By D. Brian Burghart

“They had problems before [the bowling stadium], but I didn't have to deal with them,” Mike Mouliot told a reporter from a booth at the Bowling Stadium Big City Diner. “They send me to the RSCVA, and they say, 'Oh man, you've got a good job; that's a real plum.”

But Mouliot's job is no plum.

Since joining the board of the Reno-Sparks Convention & Visitors Authority, the agency that built the downtown bowling stadium, Washoe County Commissioner Mouliot has watched community bitterness mount against the troubled RSCVA.

And for good reason.

Here is an organization that's at least $120 million in debt, with tens of millions in public funds being sucked up into building a bowling stadium that's set to continue to lose at least $1 million a year. It's an enterprise that has inspired multiple grand jury investigations over the years due, among other things, to allegations of illegal transfers of funds and behind-the-scenes deals. It's an organization that has recently racked up enormous unpaid bills, including more than $1 million to its own advertising agency.

Last but not least, the RSCVA seems to be an organization where the people allegedly in charge—the board of directors—don't seem to have the information to actually know what the hell is going on.

“If this was a privately held business, we would have bankrupted last year—there would be paper over the windows and the doors,” says Mouliot. “But because it's public money, we can keep pouring money in [the bowling stadium]—two million a year.”

Like other members of the RSCVA board, Mouliot is stepping forward to shed light in the corners of the agency. The board, through systematic public disclosure in board and committee meetings, has been airing dirty laundry, essentially lancing abscessed wounds, with two goals in mind: healing the agency and putting the past behind them.

“I thought it was very good to shine a light on ourselves before somebody else did. It was clear to me that we had a significant problem,” says Sparks Mayor and RSCVA board chairman Bruce Breslow. “This board has chosen to fix it at the personal expense of always being in the news with 'You guys are doing something wrong over there.' The board knew that this would be controversial, but elected to go forward anyway.”

Board members say that the heads of some RSCVA staff members will soon be rolling. This process began last week when two RSCVA officials lost their jobs. In fact, with a new CEO to be selected (probably at the June 19 board meeting) for the organization and skeletons being dragged out of the closet on a regular basis, Breslow has hope for the future of the RSCVA.

But some aren't so optimistic.

“If this were a company, would you invest money in it?” asks former Reno City Councilmember Jim Pilzner. “The answer would be, 'Hell no.' Their advertising is poor. They lose money on a $65 million investment [the bowling stadium]. The point really is this: What do you think Reno and Sparks could have done with that money to build a really first-class attraction for this area?”

Dazed And Confused

Few people are arguing that Washoe County doesn't need the RSCVA. Since its creation more than 30 years ago, tourism in the area has grown tremendously. At least some of the credit for 5.2 million visitors last year must go to the agency.

“The bottom line is that tourism is the economic engine of the area,” says Stephen Ascuaga, board member and representative of gaming. “Not just for gaming, but for restaurants, and the ripple effect goes down. If we don't keep that economic engine running efficiently, we're going to be stumbling. We're sputtering a little bit now. I think it's getting better; we're starting to turn a curve. I think getting the new leader in is going to be a huge move.”

The RSCVA's annual budget is greater than that of some cities—around $30 million next fiscal year. It has tendrils in every aspect of tourism in Washoe County, but the public is generally uncertain exactly what the agency does or is supposed to do.

The RSCVA's most recent mission statement states the agency exists to “provide marketing leadership and facilities promoting a distinct, quality image of Reno/Sparks/Lake Tahoe's unmatched natural beauty, entertainment and attractions—to increase overnight guests and gaming demand.”

But a News & Review investigation found that board members, while well-meaning, are often unaware of past and present activities within the agency.

The board of directors, the closest thing to a publicly accountable group the agency has, meets once a month and doesn't manage the day-to-day business of the bureau. With representatives from the two cities, the county and a variety of businesses (some in direct competition with each other), personal agendas often conflict. The question often isn't how to get something done, but how the board ever got anything done. Board members (with the exception of elected officials) can serve four years at most; a pair of two-year terms. That doesn't make for a long memory, and sometimes things the board considers important—such as some of the specific items of how the National Bowling Stadium got built—get lost.

