Under NRS 279.500, if a redevelopment agency sells property to a developer at less than fair market value or provides a financial incentive to a developer worth more than $100,000, then the agency must require in the underlying development agreement that the development is subject to prevailing wage laws under NRS Chapter 338.

On December 11, 2017, the Sparks Redevelopment Agency, the City of Sparks, and SWD, LLC (Silverwing), entered into a Disposition and Development Agreement (DDA) for the property located at 955 Avenue of the Oaks (formerly C Street) in Sparks, Nevada (the Property). The Property previously housed the old C Street parking garage that was generally underutilized except during major events in Victorian Square.

Initial discussions for the sale of the Property contemplated a cash sale to Silverwing for the appraised value, however, there were concerns about losing all of the public parking capacity at the parking garage that patrons of nearby businesses had been using. In light of these concerns, City staff negotiated that instead of a cash sale, Silverwing would agree as a term of the DDA to provide the first level of the parking garage for open public use for a period of 50 years, subject to any limits imposed by the City. The public’s right to use the public parking was secured by a deed restriction recorded against the title to the Property. All insurance, utilities, maintenance, repair and other costs associated with the Property, including the public parking areas, are to be paid for by Silverwing or any successor owners at no cost to the City or the Redevelopment Agency.

Before entering into the agreement, City staff obtained an appraisal of the Property. The Property was valued at $950,000.  City staff then obtained a second supplemental appraisal of the value of the deed restriction’s right to use the first floor of parking for free, which was estimated to be 100 spaces. The supplemental appraisal estimated the value of the public’s right to use 100 free parking spaces with no maintenance or repair liability was $60,000 per year.

Both appraisals were performed by a Nevada Certified General Appraiser, who certified that (1) he had no present or prospective interest in the property and had no personal interest with respect to the parties involved; (2) he had no bias with respect to the property or the parties involved; (3) his receipt of compensation or obtaining the work involved was not contingent upon developing or reporting predetermined results, or a predetermined value that favored any party or the attainment of a specific result; (4) his analyses, opinions, and conclusions were developed, and his report had been prepared in conformity with the Uniform Standards of Professional Appraisal Practice; (5) he had completed all of his requirements under The Appraisal Institute’s continuing education program; (6) the statements of fact within his appraisal were true and correct; and (7) his analysis, opinions, and conclusions were his personal, impartial, and unbiased professional analysis, opinions, and conclusions. City staff then obtained a second independent review of the appraisals by a different Certified General Appraiser who stated that the appraisals were reasonable, justified, and well-supported, and opined that the analysis showing a benefit of $60,000 per year in free rent “best represents what is the public benefit.”

When the proposed DDA was presented to the City Council and Redevelopment Agency on December 11, 2017, City staff noted that the actual number of spaces had not been finally settled due to pending restriping, and the number of spaces could be closer to 90 spaces. Therefore, the analysis of the value received under the DDA that was presented to the City Council and Redevelopment Agency conservatively used 90 parking spaces and an annual rent value of $54,000 (90% of $60,000) for the 90 spaces. The value of the public benefit associated with the deed restriction’s obligation on Silverwing to provide and maintain 90 public parking spaces ($54,000 annually) for 50 years well exceeds the $950,000 value of the Property. The DDA was approved by the City Council and Redevelopment Agency on December 11, 2017, and was recorded against the Property on December 18, 2017.

On January 7, 2020, the Laborers International Union of North America, Local 169 (the Laborers Union), filed a complaint with the Labor Commissioner primarily alleging that the Redevelopment Agency violated NRS 279.500 because it did not receive cash in exchange for the Property. The Chief Legal Officer and City Attorney’s Office filed an answer and defended the action, arguing (1) the complaint was filed after the two-year statute of limitations, (2) the complaint was barred by laches, (3) the Laborers Union did not have standing to assert claims on behalf of others, and (4) the Labor Commissioner does not have jurisdiction to examine or substitute the appraised value of interests in real estate under NRS Chapters 279. Relating to the merits of the matter, the Chief Legal Officer and City Attorney’s Office also argued that (a) the promise of future services under the DDA and in the form of the deed restriction against the Property constitutes valid compensation as a matter of law and therefore the Redevelopment Agency received fair market value in exchange for the Property, and (b) the Laborers Union could not rebut the opinion of certified appraisers without expert testimony under Nevada Supreme Court precedent and the Laborers Union failed to provide any evidence to contradict the values within the appraisals.

