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Source link: http://archive.mises.org/14810/walking-all-over-city-hall/

Walking All Over City Hall

November 30, 2010 by

Shoe magnate Tony Hsieh (Zappos.com) has made a deal to buy the City Hall building from the city of Las Vegas. Anyone who has visited downtown Vegas has noticed the curious building just off Glitter Gulch but with few windows facing the teaming activity on Freemont Street.

After they move in, a thousand Zappos employees will be able to walk a couple blocks and have a shrimp cocktail for lunch, maybe buy a dice clock or play some single-deck 21 on their lunch breaks.

Zappos and partner Resort Gaming Group will pay the city $25 million for the building which is $91 per square foot. Zappos will put $3 million down (of which the city must pay $2.5 million to Cornish Cos for it to release its rights to the property) and the seller will carry the remaining $22 million in two separate notes in second position behind an $18 million loan from another lender that is funding the remodeling.

The $17 million loan calls for payments through 2043 with a fixed interest rate of 5 1/8 percent. The other $5 million note is also due in 2043, but accrues no interest and requires no interim payments.

Sellers who carry back paper rarely would take a second position and fixed-rate 30 plus-year financing in the commercial real estate finance world is unheard of. Not to mention the no-interest, balloon payment-in-2043 note and the low required down-payment.

“There is a legitimate purpose in trying to boost downtown and job creation,” Robert Moore, the managing director of Faris Lee Investments told the Las Vegas Review Journal. “Otherwise, I would hate to think the city would do a deal this dumb.”

Mr. Hsieh sold Zappos to Amazon last year for $1.2 billion after growing annual revenues from $185 million in 2004 to over $1 billion in 2009.

Meanwhile finances at Las Vegas city hall aren’t that hot. Mark Vincent, the city’s chief financial officer recently told the mayor and council members that the city will have a $12.7 million shortfall next year, with the good news being that since May, the city’s projected budget deficit for the next five years has dropped from $270 million to $66 million.

But deal making Mayor Oscar Goodman found Vincent’s budget numbers boring. “You’re putting us all to sleep up here,” Mayor Oscar Goodman groused.

{ 5 comments }

Dave Albin November 30, 2010 at 1:54 pm

Is there even a need for city government in Las Vegas? It always seemed like a perfect place to ascend to an-cap status right away.

Michael A. Clem November 30, 2010 at 3:56 pm

Cities all over the place have an “interest” in boosting their downtowns, including my own–I’ve yet to figure out why! Downtowns are a relic of the days before widespread suburbanization, when people living and working closely together was an ecnomic necessity. Why one part of town should still be considered more important than any other part of town is beyond me. Other than, of course, that’s where the city government is located.

J. Murray November 30, 2010 at 4:38 pm

Just think, in 20 years from now, cities will be rushing to revitalize their shopping malls.

bobobberson December 1, 2010 at 10:00 am

lol,… haha agreed. Not to mention it was the freaking interstates the probably were what wrecked the downtown anyways. Government hikes in gas taxes may kill the shopping mall to revitalize down-town.

BuckeyeChuck November 30, 2010 at 3:58 pm

Oscar Goodman is quite a character. He also has clear ideas that private property should be no impediment to his government’s wants. The Plaza (sits at the west end of Fremont Street) is in financial straits and its current owners will be shuttering most of it. Goodman has groused out loud that this property is an eyesore and should simply be taken down. Since the law impedes the inimitable mayor’s ability to simply seize property to which he holds no title, he has instead proposed a ridiculously expensive tunnel under the property.

Like all people with little or no economic sense, he claims it can be paid for by putting shops and such in the tunnel. Right, sure… when all of the businesses in the area are struggling, adding more capacity makes things better right?

I love Las Vegas. If I ever own a second home, it will probably be there. The Goodman administration is drunk on public expenditure and Las Vegans seem mostly apathetic if not oblivious. Of course, fiscal realities will eventually stop him, even if he squanders the precious resources of his town. Like all people who steal money from earners as their own, he will do massive damage in the process.

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