The Proposed Development Agreement for the Neon Line District

Reno City Council to discuss possible contract with Jacobs on April 14

There are a few development-related projects slated for discussion at the Reno City Council’s (still virtual) April 14th meeting (scroll down to see the others), but the big ticket item to me is Item D.2: a proposed Development Agreement between the City of Reno and Jacobs Entertainment (via its real estate entities, Reno Real Estate Development, LLC and Reno Property Manager, LLC).

Spoiler alert: this post is long, and the meeting is tomorrow (as I publish this on 4/13) but I wanted to be sure to get my thoughts out in time to encourage public comment, which is always best submitted by Tuesday at 4pm for a Wednesday Council meeting.

As always, you can consult the full meeting agenda here for items that may be of interest to you and info on how to view the meeting and submit your comments.

The Reno Neon Line District

Everyone has been waiting for Jacobs to reveal what they plan to build on all the land they have purchased and (largely) cleared on the west side of downtown Reno, and while this item is short on details of what might ultimately appear there, it is big on confidence about the Neon Line District, which they say “will become a nationally recognized world class entertainment and modern residential district.”

There’s too much here to synthesize or analyze in any great depth, since this agenda and its supporting materials were only posted late last week, so I’ll do my best to point out some of the key components of this proposal, while expressing my deep concern that the public has had next to no time to examine it, much less to provide City Council with the input I hope they would seek from local residents. I’ll continue to examine this issue and update this post as needed on my Substack website.

The materials in the staff report here include the first map I’ve seen that clearly shows all the properties that Jacobs owns or controls—all (gulp!) 72 parcels of them. 

A map shows all the properties currently owned or controlled by Jacobs. An additional sheet in the report lists all the addresses. Included in meeting materials

Jacobs is providing a general description of their plans now in hopes of entering into a Development Agreement that would set in place certain arrangements and agreements with the City of Reno for the next 20 years. None of this is being finalized on Wednesday, as this proposal is still in draft form; still, it gives a good indication of what Jacobs has in mind.

There is a lot to unpack here, so I’ll focus on three questions:

1. What is a Development Agreement?

2. What does this proposed Development Agreement contain?

3. What happens next?

What is a Development Agreement?

A Development Agreement (DA) is a voluntary and binding contract between the City and a developer (and its successors) that is negotiated by City staff and the developer and formally approved by City Council. This is the first one to be brought to Council since they approved a text amendment last September that revised the section of Land Development Code (18.08.805) governing them.

That revision expanded eligibility for DAs by removing several requirements that had prevented most projects from qualifying for them. Among the removed conditions were the requirements that the proposed project be a “Project of Regional Significance” and subject to a discretionary permit like a Planned Unit Development (PUD), SUP (Special Use Permit), or Special Planning District (SPD). So the scale of a project can now be much smaller, of local impact only, and not necessarily subject to any other public reviews if everything is already zoned appropriately (a DA doesn’t eliminate or preclude required discretionary reviews unless the contract says so).

Nationally, and elsewhere in Nevada, Development Agreements are tools used by jurisdictions for certain types of development projects (the word that Reno staff keeps using is “unique”) to formalize a give and take of mutual benefit. They are intended to simultaneously reduce risks for developers and to guarantee benefits for the jurisdictions that enter into them. You can see some good examples from Washington State’s Municipal Research and Services Center (MRSC) here and an excellent overview from the Institute for Local Government here.

The revision to the City Code’s section on DAs was initiated at the request of one or more members of the City Council in order (admittedly) to help streamline construction and make development more efficient. And DAs clearly do benefit developers, sometimes by locking in certain rates or gaining other advantages, for extended periods of time.

But they’re supposed to equally benefit jurisdictions, and are generally used to secure public benefits for which a City has voiced a need, like these:

• Affordable housing

• More revenue

• Significant donations of land for public use

• Preservation of historic resources

• Firm timelines and financing for key infrastructure components like sewer lines, police stations, public roads, or other improvements

What is Jacobs offering the City?

From the perspective of the City and its constituents, the first question to be addressed before even considering entering into such a binding contract is this: What is the developer offering? In that respect, this proposed agreement is rather unusual, since there doesn’t appear to be anything in the initial list of proposed components that constitutes a clear public benefit above and beyond what would be expected of any development (i.e. a housing development provides housing; a commercial development provides commerce).

The listed components of the proposed Neon Line District include the following:

• approximately 2,000-3,000 residential units

• the expansion, renovation, and rebranding of the Sands Regency Casino Hotel (including a new spa, pool area, food and beverage venues, banquet kitchens, gaming areas, conference spaces, ballrooms, vestibule and a parking garage)

• a new 6,000 seat open-air amphitheater

• world-class artwork from local and international artists (the artwork already installed is specifically mentioned)

• an array of other commercial, retail, plaza, green space, convention and entertainment venues

I would hope that City Council might respond to that list by asking Jacobs, “So, what’s in it for us?” From a quick glance, most of these components seem more oriented toward private benefit and might be best left to market forces to determine their ultimate viability.

