Pricey Projects: A Look at Where Taxpayer Dollars are Going

Aug. 6, 2010 -- If you thought all U.S. cities are tightening their belts because of budget crises, think again.

Despite the tough economic times most U.S. cities are facing, some city officials -- from Las Vegas to Pittsburgh -- are spending millions of dollars on expensive projects that are raising eyebrows.

Here's a look at some questionable spending sprees on taxpapers' dimes:

In early July, the Las Vegas city council approved $7.1 million for museum exhibits for the Las Vegas Museum of Organized Crime and Law Enforcement, also known as "The Mob Museum."

About $12.4 million for the project is coming from the city's coffers, and the museum -- which is scheduled to open in 2011 -- has attracted about $8.3 million from local, state and federal grants.

Funds for the $42 million museum were allocated in 2004, and city officials are defending the project as one that will create jobs and help the tourism industry. The city projects that the museum will generate $8.5 million to $13.9 million in revenue over a 10-year period and will employ 92 people when it's complete.

But at a time when Las Vegas is facing an $80.8 million shortfall in fiscal year 2011, plans to cut at least 200 jobs and reduce overtime and is cutting community programs, the decision to spend millions on a museum has generated severe criticism. The union for Las Vegas city employees assailed what it called the city government's "spending spree" as "absolutely unconscionable."

Officials say the money for the museum was set aside long before the economic downturn.

"Much of the funding for the Museum comes from redevelopments funds, which have to be spent in redevelopment areas for redevelopment projects like the Museum -- not jobs. Of this $42 million, more than $8 million is from grants that must be used for the Museum -- not jobs," city officials said in a statement to ABC News.

Museum representatives say the city council, only one member of which voted against the museum funding, didn't discuss whether to allocate the money on another project, in light of the declining economic conditions since the museum was approved.

The Power & Light District, a downtown revival project and one of the Midwest's largest construction ventures, was supposed to revive the downtown district in Kansas City, Missouri, when it was approved in 2006.

But the project, hailed by some as the "renaissance of downtown," has become a noose around the city's neck with its $850 million price tag, opponents say.

When the project was initially approved, the city agreed to back $295 million in bonds on the assumption that the entertainment and dining area would quickly attract revenue and become self-sustaining.

Original projections from the Chicago-based consulting firm C.H. Johnson Consulting slated the entertainment district to be at 90 percent occupancy and generate $17.7 million in revenue by March 2007, according to the Kansas City Star.

But a poor economy, coupled with difficulty attracting investors and an eight-month delay in opening, has left the Power & Light District 25 percent unoccupied, and city officials in July projected an annual cost of $10 billion to $15 billion in subsidies until 2033, when the bonds are set to expire.

Kansas City Mayor Mark Funkhouser, a Democrat who was elected after the Power & Light District project was approved, has assailed the project as a waste, saying it will do nothing to help the city's $87 million budget shortfall.

"These glitzy projects, paid for by tax incentives, do not generate the positive cash flow that would somehow lift up everybody else," Funkhouser told ABC News. "It simply doesn't work. The evidence is clear, over and over.

"It's finally been acknowledged that the thing is going to run probably a permanent subsidy ... but it should not be a surprise to anybody who's paying attention," Funkhouser said. "This thing was done without, in my view, an adequate financial analysis at all. ... In addition to sucking up all the taxes, it also requires $10 to $15 million in general municipal revenue that we could have spent on cops, on teachers, on firefighters or something else."

In the meantime, the city is cutting services across the board. In March, the city decided to shut down 28 of its 61 schools in an attempt to close a $50 million budget gap, and the city council has approved a $15 million cut to the police department, slashing civilian positions and stretching the existing police, Funkhouser said.