Las Vegas tourism and business development efforts were dealt more crushing blows this week. The $11.5 million proposed Mob Museum (on the current old post office site, right) — aka the Las Vegas Museum of Organized Crime and Law Enforcement, which was supposed to chronicle the influence of organized crime on Southern Nevada and the law enforcement effort to drag criminals into courts of law — became the focal point in a contractor bidding dispute Wednesday on one of the final phases of the planned construction project. 
The matter could head to litigation, tying up the museum’s originally planned 2010 opening for years.
Las Vegas is in protracted litigation with one of the contractors over a separate project. Furthermore, Las Vegas City Council members criticized city staff for inadequate bid specifications, worrying that disputes like this one will increase because of intensifying competition for construction work.
The contract was scheduled to be awarded Wednesday to APCO Construction. After a lengthy hearing on a protest filed by Flagship Construction Co., a competing bidder, the matter was rescheduled for July 1, but some expect the fight to continue beyond that date.
At issue is the full disclosure of contractor litigations, specification on removing hazardous materials, a seismic retrofit, interior remodeling and the historic restoration process.
“I suspect litigation may flow from this,” said Las Vegas City Attorney Brad Jerbic.
Las Vegas Mayor Pro Tem Gary Reese was even more pessimistic: “We’re going to have a project here in the city of Las Vegas that’s going to be detained for a couple of years.”
The news was a real downer for prior mob lawyer and current Las Vegas Mayor Oscar Goodman, a top-tier pet downtown development project of his. On top of that, the always outspoken mayor had to remain silent, recusing himself from the discussions because he shares an interest with one of contractors, APCO in the Apex Industrial Park.
“I’ve been the driving force, I guess. I hope it’s complete while I can still enjoy it in public office,” says Goodman, who is considering a bid for Nevada governor as an independent in 2010.
However, work continues on the Mob Museum exhibits that are planning to be located inside the retrofitted 1930s-era former courthouse on Stewart Avenue downtown, across the street from City Hall.
The museum is being funded by a mixture of private donations and grants, with the bulk of the money to come from city Redevelopment Agency bonds used to boost downtown Las Vegas development.
Wednesday’s bad business development news was a prelude to more bad Las Vegas news on Thursday. To add salt to the oozing wounds, the controversial new city hall project, the touted savior catalyst that could jump-start the next wave of Las Vegas development, is also stalled and in jeopardy, according to Goodman in his Thursday news conference.
Goodman blamed skittish financial markets, saying the city originally planned on an interest rate of around 5 percent. As of Wednesday, it appeared the best the city could do was 7.5 percent. “That’s a difference of millions of dollars,” Goodman said.
Although the city received final approval to seek up to $267 million to finance the construction of a new city hall, left, now Las Vegas has run into the brick wall reality of financial markets, said Chris Bohner, research director for Culinary Local 226. “I think the financial markets have a better understanding of risk than the City Council,” he said. “The financial markets have said, ‘We don’t think your project’s feasible.'”
The next step for the city hall project would appear to be to seek bond financing for what is known as a “lease-purchase” agreement in which investors put up the construction money and are paid back through annual appropriations by the city. Such financing is considered a much riskier method than general obligation bonds because it’s not tied to a specific funding source.
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