For instance, the expansion, renovation, and rebranding of the Sands Regency, along with a new amphitheater and associated parking garage(s) are components of a private hotel casino expansion, not unlike what THE ROW and The Nugget in Sparks have accomplished privately in recent years. Banking on the continued viability of gaming seems to be a risk most appropriately undertaken by gaming entities themselves.

An amphitheater of this size, in this vicinity, seems like another risk. The New Nugget Events Center in Sparks, a 8,958-seat amphitheater constructed in 2019, raised eyebrows upon its introduction, as it was not exactly responding to pent-up demand for a new regional concert and event venue, as reported by the Reno Gazette-Journal that year. I’m surprised to see one suggested for the west downtown area, as the Sparks amphitheater required additional soundproofing of adjacent apartment complexes. Is an outdoor amphitheater anywhere in the vicinity of St. Mary’s Medical Center even advisable? Would it simply sit idle most of the time? Enquiring minds want to know.

There’s the promise of 2,000 to 3,000 residential units to be constructed over the next 20 years. That sounds like a lot—and especially during a housing shortage, it certainly is—but by way of comparison, the RED Reno project (on the former Parklane Mall site) is slated to include 1300 luxury apartment homes, and is building them at a fairly rapid clip. As seen there and elsewhere in Reno, building multifamily rental units just seems like good business, and the Mayor’s recent housing initiative has spurred more such activity through short-term fee deferrals.

Additionally, it isn’t clear from the proposal what types of housing this would be—rental or condominium units, market rate or affordable? If the City is prioritizing affordable housing, this DA could offer the perfect opportunity to require a healthy amount of it, in a location that seems ideal, due to its central location, proximity to major employers (St. Mary’s, UNR, hotel casinos), public transit, and other services.

Back in March of 2020, CEO Jeff Jacobs told the Reno Gazette-Journal that 30% of the apartment units it would create from four renovated motels along the Neon Line would be senior and workforce affordable housing units. Since then, however, the company has demolished one of the four (the Town House Motor Lodge) and this proposed agreement makes no mention whatsoever of affordable housing. But if they’re not averse to the idea, here’s an opportunity to make a real difference.

So what does that leave? The other district components are much more vague: “an array of other commercial, retail, plaza, green space, convention and entertainment venues.” Most of those seem like market- and profit-driven enterprises, too, with the possible exception of green space—although this area is already pretty close to Wingfield Park and the Truckee River.  

An image of the projected renovation of the Sands Regency accompanied an application (later withdrawn) last spring to abandon a block of Ralston Street between West Third and West Fourth Streets. It appears a skyway may now be proposed there instead. Jacobs Entertainment

If the economic recession and pandemic have shown Reno anything when it comes to development, I would hope that it’s the need to remain flexible, since the future is so uncertain. Since Jacobs started amassing property in Reno, additional activity has accelerated downtown, with the CAI purchase of Harrah’s for a combination of housing and mixed-use amenities, the proposed Kimpton Hotel mixed-use development on the river, and rumblings of more development west of the ballpark.

What does Jacobs want in return?

That’s a general sense of what Jacobs brings to the table. So what do they want in return? The list is long and lucrative (for Jacobs, anyway), and it honestly makes me wonder whether they’re shooting for the moon at the outset, just to be able to dial things back in later negotiations while still getting most of what they really want.  But here’s the gist of it:

1. They want to purchase two City-owned properties that are together valued at around $3 million for the shockingly reduced total price of $50,000. This pertains to purchase options the company has on two lots:  one at 290 Keystone that is appraised for $620,000 and another at 0 Second Street (the lot west of the Town House Motor Lodge, which they recently demolished), which is appraised at $2.44 million. They propose to buy these two lots for just $25,000 each.

   Revenue from the sale of these properties is currently earmarked for a new Public Safety Center, Moana Pool, and a seismic retrofit for City Hall, so selling these City properties for so much less than their appraised value would seem irresponsible, and staff seems to agree.

2. They want the City to create a new, separate redevelopment area just for the Neon Line District, removing all of their properties from the existing redevelopment project areas, and directing 40 percent of future tax increment revenues back to the developer, for a total not to exceed $20 million.  They justify this by citing the City’s policy that Tax Increment Financing “can be used to channel funding, or tax increment, toward improvements in distressed or underdeveloped areas where development would not otherwise occur” (more on tax increment funds here).

   Is it advisable to carve out an entirely new redevelopment area consisting of a single developer’s properties, with revenues to be directed back to that developer alone? From my view up here in the cheap seats, this description of the area as “distressed or underdeveloped” seems a bit disingenuous; these prime locations are hardly undesirable for development, as prime infill property.

   Making any major changes to the redevelopment areas is even more problematic these days, as the City has quietly in the last few years disbanded the Redevelopment Agency Advisory Board (RAAB), which was the citizen body tasked with advising the Reno City Council in its role as the Reno Redevelopment Agency. Its dissolution might have seemed reasonable when the RDAs weren’t generating any funds, but with development picking up, it could be a good time to reinstate it, and I would think the RAAB would have had a lot to say about this current proposal.

A detail of current Reno Redevelopment Areas 1 (yellow) and 2 (pink) in the downtown area. Full maps available here. City of Reno

3. They want additional financial subsidies related to building permit fees, sewer connection fees, sewer credits, pedestrian amenity requirements, and residential construction tax. This category alone deserves much more scrutiny.

