Jacobs Entertainment should learn from Reno's history of failed downtown districts

by Mike Van Houten / Jul 26, 2018

"Here comes the neighborhood" - West 2nd District's website ironically boasts in big letters. And when would that be?

There are two types of entertainment districts in redevelopment-land, artificially manufactured districts produced by one developer or a group of developers: and organic, naturally occurring districts that are a trickle-response to the demands of newfound residents moving into that specific neighborhood who long for and require certain amenities.

Developers in Reno have attempted to create entertainment districts several times, with mixed results, but all of them failing to this day, to some extent.  

What do West 2nd District, The Tessera District, The Freight House District and now the 'Fountain District' have in common? Not a single new building from any of these districts have actually come to fruition. I don't consider a bar and a couple restaurants added onto the Aces ballpark as a true expansion of the Freight House District. More like an expansion of the ballpark. And granted, time is still on 'The Fountain District's' side, as they haven't released their plans yet, but frustrations are mounting among residents of Reno.

As developers amassed properties in each quadrant of downtown (Tessera to the Northeast, Freight House District to the southeast, West 2nd District to the southwest and the Fountain District to the west), we're left with large portions of downtown undeveloped, abandoned, flattened, or under-utilized. That raises the question, are ‘overnight’ master-planned entertainment districts a good thing?

The “Fountain District” is the most recent large-scale redevelopment concept to emerge, and as I watch city officials glow as a good chunk of downtown’s affordable but deplorable housing is wiped out to prep for a blocks-long new urban center concept, I’m sitting here asking myself, “Is this what Reno even needs right now?” "Will this project actually be built and not turn into what other entertainment districts have become?" Let’s take a look at where other proposed entertainment districts have lagged or failed in downtown Reno. History lesson time!

Tessera District

When the Tessera District was first proposed, and the 'big reveal' happened, we were shown everything from a pedestrian bridge crossing the freeway connecting the University to Lake Street, to Lake Street being shut down and made pedestrian-only, and blocks of shiny beautiful architecture that created an entire entertainment district, both for tourists, university students and downtowners. It too was a multi-phase project, to be built out over five years. Northern Nevada Urban Development mentioned to the council during their first presentation of the project that they invested close to $26,000,000 in property acquisition, feasibility studies, and project planning. This was one of the last districts to become a 'STAR bond' district before the Nevada legislature put the squeeze on how these tax increment districts worked. There were four players who owned property in this district, Brown Nevada, NNUD, Italian Capital and Urban Development LLC. Here's a great reference of who owned what property when hype about this district was at its peak. Yet in 2013, as Mike McGonagle so bravely pointed out on his blog, five years later into a 20-year STAR Bond district and the only thing that was developed was delinquent property tax, to the tune of $250K. The grand plans fell apart, and what we are left with are closed-down fenced-in motels, evicted people, and run-down properties in one of the more unsightly areas of downtown Reno. We did get an Apple Warehouse that's close to going operational, who took advantage of the sales tax increment district. In addition, The Standard, a proposed large student housing project, never happened. Capital evicted over 100 people in this area in preparation for a sale of the properties to The Standard, but the developer never bought the properties, as that block-wide project fell apart as well.  There's still hope that this project, a student housing project across the street from Circus Circus, will get constructed. 

West 2nd Street District

A few years back, plans were released for a new, vibrant downtown around 2nd Street, called the West 2nd District. I was excited for this one, because the developer seemed to have ‘almost’ enough property collected to pull it off. This district's master plan and vision was not as damaging as others, because there were no property evictions to my knowledge, and no property demolitions. Northern Nevada Hopes praised the developers for coming up with a plan to relocate any future displaced residents. The first project proposed for the district was 235 Ralston, a slick building designed by Cathexes, slated to go on an empty parcel on Ralston Street. The developer posted on their web site they were taking reservations, and that interest in the project was phenomenal. I had read somewhere that 80% of the building ended up being reserved. With letters of intent for the ground floor retail, this project seemed like a sure thing. But then, delays started piling up. Insurance and HOA issues were cited as reasons for the delay. Two years later, the project hasn't broken ground still. At the same point in time, the developer started losing key parcels of property required for the overall vision of West 2nd Street, because the project was announced before deals were closed on key parcels of land, losing  them to other buyers or the sellers decided to ask for exorbitant prices since they knew exactly what the developer wanted to do with the land. According to RGJ, "Clark laid off architects at his architecture company Cathexes because he said he spent more time focusing on West 2nd District than building a client base. Since then, none of the buildings have broken ground. Few of the parcels Clark said he had under control ever transferred to his holding company, Secundo Vita LLC. Some of the parcels even went back up for sale on the open market and either sold or went nowhere." 

