Reno Neon Line: Jacobs seeks $3 million discount on city property, millions in tax revenue

The owner of the Sands Regency hotel-casino is requesting a dozen incentives from the city of Reno as part of the downtown Neon Line project, including millions of dollars in discounts to purchase city-owned property and a large chunk of future tax revenue as part of a proposed new tax district. 

The Reno Neon Line is an ambitious redevelopment project that aims to turn the West Fourth Street corridor into a tourist destination while adding new housing. Plans for the district that were included in the proposal to the city by Jacobs Entertainment include between 2,000 to 3,000 residential units; entertainment venues such as a 6,000-seat, open-air amphitheater; commercial retail; a plaza and green space; and several art installations that include Burning Man sculptures. 

In depth:Jacobs mulls Sands Regency rebranding, says Reno Neon Line will bookend career

CEO Jeff Jacobs pledged an additional $150 million for the project last year in addition to the original $135 million investment that was announced for the Neon Line. Jacobs says he envisions the district as a $1.8 billion entertainment and residential area once his plans are fully fleshed out.

The proposal by the developer and gaming operator is scheduled to go in front of the Reno City Council on Wednesday. The developer’s requests to the city as part of its proposed development agreement include:

• A reduction of about $3 million in the price of two properties that the developer wants to purchase from the city — one on Second Street and another on Keystone Avenue. 
• Up to $20 million in future revenue that would be generated by a proposed tax increment financing district that the developer wants to be created along the West Fourth Street corridor.
• Having all residential construction taxes collected from residential construction be used only on the Reno Neon Line with expenditures and improvements to be picked by Jacobs Entertainment.
• Deferred building permit and sewer fees for five years as part of Reno’s 1,000 Homes in 120 Days program.
• Extension of sewer connection fee credits for the developer for the duration of the agreement —  up to 20 years or more — instead of five years after demolition.
• Credits for the cost of existing and future concrete pedestals, landscaping, fencing, art installations and other pedestrian amenities.
• Collaboration with the city and Regional Transportation Commission of Washoe on two bus locations, a parking garage, and a visitor center on West Fourth Street.

Jacobs Entertainment is also proposing the closure of Third Street between Arlington Avenue and Vine Street as well as perpetual air rights for three skyways to connect the Sands over the ReTrac corridor, Arlington Avenue and Ralston Street.

Jacobs is set to reveal more details about its plans at the Reno City Council meeting, said Garrett Gordon, a lawyer who represents the company.

“The impact of COVID has not necessarily changed the scope of Reno’s Neon Line District, but rather delayed it,” Gordon told the Reno Gazette Journal. “That said, Jacobs is very optimistic this year and intends to announce very exciting grand openings and events at the April 14th City Council hearing.”

City staff raise concerns

Planning staff from the city of Reno’s community development department are asking for guidance from the city council on how to respond to the requests from Jacobs. While the staff was generally supportive of requests such as pedestrian-related improvements and found the request to defer building permit and sewer connection fees to be “reasonable,” it also raised concerns about some of the big-ticket items in Jacobs’ proposal.

The company’s request for the city to discount two city properties — 290 Keystone Avenue and 0 Second Street — to just $25,000 each amounts to “a major subsidy for project development” and could put the city on the hook for financial commitments that are due to come up soon, staff warned. Proceeds from the projected $3.06 million sale of both properties, for example, are already earmarked to satisfy grant requirements for the Public Safety Center, Moana Pool and a retrofit of City Hall for better withstanding earthquakes.

“Council should weigh the impacts of not having that funding against potential benefits of steeply discounted property sales for economic development purposes,” city staff warned. “If Council supports the proposal, the $3 million in reduced city revenue would need to be replaced with other city funds.”

Staff also raised concerns about the request to create a new tax increment financing district — which is typically used to raise funds for the city and the Reno Redevelopment Agency — for the Neon Line. The proposal includes a request by Jacobs to receive 40% of revenue from the city’s second redevelopment project area, also known as RDA #2. Planning staff noted that the project is mostly located in the city’s first redevelopment project area, whose tax increments are already set aside to pay for existing bonds. Tax increments for RDA #2, on the other hand, are prioritized for outstanding bonds as well as the baseball stadium.