New board members simply don't know, in specific, what the agency has done in the past, how its money has been spent, or what the day-to-day business of the organization is. In short, new board members are dependent on the institutional memory of staff and on members who have been on the board longer.

While conducting research for this article, the News & Review discovered it was actually revealing crucial pieces of information to the board for the first time.

A classic example of this was the board's lack of knowledge of a feasibility study conducted on the bowling stadium. During an interview, Breslow criticized the way past boards had handled the building of the stadium, which went more than $20 million over budget and continues to lose over $1 million each year.

“Before an organization should build a building of this magnitude [the bowling stadium], we really have to have a feasibility study that shows a business plan, how it will operate, what makes sense and where it should go. That did not occur,” said Breslow.

“Well, you do know that there was a $33,000 feasibility study done on the bowling stadium?” the News & Review asked him.

“When?” he responded.

The following day at the RSCVA's general meeting, Breslow (who has served on the board the longest) announced to the board the existence of the study. Two days later the study was being circulated among members, after spending six years in the closet.

It was immediately apparent at that meeting that the board and staff had no idea that an earlier board had spent $33,000 to find out how to make the bowling stadium work, and that they needed the information desperately.

It must be stated that the various news outlets, especially the Reno-Gazette Journal and the Sparks Tribune, have recently been instrumental in not only informing the public of the agency's problems, but informing the agency's own board of directors.

Breslow actually believes that the booster-style coverage the agency had received in the past from the press even hurt the agency's ability to operate. “Press coverage for years and years was very 'chamber of commerce' toward the RSCVA, and I think past board members honestly felt that the CEO was doing a terrific job of taking care of the company—[in reality], he did a great job managing the board,” said Breslow.

At the same time, some of what has appeared in the local press about the RSCVA simply isn't true. The Gazette-Journal has often reported that there is a “sunset clause” that will end the tax that funds the organization in the year 2010. Before this article was researched, every board member the News & Review talked to believed there was such a sunset clause.

Eventually, though, the truth came out: While members of the public and members of the board members believed there was a sunset clause, the RSCVA staff knew that there wasn't one.

“There is no such thing [as a sunset clause],” said Ed Beaver, finance director. “I don't know who came up with that, but there is no such thing. There is no sunset to the RSCVA.”

Pilzner believes it's a sign of just how bad communication is at the agency. “That's the standard operating procedure for the RSCVA,” he says. “It appears that the board of directors doesn't very often get good information from staff. In fact, things are happening that the directors don't even know.”

Who's To Blame?

The laundry-airing effort at the RSCVA began when the board of directors asked for Coopers and Lybrand and Human Resource Partnership studies of their agency in 1996.

There were few bright spots to the studies—most notably management of the agency's golf courses. But overall, the reports were devastating.

The Human Resource Partnership study expressed the problem succinctly: “The major issue which has limited the success of the RSCVA is the lack of leadership caused by a weak organization structure, weak processes of governance, and weak management practices. ... The net of it is that the RSCVA spends $33.5 million and 260,000 hours with an insufficient return.”

The study said this sad state of affairs came about because “the enabling legislation for the RSCVA did not include a specific charter or by-laws, stakeholders have highly diverse requirements, the existing inadequate organization developed by default, not design, and there was insufficient leadership to plow through these infrastructure problems.”

The first action that came amidst the studies happened late last year with the retirement of Thomas “Jay” Milligan, the president and chief executive officer of the organization, who left under pressure of the board of directors. (Ironically, the former CEO's signature is still on the bowling ball of a giant statue in the lobby of the bowling stadium, constructed during Milligan's tenure.)

Now, the board apparently wants to get the disclosure process finished before Milligan's replacement is found—a process that began last August.

Acting CEO Fred Boyd is getting unilateral acclaim from board members for helping to put the RSCVA on a course toward healing.