The Labor Commissioner issued a Final Decision and Order on March 1, 2021, finding that the DDA violated NRS 279.500 because (1) the Redevelopment Agency “had no legal requirement to execute the DDA that required 90 +/- parking spaces to be kept in exchange for no money/cash being paid to the Sparks [Redevelopment Agency] for the full Project Property”; (2) the Redevelopment Agency did not receive fair market value because it would take years, if not decades, to equal $950,000; and (3) providing the Property to Silverwing without getting cash compensation in the initial years amounts to a “financial incentive” because any compensation is “future compensation.” The Labor Commissioner noted that Silverwing was not a party to the proceedings and that there had been no wage claims submitted regarding work on the Deco, but issued an administrative penalty of $5,000 against the Redevelopment Agency for future investigative costs for future wage claims, if any.

Construction at the Deco was recently completed. The final count for public parking spaces that will be available on the ground floor of The Deco is 91 full-size vehicle spaces and eight motorcycle spaces that are each roughly half-width. During construction, Section 4.6.1(D) of the DDA required Silverwing to obtain and provide 90 temporary parking spaces at a nearby location for free public use for the entirety of the period when first-floor parking for the public was unavailable at the Deco.  Silverwing obtained those temporary parking spaces and made them available for public use during construction.

The Chief Legal Officer filed a petition for reconsideration of the Final Decision and Order on March 16, 2021, pursuant to NRS 233B.130(4), primarily arguing that the Labor Commissioner made clear errors of fact and law in determining that “future compensation” is not valid consideration under a contract in light of the fact that the deed restriction gives the Redevelopment Agency a legally enforceable right to its compensation. The petition also argues that the bases for the Labor Commissioner's decision were not argued by the Laborers Union and the Redevelopment Agency should, at a minimum, have an opportunity to submit a brief addressing the arguments raised for the first time in the Labor Commissioner’s Final Decision and Order.

If the pending petition for reconsideration is denied, the Final Decision and Order issued on March 1, 2021, will remain in effect and any petition for judicial review must be filed by March 31, 2021. NRS 233B.130(2)(d).  If the petition for reconsideration is granted, then the order granting the petition for reconsideration would be deemed the final order for the purposes of judicial review, meaning that any petition for judicial review of a new final order would be due 30 days after service of the new order. In such an event, legal staff would present to the Redevelopment Agency a similar agenda item in the future requesting authority to appeal the new final order, if necessary.

The Chief Legal Officer of the Sparks Redevelopment Agency and City Attorney’s Office may only commence civil actions or initiate appeals upon receiving the express prior permission of the Redevelopment Agency.  See Comm’n on Ethics v. Hansen, 134 Nev. Adv. Op. 40, 419 P.3d 140, 143 (2018).  Therefore, the Chief Legal Officer of the Sparks Redevelopment Agency and City Attorney’s Office requires the Redevelopment Agency’s direction and authorization to file a petition for judicial review of the Labor Commissioner’s decision.

Given the uncertainty surrounding the petition for reconsideration and the pending March 31, 2021 filing deadline if it is denied, it is appropriate for the Redevelopment Agency to provide direction to its Chief Legal Officer and City Attorney’s Office whether a petition for judicial review should be filed if the pending petition for reconsideration is denied.  NRS 233B.130(2)(d).

The Redevelopment Agency may direct the City Attorney and Chief Legal Officer of the Sparks Redevelopment Agency to petition the appropriate court for judicial review and/or other appropriate legal remedies regarding the Labor Commissioner’s Final Decision and Order if the pending petition for reconsideration is not granted.

The Redevelopment Agency may direct the City Attorney and Chief Legal Officer of the Sparks Redevelopment Agency to take no legal action regarding the Labor Commissioner’s Final Decision and Order and provide the Chief Legal Officer and City Manager with alternative direction.

Alternative 1:

I move to direct the City Attorney and Chief Legal Officer of the Sparks Redevelopment Agency to petition the appropriate court for judicial review and/or other appropriate legal remedies regarding the Labor Commissioner’s Final Decision and Order if the pending petition for reconsideration is not granted.

Alternative 2:

I move to direct the City Attorney and Chief Legal Officer of the Sparks Redevelopment Agency to take no legal action regarding the Labor Commissioner’s Final Decision and Order.