To protect the city’s position as well as taxpayers’ interests in case the Neon Line fizzles out, staff pushed for more concrete plans and timelines for projects in the proposal prior to approval. These include a general schedule of improvements that allows financial subsidies to expire if targets are not met.

“Staff recommends the Developer prepare a phasing plan with milestones, so that financial incentives from the City would phase-out if incremental redevelopment of the area does not materialize,” staff recommended.

Jacobs Entertainment responds

Jacobs Entertainment described the incentives outlined in its proposal as necessary in order to execute its vision for downtown Reno’s Fourth Street corridor.

“In a time when we desperately need housing and sustainable redevelopment in downtown, while at the same time are experiencing unprecedented costs for construction materials, Jacobs is proposing a public-private partnership with the city to deliver hundreds of housing units to Downtown Reno in the short term,” Gordon said. “This public-private partnership will also generate property taxes from two blighted, underutilized City-owned properties and will be the catalyst for the development of Reno’s Neon Line District.”

The company has already paid the city a $25,000 option each for the Keystone Avenue and Second Street properties, Gordon said. Jacobs is proposing an 18-month extension for its option on the properties, which will bring up the total payment to $100,000, but it would still be way below the actual value of the properties.

The new tax increment financing district, meanwhile, is needed to fund public improvements in the proposed Reno Neon Line District. The proposed improvements include green spaces, plazas and other public areas. The money, which includes up to $20 million from RDA #2, will also be used on historic preservation in addition to public infrastructure, according to Gordon. 

In response to concerns about the lack of concrete plans, Gordon added that Jacobs “will be presenting these development targets and milestones at the April 14th City Council hearing.”

The proposal is the latest development in the Jacobs saga, which started with its purchase of the Sands Regency back in 2017 and was followed by a slew of property purchases along downtown Reno’s West Fourth Street corridor. The developer and gaming operator now owns more than 70 properties stretched across 10 city blocks between West Street and Keystone Avenue.

Several of those properties include aging motels that served as de facto lower-income housing for Reno residents. Jacobs has remodeled a few of those into new developments. The Crest Inn, for example, was turned into Renova Flats while the Courtyard Inn is undergoing its transformation into the Loft 601 project. Several motels, however, have also been demolished, removing hundreds of rental units out of the market in the West Fourth Street corridor alone. These include the Mardi Gras Motor Lodge, InTown Motel, El Ray, Star of Reno, and Keno Motel.

The purchase of several motels by the Regional Transportation Commission of Washoe County as part of its Virginia Street Bus RAPID Transit Extension Project took out even more old motels from the market, further reducing supply at the low end of the market as apartment rents in Reno reached new record highs multiple times last year.

Just recently, Jacobs Entertainment decided to demolish the Town House Motor Lodge after initially saying it had no plans to do so. The developer has consistently stressed that it does not believe that blighted motels should be used as housing.

“Some were salvageable and many were not,” CEO Jeff Jacobs said in response to a question about the initial wave of motels demolished by his company. “And the ones that were not, I’ve made a commitment to relocate some of the folks (who lived there).”

Jacobs also pledged that 30% of his company’s apartment projects in the Reno Neon Line will go toward affordable senior and workforce housing. Critics, however, have questioned how long it would take for those units to come online. One person who pushed back sits on the very city council that will be going over Jacobs Entertainment’s proposal on Wednesday.

“We’re in a housing shortage, and he’s not gone vertical on one property,” said Reno City Councilwoman Jenny Brekhus back in February.

“He’s got gaming properties, he’s reinvesting in those. What else he’s got is a whole lot of vacant land.”

Jason Hidalgo covers business and technology for the Reno Gazette Journal, and also reviews the latest video games. Follow him on Twitter @jasonhidalgo. Like this content? Support local journalism with an RGJ digital subscription.