“The day that I took this position will always be etched in my mind. It was Thursday, Feb. 20, at our board meeting,” Boyd said. “It was apparent to me well before that that this organization from a management standpoint lacked competent, creative leadership. I'm talking about top management. That was the reason we wanted to make a change, starting not too long after the board made an almost complete turnover in the summer and fall of '95.

“We had to take a look at the organization—see what's working, what isn't working, what can be fixed, how fast it can be fixed. These aren't problems that can be solved overnight.”

One thing that seems to be missing from all the laundry airing is blame—who's to blame for millions of dollars in cost overruns on the National Bowling Stadium? Who's to blame for nearly $1 million in unpaid bills to a local ad agency? One could imagine that officials would love to point the finger squarely at Milligan, to use him for a scapegoat. Critics such as Pilzner tend to blame Milligan the most.

But the board can't because Milligan's retirement contract reportedly says members can't make any disparaging, uncomplimentary or negative remarks about him.

The other reason may be that no rational person could possibly believe that any individual could singlehandedly mess up an agency of this size. Which means the board of directors and staff share the culpability through negligence or willful ignorance and are guilty by association.

But, of course, it is not that simple.

After conducting its study, the Human Resource Partnership said “no one” was at fault. “RSCVA stakeholders had been caught in the tangled web of a poor organization design, weak processes of governance and poor management process,” the study said.

The simple fact that it's a fairly new board answers two questions: Why the board is willing to bring out all the agency's problems and how the board can bring out all these problems without having to accept responsibility for the problems.

History shows the RSCVA has never lived up to the public's expectations, and the problems that have come to the fore lately had their beginnings in the way the board was set up, its political makeup and its facilities-oriented philosophy. Seeking to blame the latest board of directors is like a lung cancer victim blaming the cigarette they last put out instead of the thousands they lit up.

Much of the press the organization has received recently hasn't taken into account that there were serious problems at the RSCVA before Milligan. Another one of the organization's heads left in disgrace, and grand jury investigations of the RSCVA began early in its history.

“These are challenges and problems and difficulties that have been building for years,” says interim CEO Boyd. “Certainly the last 15 years.”

Birth Of An Agency

Picture the Truckee Meadows in 1959—the population of Washoe County is only 84,000. The main thoroughfare between Reno and Sparks is Highway 40; Kietzke Lane is a dirt road. It's an altogether more provincial sort of place than the concrete and neon pasture that exists in Washoe Valley today.

Community leaders had been wrangling for decades about how to go about building a convention center to buttress the Reno economy during the slack winter months.

It was in this environment that the RSCVA was born.

With the adoption of a county ordinance and corresponding city ordinances, a room tax of 5 percent was levied. The original ordinances incorporated the 1960 “Tax Administration Resolution,” which was adopted by the County Fair and Recreation Board (the original name for the RSCVA) and pledged the room taxes for the repayment of general obligation bonds and the general business of the agency. What the resolution essentially says is that until all general obligation bonds that are sold in the agency's name are paid off, the agency gets the room tax.

It is clear from the phrasing of the 1960 resolution that its intent was to cover a $4.5 million bond to build Reno, Sparks and Washoe County the convention center that everyone wanted, but with the growth of the area and the agency, that intent was forgotten in the rush to build facilities—first the convention center in 1965, then the Pioneer Center for the Performing Arts in 1967, then Wildcreek Golf Course in 1975, then Northgate Golf Course in 1986, then the Livestock Events Center in 1987, then the Incline Village Visitor's Center in 1988, and the National Bowling Stadium in 1995. (The bowling stadium gets funding from a separate 1 percent room tax.)

From the beginning, the tourism agency has generated controversy.

From its earliest days, the RSCVA has never brought in a major project on budget, and the Washoe County grand jury has met a number of times to consider purchases, business practices and expenditures made by the group.

Its first major purchase, the land on which the convention center was to be built, was owned by Harold “Pappy” Smith Sr., owner of Harolds Club. It had been assessed for less than $600,000 a year earlier. After negotiations, the Fair Board got the land at a steal, $1.2 million. Rumors of bribes made the newspapers.

