Their masters’ voices

In 1981, Gov. Robert List convinced the Nevada Legislature to shift state government’s reliance from stable and predictable property taxes to sales taxes, which fluctuate wildly with the economy. Later that year, Nevada was hit with a devastating recession, and its state government had a terrible time coping because of the List tax shift.

List said, “I could not have known that there was a recession coming.”

It was an outrageous defense. There is always a recession coming, and the wise leaders plan for it. Sooner or later, Nevada was going to be in a recession, and List had made the state structurally defenseless against it.

It is the job of public officials to plan for hard times, not good times. List failed to do that.

In our cover story by Willie Albright last week (“We told you so,” July 14), we recounted how the city and county went ahead with the casinos’ pet project of lowering the railroad tracks through Reno against the advice of most experts, and it now has the city government at risk of default.

The city’s interim finance director, Jill Olsen, told Albright that hindsight is 20/20 and then used the Bob List defense: “I’m not saying I agree with it, but this is my understanding,” she said. “They [city officials] felt that the projections on average were reasonable. Nobody foresaw a recession such as what we experienced.”

She is essentially copping a guilty plea to the charge that the city failed to plan for future hard times. But it’s more complicated than that. Either Olsen is uninformed on what happened back then or she is trying to rewrite history. She has the financial projections wrong. The fact is, the city did know that difficult times were coming. Its financial advisors told city officials so and warned against going ahead with the railroad project, and those officials refused to listen.

Here is a February 2001 report from the Sparks Tribune: “Reno’s Financial Advisory Board recommended yesterday that the City Council wait to find out more about the cost of the proposed railroad trench and approve the project before it issues bonds to pay for it. … The projected cost of the project has risen $31.25 million—more than 25 percent—since the city applied for a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan to pay for it. That figure comes after the planned trench was shortened. … And the good economic conditions that prevailed when the project was initiated are disappearing, according to Terry Campbell, finance advisory board chair. Indian gaming is a reality in California, as is the energy crisis, and the nation’s economy has taken a significant downturn. ‘This is not exactly the best time to be planning on a project of this size,’ Campbell said.”

Reno casino executives during that period were tracking the small but inexorable losses in customer traffic they were experiencing because of the rise of tribal gambling, but city officials were not doing the same and didn’t listen to those who did.

The fact is that the city arrogantly ignored all the warnings and undertook the railroad project because it was too responsive to the casinos and tourism. Local officials, as they so often do, confused the interests of the casino industry with the interests of residents.