Freight House District

Ah yes. Baseball. I love baseball, and I love the Reno Aces Ballpark, which is within walking distance of my neighborhood. There’s no doubt that the Reno Aces are a nice addition to downtown and provide a fun family-oriented activity in one of the nicest ballparks in the Triple-A franchise. On Fridays, I like watching the fireworks from my front porch.

The ‘district’, however, is not the multi-block entertainment mecca that was originally proposed to the city council. The project was originally to be multi-phase, with phases laid out in a five year timetable that never came to fruition. A ‘STAR Bond’ district was created in anticipation of the large entertainment district. The district was to be built out over a five-year period in multiple phases. Phase 1 was the ballpark itself. Phase 2 was the attached restaurants and bars you see today at the ballpark. Phase 3 was to restore and utilize the old ‘Freight House’ building that the ballpark was built around, and Phase 4 extends the entertainment district out to the surrounding blocks, including the ‘Bundox’ property, the empty lot the Mizpah Hotel formerly occupied before burning down, and the lot the Men’s Club resides on. The district also includes portions of the bowling stadium, the now-closed CitiCenter property on the other side of Center Street across from the bowling stadium, and a few other properties.

Obviously, Phase 3 and 4 never happened. The grossly-overestimated sales tax income Meridian predicted (Estimated $164.9 million in sales tax revenue over 20 years) never occurred, and the overestimated property tax revenue (Estimated $183.9 million in property tax revenue over 20 years) never materialized because nothing additional was added to the tourism district except for the Phase 2 development of the Freight House, and eventually the Courtyard Marriott years later. Because the Reno City Council at the time smartly covered their asses, payments to the developer were never made, because the levels of tax revenue generated that were supposed to trigger those payments never materialized. In 2013, SK Baseball basically said, ‘we have to refinance this deal or the Reno Aces are no more.’ The whole deal was refinanced. This allowed the Reno Aces to stay in operation.

Meridian Business Advisor’s initial numbers that the Ballpark deal was based on were severely bloated. As a result of the district underperforming, combined with a significant economic downturn, the developers were never able to finish building out the district, and the Reno Redevelopment Agency basically became a debt-paying agency powerless to finance any new redevelopment projects based on future property tax income in the redevelopment districts. Because property tax for commercial businesses is calculated on how well the businesses are doing, this choked the income for the redevelopment agency.

To SK Baseball’s credit however, they have continually made upgrades to the stadium, most recently the sound system….and the stadium is being used in the off-season for something besides baseball….soccer!

The lots around the ballpark still remain vacant, and often unsightly. Billionaire mall developer Herb Simon now owns the long-vacant property to the southwest of the ballpark across the street from Chicago Dogs, and in 2014 when that article was written, mentioned apartments or a hotel would be a good fit, though the lot still remains vacant four years later. It was recently used as a prep area during construction of the Marriott. Prior to the ballpark, you might remember the glistening 40-story-tall Waterfront Project that was never built. The City abandoned the diagonal section of First Street (where Chicago Dogs is) for the project.

The Fountain District

The Fountain District, which isn’t its official name, has the distinction of being the only proposed entertainment/urban district that so far, hasn’t asked the City or County for tax assistance.

In April 2017, Jacobs Entertainment made headlines when they acquired the Sands Casino. Though they had already been running the Gold Dust West as partners for 10 years prior to that, not many had heard of them.

Blogger Mike McGonagle knew about them though, because for the six months prior to the Sands purchase, he had been tracking Jacobs Entertainment’s other quiet purchases on 4th Street, starting with the ‘Stained Glass Pub’ half-n-half building.

Then came the motel demolitions. Stardust Lodge was demolished, with 50 seniors being moved to EconoLodge and their rent subsidized by the developer for up to five years. The Star of Reno, El Ray and Keno 1 Motels were demolished. All three were in bad shape, but still habitable. To help offset displaced residents, Jacobs Entertainment donated $1.5 million to the Reno Housing Authority to help residents find affordable housing and purchase properties to qualify as affordable housing.

Then the Carriage Inn, Donner Inn, Keno 2 were demolished, along with a handful of houses and vacant buildings. The Mardi Gras and In-Town Motel still stand but are most likely next on the chopping block, along with a wedding chapel. Here’s a map Mike Higdon, RGJ City Reporter, made, showing all the properties Jacobs Entertainment owns.

Despite adaptive re-use options, or options to reopen them as chic retro motels, Jacobs wanted the motels gone, in an effort to improve the living conditions of affordable housing in Reno. Preservationists spoke out against the demolition, and a Facebook Group was created in an attempt to show alternatives to demolition. Appeals were filed but they didn’t stop the demolitions.

