Plan is to create a highly energized, mixed-use district with a unique ambiance to draw local residents and visitors.  Victorian Square has the highway proximity and sufficient “brand recognition” to support mixed-use development.  With over 300 residential units currently under construction, and with a proposal for almost 200 more units pending, the biggest challenge for the Victorian Square project area now is the need for complementary activity-generating uses, including additional retail and other commercial uses, that will draw visitors to Victorian Square even when special events are not occurring.

As in the previous (2008) version, this Master Plan identifies incentives for privately owned capital projects with new retail uses (defined to include dining and entertainment) as appropriate for the use of Lodging Tax proceeds.  Incentives for substantial upgrades to existing privately owned entertainment venues and facilities that increase the regional appeal of such facilities would also be eligible.  Lodging Tax proceeds may also be used for off-site public infrastructure to serve private capital improvements in retail facilities, if the infrastructure is to attract private investment.  Any Lodging Tax investment or incentive for a privately owned facility is intended to fill an anticipated financial “gap” and must leverage private investment on, at minimum, a one-to-one (1:1) basis.

No specific private retail or entertainment projects are identified for funding at this time.  Any future expenditures of Lodging Tax proceeds to incentivize private retail or entertainment capital projects need a Committee recommendation, in the form of a resolution, to the Sparks City Council.”

In reaching its decision to adopt Resolution No. 3, the Committee reviewed and considered:

• The proposed scope of work for the Victorian Square cinema property, including photos of other Galaxy Theatres facilities and conceptual illustrations for the Victorian Square property which are representative of how Syufy and Galaxy are proposing to remodel the Victorian Square property.
• The proposed terms for the provision of financial assistance to the cinema project, per which Syufy and Galaxy would collectively invest at least $6,100,000 while the City would contribute $1,500,000 from Lodging Taxes.  The proposed terms obligate Galaxy to refurbish and reopen the renovated cinema facility to the public prior to December 31, 2017.  (A copy of the proposed terms provided to the Committee is included as Exhibit A to Resolution No. 3).
• A hypothetical cash flow analysis prepared by City staff (see Exhibit C to Resolution No. 3) demonstrating that the City can provide $1,500,000 from the Lodging Tax for the Victorian Square cinema remodel project while also paying previously approved and anticipated costs for the Victorian Square Infrastructure Improvement and Public Art projects.  The cash flow analysis further indicates substantial capacity, based on projected revenues and expenditures, for the Committee and City Council to fund other projects over the period through fiscal year 2022.

City Council acceptance of the Committee’s advice and recommendations, as provided for in Resolution No. 3, enables the City to expend, through separate action, up to $1,500,000 of Lodging Tax proceeds to incentivize substantial upgrades to the Victorian Square cinema property.

The Council could reject Resolution No. 3 or ask the Committee to reconsider or revise their recommendations.

I move to accept the Committee’s advice and recommendations, as provided for in Resolution No. 3, regarding the expenditure of Lodging Tax proceeds for renovation of the Victorian Square cinema property.