The board shortly thereafter came under scrutiny of the Washoe County grand jury, which investigated the “triangle” purchase in 1962, focusing on the question of whether the board violated state law by not having the land appraised by three independent appraisers, and whether the purchase was void by reason of illegality and abuse of discretion.

A Reno Evening Gazette story on Aug. 15, 1963, set the theme for the next 34 years of press coverage. “Washoe County Fair and Recreation Board members expressed astonishment late Wednesday night when they discovered their $2.85 million arena-convention hall will cost $3.9 million to complete,” it read. The coliseum's final cost was $6.2 million, according to RSCVA literature.

In March 1965, the grand jury met again to consider whether there were illegal dealings in the purchase and to decide whether to release the findings of the earlier grand jury. They again found none and refused to release the findings.

The next building to go up was the Pioneer Center for the Performing Arts, which came about as a result of the squabbling over where to put the convention center. Original estimates had construction of the center at $992,000. The final construction cost more than double that.

The grand jury met again when the board decided to build Wildcreek Golf Course and purchased land in Sparks. The land was owned by brothel proprietor Joe Conforte. Once again, the grand jury investigated and found nothing criminal, although it slapped the tourism board in its 1976 report, saying the procedure followed was “not in the best public interest.”

The board grew from five to nine members in 1977 to include representatives of the business community (general business, financial, hotel and motel). The idea was to give the board of directors a more diverse, less political view for more equitable spending of taxpayer money.

A Director Is Charged

The agency changed its name to Reno-Sparks Convention and Tourism Authority and restructured in 1981, creating several new positions, including a combined executive director and chief executive officer position.

In 1981, as now, the agency's biggest problem was to find “an executive director nationally recognized in his field.” After a four-month search, they chose Atlanta tourism official David Kievit.

Kievit made it all of a year before resigning because the grand jury began looking into his alleged misuse of public money and employees to build a $7,300 deck on his home. He pled “no contest” to two gross misdemeanors and was ordered to pay restitution and a fine. Six other charges against him were dropped.

The agency needed to find a new leader. After a two-month search, then-Sparks City Manager Milligan took the job.

The decision to build an $8 million equestrian and livestock center at the Nevada State Fairgrounds was made in March 1986. Milligan estimated the equestrian center would lose $176,000 in its first year of operation, but would reach a break even point in its second year.

The Livestock Events Center was completed in 1987 at a cost of $10.3 million and has never broken even.

The RSCVA once again displayed “poor business judgment” by not seeking bids for certain purchase contracts, but a police probe found no evidence of criminal intent, a Washoe County deputy district attorney said in 1985. That investigation stemmed from a Reno Gazette-Journal claim that the agency violated open meeting laws by awarding an advertising contract to Media Consultants. The law requires the purchase of goods and services costing more than $5,000 be submitted for bids to two or more suppliers. Contracts for more than $10,000 must also be advertised in a general-circulation newspaper.

Northgate Golf Course was the next capital project to be built. Its funding came from a $26 million bond sale (the same bond sale that financed the Livestock Events Center and paid off $12.58 million in higher-yielding bonds). The golf course, once again, came in way over budget.

The East Hall, completed in 1991, was the final adjunct to the convention center. The $9.959 million addition actually came in at a cost of $11.1 million.

The agency began with only five board members. Today the board has 12 members: Representing Reno are Jeff Griffin and Candice Pearce; representing Sparks is Bruce Breslow; representing Washoe County are Mike Mouliot and Jim Shaw; representing the gaming industry are Stephen Ascuaga, Jim Rogers and Tony Santo; representing general business is Fred Boyd (who is also acting president and CEO until one is selected); representing the airport authority is Bob Reding; representing the motel industry is Del Rice; and lastly, representing the financial industry is Leo Seevers.

Bowling For Dollars

At the center of the RSCVA controversy these days is the bowling stadium that officials at the agency first talked of building in the early 1980s.

A March 4, 1982, Reno Evening Gazette story said that David Kievit told the board that the agency was going to pitch the American Bowling Congress the idea of making Reno its permanent home.

“However, construction of a big new bowling arena might be required to get the bowling congress to agree,” he said. He also said the congress would want a 10-year contract.

