Gibbons’ plan to fund roads hits a bump

CARSON CITY -- The Las Vegas Convention and Visitors Authority's bond lawyer said Gov. Jim Gibbons' proposal to solve the road construction financial shortfall by taking money from his client would violate the Nevada and U.S. constitutions.

Reno lawyer John Swendseid said Gibbons' plan would not leave the convention authority enough revenue to pay off an existing $230 million bond and a $680 million loan to pay for renovation of the convention center.

Swendseid said bond holders have been promised that their loans would be paid by "growth in room taxes."

A letter by Swendseid to the convention authority was released on Monday.

Unless additional revenue were given to the agency, Swendseid said its contract with lenders would be impaired and that would be unconstitutional. He said the U.S. and state constitutions prevent the impairment of contracts.

Gibbons proposes to use more than $400 million of revenue that the convention authority would raise over the next eight years from room taxes to pay part of the cost of a $2.5 billion program to construct needed state superhighways.

When Gibbons' proposal was announced last week, Las Vegas Mayor Oscar Goodman said the convention authority would have to stop expansion of the convention center.

Goodman, chairman of the convention authority, said the city will lose $20 billion in convention business to other cities without the expansion.

The convention authority's entire board voted unanimously to oppose Gibbons' plan. The Nevada Resort Association also went on record against the room tax proposal.

A bill to implement Gib-bons' highway construction proposal has not been introduced.

Convention authority spokesman Vince Alberta said the authority would need to spend an additional $48 million a year to pay off the convention center expansion bond.

Under Gibbons's proposal, the agency's annual budget would increase only marginally, from $225 million in 2010 to $227 million in 2014.

In a separate letter also released on Monday, longtime financial analyst Guy Hobbs noted that the convention authority sold refinancing bonds on Wednesday, a day before the governor's highway construction announcement.

The refinancing of bonds was designed as a way for the agency to secure lower interest rates.

He said the bond buyers are likely to view Gibbons' announcement in an "overly negative" way and that could cost the convention authority a potential $5.86 million in bond interest savings.

Hobbs said other state and local government bonds could be viewed in a "far less positive view" by lenders.

"This is not a trivial matter, as higher costs of borrowing in the future would cause tax(payers) and ratepayers to incur higher costs that would be unnecessary and avoidable," Hobbs said.

Neither letter mentioned other sources of convention authority revenue, including convention center events.

Swendseid is a 30-year lawyer who has advised the state and local governments on bond proposals.

Brent Boynton, Gibbons' director of communications, said they had not seen the letters and could not comment.