It’s important to note that these motels represented extremely poor living conditions for the residents. Why these buildings were allowed to fester that long is beyond me. Perhaps it’s because our code enforcement department is a fraction of the size it should be, as evidenced by the Reno City Council’s recent actions to more closely monitor weekly motels including a motel inspection program to be discussed at the July 25 Reno City Council Meeting.  The motels ran the full gamut of grossness, from mold-infested rooms to non-working bathroom fixtures, none of them were places you’d want to recommend to a friend or family member, or maybe even your enemy. But there are also little-to-no alternatives for affordable housing in Reno right now.

Even though the motels were in bad shape, frustrations are mounting in this city surrounding the lack of information about what is actually planned for this stretch of 4th Street. You can feel it in the ‘tone’ of local reporters, from RGJ to ThisisReno, as well as discussions I’ve had with friends and colleagues. No one is happy with the ‘abandoned wasteland’ that West 4th Street has become. “CEO Jeff Jacobs has not publicly released specific information about his project in the future "Fountain District" he plans to develop in the now mostly abandoned wasteland of west downtown Reno”, writes city life reporter Mike Higdon in the latest RGJ article covering the move of a historic home.

On the Facebook page Our Town Reno, which does an AMAZING job highlighting affordable housing issues and the homeless, which I highly suggest you follow, frustrations are building at the lack of information surrounding what is planned for this now-mostly-vacant stretch of 4th Street. Mike McGonagle, local architect and well-respected local blogger on real estate across the region, also isn’t showing much love for Jacobs lately, with his tongue-in-cheek writing in this post and this post.

So my question to Jacobs Entertainment is, are you feeling the pressure mounting from locals yet? Are you noticing the increasingly harsh tone from local reporters, bloggers, Facebook groups and well-respected residents regarding your demolition spree, without offering any public glimpse or hope as to what the neighborhood will become? It’s fine and dandy that you have plans, and that some people such as council members and others are privy to those plans, but what about the rest of us? And even when you unveil the plans, how do we know it won’t be yet another Tessera? A bunch of shiny renderings with no financial backing to actually build anything? And is this project what Reno even needs right now, when most of the city makes less money than what is required to buy a home? What will it do to our existing downtown? 

I just have concerns that after demolishing a large chunk of affordable housing downtown, that this area will be left this way for years, in the same condition the area around the Aces ballpark and the Tessera district were left. History is not on the side of urban districts in Reno if we look to our past. 

It’s been a year and a half since Jacobs Entertainment mentioned this area would become ‘greenspace with fountains’ yet not a single permit has been submitted other than demolition permits and a permit for a surface parking lot (how about a parking garage?), and no planning documents are in the pipeline. It’s time to plant some grass/trees.

I’m sure Jacobs Entertainment has good intentions, as evidenced by helping residents relocate and working with the Reno Housing Authority to purchase $1.5 million in properties around Reno for affordable housing. In that same article it states ‘Jacobs' team will start researching plans for a 125-unit market-rate housing tower somewhere on the two blocks.’ It’s important to understand what the term market rate means…… Market rate housing is any apartment that has no rent restrictions. A landlord who owns market-rate housing is free to attempt to rent the space at whatever price the local market may fetch. In other words, the term applies to conventional rentals that are not restricted by affordable housing laws.

It would help if we knew that we didn't have to drive by empty dirt lots for the next five years. 

Affordable Housing

So, despite the motels being atrocious (which could have been corrected with strict code enforcement), a large number of affordable housing units are now gone. They probably won’t be replaced with equally affordable housing when The Fountain District’s construction gets underway, partially due to the amount the developer paid for the land, and partially due to the skyrocketing cost of new construction. Prime land is expensive, and new construction is expensive. Here’s a great article explaining why this occurs. This is why I feel renovating a few of the motels on 4th Street into affordable housing, much the way HabeRae did with the Coach Inn, would have been a better fit for the now-demolished motels downtown. Or at least SOME of them. Or even one or two of the seven that were demolished.

But instead, we’ll wait and watch as the weeks go by, waiting for the plans for the Fountain District to be released, so people can comment on how unaffordable it looks. That’s the collective opinion of my readers and page followers every time I post a new project. “Will it be affordable?” They ask. The answer is usually no, not to most of us. Not to me.

So to Jacobs Entertainment, I say, or maybe as a casual suggestion, retain the last few buildings and motels that you own, and emulate what HaberRae did with the Coach Motel. Or housing for veterans. But whatever it is, retain the affordability. And learn from the failed promises of entertainment districts of the past. Be innovative. Think outside the box. Shiny new blocks of mixed-use plans never seem to get off the ground and be built in this town. Maybe for good reason. Or maybe it's just bad luck. 

Either way, you're in a position right now to preserve some of the buildings you have remaining, and convert them to adaptive re-use affordable housing. You're in a position to give this city what it actually needs. 

I'm not against what you're doing, I'm just afraid we'll be left with another section of downtown that won't get built out as envisioned, and won't be what this city needs. Just a thought...to learn from Reno's history. I want this project to happen, but I don't want to be left with fenced dirt lots for years while we wait. 