4. They want design allowances related to area identification signs, streetlights, Regional Transportation Commission (RTC) projects (like bus shelters), artwork, and skyways. This would include two big signs at either end identifying the Neon Line District as well as easements for three skyways—above Ralston Street, Arlington Avenue, and the railroad tracks (that one would apparently be to connect the Sands to proposed timeshares between Ralston and Arlington).

5. They want the City to abandon public streets, including three blocks of West Third Street—stretching all the way from Arlington Avenue to Vine Street—and an alleyway between West Fifth and Ralston Street.

The draft agreement refers to a number of Exhibits that aren’t included in the staff report that supposedly show the design of proposed Neon Line District streetlights, skyways, and signage, and perhaps even an overall site plan, but I haven’t seen them.

Branding seems to be a primary goal here that would enable the company to literally put the Neon Line District on the map before it even exists or has proven itself viable—a true marketing coup. Reno’s existing recognized districts earned signage (or sign toppers and banners, like the Riverwalk District) and amenities like unique streetlights (as in Midtown) through years of dedication to supporting small businesses and proven track records as appealing destinations for residents and tourists alike.

RED Reno is calling itself a district (the full name is the “Reno Experience District”) but that’s a self-contained, private development that they can obviously name whatever they want. But can a new district that includes public streets and sidewalks be bought in one fell swoop? That seems problematic to me, and I look forward to the Council’s discussion of these major issues.

There’s no way for me to get into the financial implications of all those concessions and subsidies on such short notice, so I won’t even try, but there’s no question that they together would constitute a serious reduction in revenue for the City of Reno, with an array of discounts and diversions exclusively benefiting the developer, to the detriment of the public needs that the existing Redevelopment Districts, taxes, and fees currently fund.

The public needs more of a voice

As I mentioned above, the Text Amendment that revised the Reno City Code’s section on Development Agreements was initiated last summer by City Council. Last July, when City staff brought that proposed code revision to the Planning Commission, the commissioners had two primary recommendations, and their ten-minute discussion of them on July 15 is worth viewing (which you can do by clicking this link and forwarding the video to the 1:13:50 mark).

1. First, they asked that Development Agreements be brought before the Planning Commission for review and recommendations before heading to City Council.

2. Second, they asserted the need for Development Agreements to receive substantial input from local residents, perhaps via a workshop or other public meeting, before a City Council vote.

In their final revision of the code last fall, City Council implemented neither of those recommendations, determining that a Council meeting alone—as well as any public hearings required for individual components down the road—would provide enough opportunity for the public to weigh in. What that means is that Development Agreements can potentially be approved by City Council at a single meeting, with no review by the Planning Commission and no requirement to hold public workshops or even to notify local residents of the imminent decision, beyond the standard posting of the City Council Agenda, less than a week in advance of a meeting, and noticing of adjacent property owners.

What’s coming before Council this week is only a draft, but City Council has the freedom, and will likely feel the urgency, to direct staff to make various modifications of it, which City staff can then continue to negotiate in private with the developer, only revealing the next draft days before securing final approval from Council. And although City staff was a party in the creation of this draft, I want to emphasize that they have serious reservations about many of its stipulations, as you can read here.

Consolidation of review authority for such a momentous agreement certainly promotes efficiency, but I’m hoping that the City Council will voluntarily seek more public input on this and future Development Agreements, in order to benefit from the perspectives that others can provide. When a contract like this one can be hammered out in private for months, additional public review and awareness is the only way to ensure that the residents of their City are in general support of any concessions and subsidies that Council might approve, sharing their confidence in whatever a developer might be promising to construct in the name of public benefit.

Coverage of this issue over the past few days has included brief pieces from Downtown Makeover, This is Reno, the Reno Gazette-Journal, and KRNV. But there is so much more to this proposed Development Agreement, and you really need to read through it yourself to capture everything. You can find it on the City’s website here and access the full agenda here for information on how to submit public comment via email or voice mail. You can also email the City Clerk at CityClerk@reno.gov and copy your City Council members, whose contact info can be found here.

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More Development on the April 14 City Council Agenda

F. 1         Santerra Quilici Properties

This item would finalize some Zoning Map changes for this approximately 1,165-acre site just southwest of Boomtown. City Council approved the first reading on March 24, a discussion I previewed in my March 23 Brief, here. You can read the staff report for the April 14th Council meeting here.

F.2.         The Canyons

This Zoning map amendment for a proposed 71-unit residential subdivision being proposed for an approximately 80-acre site in the foothills above Damonte Ranch is also returning to City Council for a second view, with some modifications from an initial draft of the project’s Planned Unit Development (PUD) handbook. KTVN did a story about it, which you can view along with a map here. Read the full staff report for April 14th here.

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I think we can agree that’s enough for today!  I’ll be back soon with more tips and updates. As always, you can view my previous newsletters, with more context, analysis, and tips, on my Substack site, https://thebarberbrief.substack.com/. If you’re not yet a subscriber, click the button below to sign up for free. And have a great week!