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.  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 (the “Committee”), which was created per Sec. 6.8 of Chapter 432.

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.  In 2016 the Committee again amended the master plan, referred to as the 2016 Victorian Square Master Plan. On that date the Committee also adopted Resolution No. 2, which, among other recommendations, advised the City Council that the Committee has determined that all projects and capital improvements identified in the 2016 Victorian Square Master Plan are advisable to promote tourism in Washoe County. The City Council accepted Resolution No. 2 on July 11, 2016.

Among the 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 any expenditures of Lodging Tax proceeds for a proposed project.

Marnell Gaming, LLC has requested Lodging Tax proceeds to fill an anticipated financial gap in the cost of demolishing the vacant structure (the former Bourbon Square Casino) located at 1040 Victorian Avenue in Sparks, Nevada and replacing it with the proposed Nugget Events Center (the “Project”). The Project will consist of an outdoor amphitheater to host concerts and other events with a capacity of approximately 8,600 seats. The estimated total cost, exclusive of the cost of acquiring the property, is $6,400,000. Per the terms of the proposed Incentive Agreement between Marnell Gaming and the City of Sparks for the Project (the “Agreement”), Marnell would invest at least $5,120,000 while the City would contribute $1,280,000 from lodging taxes. The proposed terms obligate Marnell Gaming to complete construction of and hold a live performance or special event in the Project prior to September 15, 2019.

On December 12, 2018, the Committee considered and approved, by a vote of 3-0 (with one abstention), Resolution No. 4, which formally advises and recommends to the City Council that it expend up to $1,280,000 of Lodging Tax proceeds, beginning in City fiscal year 2019, to incentivize development of the proposed Nugget Events Center. The City Council will have the opportunity to accept Resolution No. 4 prior to considering the Agreement at its January 28, 2018 City Council meeting.

This agenda item asks the City Council to review and approve the attached Agreement with Marnell Gaming, LLC. The proposed Agreement is based on terms negotiated by Marnell Gaming and City staff following Marnell Gaming’s submittal to the City, in late 2018, of a request for financial assistance for the Project. The proposed Agreement is similar to a agreement previously approved by the City Council to incentivize major improvements to, and reopening of, the Victorian Square cinema facility by Syufy Enterprises and Galaxy Theatres. 

Marnell Gaming has requested Lodging Tax proceeds to fill an anticipated financial gap in the cost of preparing the site for the Project, including utilities, and installing a stage, sound system, lighting, seating, and other furnishings and equipment. A site plan and Marnell Gaming’s request for funding, including a project budget, are attached to this agenda item for reference. The Project has an estimated total cost, exclusive of costs for acquisition of the property, of $6,400,000. Marnell Gaming estimates their total costs, including for acquisition of the property, will total approximately $11,000,000. Marnell Gaming’s request to the City for financial assistance, in the amount of $1,280,000, is dated November 5, 2018, and is attached. This amount equals 20 percent of the estimated cost for construction of the Project, which satisfies the requirement that the Lodging Tax leverage private investment on, at minimum, a one-to-one (1:1) basis.

Key terms of the proposed Agreement include the following:

+    Construction of the Project must be completed and a live performance or special event held in the Project prior to September 15, 2019.

+    Marnell Gaming will expend at least $6,400,000 and invest at least $5,120,000 (secured from internal and/or third-party sources) in the Project, exclusive of the cost of acquiring the property for the Project.

+    The City will pay $1,280,000 to Marnell Gaming from Lodging Tax proceeds as follows: i) $853,760 upon the opening of the Project to the general public for a live performance or other special event; and, ii) provided the Project continues to be used for concerts and other special events open to the public, $142,080 per year for three years.

+    Marnell must provide the City reasonable documentation of its expenditures, in the amount of least $6,400,000, for Project costs other than property acquisition.

+    The City agrees to grant Marnell an “Exclusive License to Occupy City Right-of-Way” for an area measuring approximately 3,859 square feet adjacent to the southeast corner of the Project site for inclusion in the Project. (See Exhibits A and B to the Agreement for a description of the area covered by the proposed license).

+    The City agrees to consider specific requests from Marnell for cosmetic improvements to the public areas adjacent to the Project. The City reserves full discretion, once the nature and cost of the upgrades are identified, regarding whether to make such improvements and the timing of said improvements.

In the view of the Committee and City staff, the requested financial assistance amount of $1,280,000 will provide Marnell Gaming a financial incentive to construct the Project. The addition of a venue for popular musical acts would advance Sparks’s goal of creating a highly energized, mixed-use district to draw local residents and visitors. The proposed events center will also bolster other special events currently held in downtown Sparks, such as the Rib Cook-off, that need additional space to continue thriving at Victorian Square.

A City investment of Lodging Tax proceeds to enable a private party to construct the Project advances numerous goals and policies adopted as part of the City’s 2016 Comprehensive Plan. These include all six of the Managing Growth goals but especially Goals MG4 and MG5, which respectively call for the City to “Facilitate infill and redevelopment and “Prioritize development and enhancement of the Downtown Sparks Center.” Other relevant Comprehensive Plan goals and policies include Community Character Policy CC2 which states “Promote a mix of uses, including restaurants and shopping, to create a vibrant downtown district at Victorian Square” and Economic Vitality Policy EV2, which states “Enhance Sparks’ appeal to visitors to the region by strengthening arts and entertainment offerings”.

Construction of the Project requires a Conditional Use Permit (CUP) for a Major Recreational Facility (an outdoor concert amphitheater). The Sparks Planning Commission reviewed and approved a CUP for the Project on January 3, 2019.

1. The City Council can approve the Incentive Agreement as proposed.
2. The Council can, subject to Marnell Gaming’s concurrence, modify the terms of the Incentive Agreement. However, certain changes, including specifically any proposed increase in the amount of City funding for the Project, would require a revised resolution of support from the Committee.
3. The City Council can reject the proposed Incentive Agreement.

I move to approve the Incentive Agreement between the City of Sparks and Marnell Gaming, LLC to provide up to $1,280,000 in Lodging Tax proceeds for construction of the proposed Nugget Events Center.