Affordable housing is rapidly disappearing in Reno, and it's not right. So what's the solution and how can you fight greed? 

As companies like Marmot Properties buy up individual homes, renovate them, evict the tenants and raise the rent significantly for new tenants, Midtown has become unaffordable to most. 

Now we have Jacobs Entertainment demolishing entire blocks of affordable housing...and while the living conditions might have been deplorable in these buildings, at least they were a place for these folks to live. 

So what's the solution? What can government do to get involved, besides build a dorm complex that will barely make a dent in the problem? 

Post your comments
  • July 26, 2018 - 3:19:20 PM

    Keystone Investment Holdings tore down a city block of '20s bungalows and mixed used small commercial over a decade ago. They continue to cut down the trees that grow on the property to make it less pleasant and deter people from hanging out there. They have no stated plan to build anything, and pay minimal property taxes on the vacant land while they wait for someone else to make the city nice enough that they can realize a return on their "investment." The City Master Plan and zoning is doubling down on density entitlements downtown that make incremental and small scale development a waste of money. All incentive structures are lined up to have absentee landlords camp on downtown land until somebody offers them a big payday. Why would we expect them to do anything else?

  • July 26, 2018 - 8:12:52 PM

    Great write up, Dude. I'll post a comment here, because your Facebook Friends are so of the moment that any true discussion will be lost. In the real world of high stakes development, Jacobs is pursuing the right course, as frustration as that seems. They need to assemble large tracts of land that they can redivide into salable development parcels, and having scuzzy weekly motels with residents who are starting to feel "protected" is detrimental to that. Add the threat of the Motel Huggers getting their voices heard and Planning stepping in, and clear cutting as soon as possible is the way to go. So what do your readers think should be built in the Fountainhead district? Locally sourced free range artisanal brewpubs, and really cool 2 bedroom view apartments that are all shiny and new that rent for $500 with free Wifi and LEED Platinum certification. Well that isn't going to happen, Jacobs buy in cost is averaging $80-100/SF for the land. In Midtown, $30/SF land costs results in neato 1 bedroom apartments that are approaching $2000/month. Our development costs might be $150/SF excluding site costs, but Jacobs is looking at $250/SF+ for denser highrise construction with a 3X land cost. What do you think their units will need to rent for?

  • July 28, 2018 - 5:10:31 PM

    Doofus. What makes you think that Jacobs wants residential units in their fountain district? The only things I've heard are actual fountains, and a super original ferris wheel a la Vegas. Sure, Jacobs may be going about this the "right" way in terms of high stakes real estate development but let's first start with this: The Sands and GDW don't really evoke high-class visions of $2000+ apts or lead me to believe that Jacobs knows what an entertainment district needs. (And I love getting breakfast at GDW). Also, whats to say that the market won't follow it's 18 year cycle of busts, and that Jacobs won't get anything meaningful built before it's too late. Can they really acquire all their land, finish their master plan, get new condo-scrapers approved by planning and built before 2026 (or sooner) at the latest? I think the Dude is going to have to deal with a lot of empty lots, for a long time. Lastly, I know everyone cries "affordability" right now, but this market is not sustainable. This town is not an overdeveloped pennisula like the Bay. There is plenty of land and the only thing it lacks is higher wages and abundance of water, and Tesla, Et Al. did not relocate here to shell out higher wages. Something is gonna break.

  • August 14, 2018 - 1:38:43 PM

    NO...refurbishing these old motels in NOT the answer as they are owned by irresponsible people who only encourage the crime that has has long been associated with them in the past. ALL money spends the same as they say. I am related to an employee at the Sands Casino and improvements have already begun there, for the better, and I with Jacobs all the luck in the world with the clean up....Reno damn sure wasn't doing it!!

  • August 14, 2018 - 1:44:09 PM

    NO...refurbishing these old motels in NOT the answer as they are owned by irresponsible people who only encourage the crime that has has long been associated with them in the past. ALL money spends the same as they say. I am related to an employee at the Sands Casino and improvements have already begun there, for the better, and I wish Jacobs all the luck in the world with the clean up....Reno damn sure wasn't doing it!!

  • February 27, 2019 - 4:11:27 PM

    The Lido, Intown and the Mardi Gras motels will be replaced with high rise condos according to the security who have been guarding these empty buildings each night. One of the problems he has had at the Sands is staffing...why work for the piss poor wages he offers when you can go to any of the big warehouses or bigger casinos and make more?? His turn over is horrible and that is one reason, the other being he values NONE of them.

  • August 2, 2019 - 6:18:22 PM

    I am surprised someone hasn't sued you for slander or defamation of character. I guess your not betting anything good will come to Reno in the next decade from your article. Articles like this seem to be the in thing in 2019. Run everything down in the name of protecting the narrative...Too bad for our great City.