The tourism agency became especially enamored of the idea in 1988, when 75,000 bowlers from the 1988 Women's International Bowling Congress Championship Tournament became the largest convention in Reno history and went into The Guinness Book of World Records for the most people participating in a sporting event.

Momentum for building the stadium picked up in 1990. A Laventhol & Horwath feasibility study was conducted—the one the current board members didn't know even existed—and concluded that in a worse-case scenario, the facility would lose $1,279,000 over five years, or in a best-case scenario, exceed break-even levels in the overall five-year prospective period by $649,000.

A 1 percent room tax specific to the bowling stadium was tacked onto the existing taxes by the Nevada Legislature in 1991. This room tax will bring in about $2,463,124 in the RSCVA's 1997-'98 fiscal year. But it still leaves a serious shortfall, and the remainder of the debt service on the stadium is coming out of the agency's general fund.

The stadium was completed in 1995.

Today the two-year-old stadium is hemorrhaging more than $1 million each year, according to Mouliot.

The study also concluded that a 72-lane bowling alley with parking for approximately 955 vehicles would only cost $29.1 million. But the National Bowling Stadium, which has 80 lanes and parking for about 300, wound up costing around $54 million.

The most serious concerns about the stadium erupted this year, however, when it was reported that the Public Works Department discovered that $17.1 million of money spent on the bowling stadium was undocumented. According to Boyd and Beaver, that is simply not true, and nobody from Public Works has even yet bothered to ask for the information

“Of the $17 million, there's not a penny missing; every penny's accounted for. We are audited every year by the same accounting firm that audits the county and the state of Nevada,” said Beaver.

But Pilzner believes the Public Works announcement demonstrated just how shoddy finances at the RSCVA really are. “I can't imagine someone building something like that and not having books that someone could open up and understand immediately,” he says.

Bondage

Even though it collects $30 million a year, the RSCVA was behind in its payments of more than $1 million to a local ad agency DRGM this year, according to board meetings. It also owes more than $120 million in government obligation bonds, according to an RSCVA debt service schedule.

Why is the RSCVA so overcommitted financially?

Some believe it has to do with the way the agency was set up. The basic setup of the organization encourages it to spend: The 1960 laws that were passed, enabling the RSCVA to take a 5 percent room tax from hotels and motels, also allows the agency to continue collecting the tax until all general obligation bonds sold in the agency's name are paid off.

City governments, which impose the taxes, by law won't have the option to control where the money goes until the RSCVA has paid off its bonds. In essence, the RSCVA can exert more control over how much tax money it receives by owing money. If it stops owing money, it can't count on receiving 100 percent of the room tax—sell more bonds, get more money and a longer life to boot.

Pilzner believes the agency is bankrupt. “They can't pay their bills,” he says.

Board members say the myth being espoused by critics like Pilzner that the agency could go bankrupt—and leave the county holding the $120 million bag—is an unlikely scenario. With the RSCVA's annual tax income of $30 million each year, in a worst-case situation the agency could lay off employees, shut down departments, and close or sell some of its operations—such as the Pioneer Center for the Performing Arts—to get on top of its debt. Bond payments are $8 million a year.

“Internally, we still have major management problems that need to be corrected,” Breslow says. “I am hoping that [interim CEO] Boyd will make recommendations to our board for restructuring our management before the new CEO comes on. It takes so long for a new person to get up to speed that I don't think our organization can afford to wait. I think that there are four to 10 people who don't need to be in our organization any longer—and they probably think the same of me.”

Detractors say the agency is fundamentally flawed because there is very little the public can do to hold it accountable. Board members aren't elected by the people, but are nominated by public and private entities—and then voted on by the “electeds” on the board. With most of its members representatives from the business community, voters have even less of a say about who is spending their tax money.

Meanwhile, board members like Mouliot are working to pull out every skeleton they can find from the RSCVA's closet.

“Some of them get mad at me, but I'm trying to get something done that's distasteful. I'd rather not have to do it. I'd rather it be the plum they told me it was when they first assigned me [to the RSCVA],” says Mouliot.