This sum was announced last summer, but the details only fell into place this month. The team announced a $650 million loan from Bank of America earlier this month, and on Monday overcame the NFL’s longtime opposition to a team in Sin City. League franchise owners voted 31–1 to approve the move.
Las Vegas appears poised to claim the mantle of World’s Most Expensive Stadium from East Rutherford, New Jersey, where the Jets and Giants play in the $1.6 billion MetLife Stadium. (Los Angeles Stadium, Stan Kroenke’s project that will host the Rams and Chargers, is estimated at $2.6 billion—but that cost includes parts of the surrounding entertainment district.*)
Clark County taxpayers will contribute $750 million to the new arena, a record for a sports facility—about $354 per resident, taken from an increased tax on hotel rooms. That tax currently pays for schools and transportation, in addition to tourism-related expenditures.
Stanford economist Roger Noll said it was the “worst deal for a city” he had ever seen.
That it came together at all is remarkable.
The Nevada statehouse gave its approval for the room tax hike in October. Clark County gave the OK in November. Sheldon Adelson, the casino magnate and Republican megadonor who owns the Las Vegas Review-Journal, had pledged to invest $650 million of his family’s money in the stadium—and an ex-partner saidAdelson saw the stadium as a “legacy project.”
When Nevada and Clark County approved the hotel tax hike, then, the split was three-way: $500 million from the Raiders, $650 million from Adelson (the board of his Sands Corp. rejected the idea of investing company money), and $750 million from a hotel room tax hike.
But in January, Adelson backed out, and the deal looked all but dead. Goldman Sachs, which the team had portrayed as a backup lender in case the Adelson investment fell through, didn’t want a deal without Adelson.
That Bank of America (which also funded Santa Clara’s Levi’s Stadium) jumped in with a last-minute loan of $650 million surprised Steve Sisolak, the chairman of the Clark County Commission, the body that had approved the hotel tax hike. Sisolak had questions about the financing earlier this month, the San Jose Mercury News reported:
Sisolak, who worked closely with Adelson and the Raiders on the negotiations, is puzzled how the current loan deal will work.
“Adelson said he couldn’t get a 2 percent return on his $650 million,” the county commissioner said. “That is $13 million a year. They must have figured that somehow this stadium is going to turn out a significant amount of cash flow to pay that loan back.”
Adelson might have believed his civic contribution would compensate for tiny returns. What does Bank of America see?
It’s certainly an anomaly. The only two sports stadiums within $500 million of the Vegas cost are MetLife and the soon-to-be-built Los Angeles Stadium, each of which has something that Vegas’ new arena does not: two pro teams.
And then there’s the taxpayer contribution. Some cities forgo future property tax revenue for a pro stadium, or issue tax-free bonds paid off by the teams themselves, or contribute complimentary infrastructure like utility work or a nearby train station. But Las Vegas will pay for the thing itself—and with a tax on hotel rooms, something it already has. (Bonds will be repaid over 30 years with the tax revenue.)
The state’s figures to justify that new tax are … ambitious. Its forecasts suggest450,000 new visitors every year drawn by the 65,000-seat stadium, spending an average of 3.2 nights per visit. About a third of tickets are supposed to be purchased by tourists, although no other city manages 10 percent. Why half a million people would fly across the country to watch a team that no one wants to pay $20 to see in Oakland is not clear. A reminder from Brookings’ big September report on taxpayer subsidies for stadiums:
Academic studies consistently find no discernible positive relationship between sports facility construction and local economic development, income growth, or job creation.
A tax on hotel rooms at first seems to be an affair for the tourism industry. Hotel owners testified in its favor. And so we have a battle between two interconnected ideas:
- Taxes go up, tourism goes down.
- Stadium goes up, tourism goes up.
But it’s not just a problem for the tourism industry. It’s true that the Clark County room tax was originally intended to fund bonds for the Las Vegas Convention Center in the ‘50s, and continued to support the Las Vegas Convention and Visitors Authority, the marketing arm of a city that lives and dies on marketing. (They are responsible for the “What Happens in Vegas” campaign.)
But these days, about half the room tax goes to support state schools and county transportation. So if the new tax on hotel rooms directed to the stadium does drive room prices down, the money comes out of schools and buses. In fiscal year 2015, a quarter of the tax paid for Nevada education, another 14 percent for the Clark County School District, and 9 percent for Clark County Transportation.
“So much of this action was premature and rushed through,” Chris Giunchigliani, the lone dissenting official on the Clark County Commission, told the Las Vegas Review-Journal after the measure was approved in November. “It’s bad public policy to take public tax dollars, especially the largest subsidy (for a stadium project) in the United States, and claim it’s going to benefit economic development.”
If occupancy rates and room prices are resilient to tax increases, then Nevada might otherwise have funneled that money into solving the CCSD’s chronic teacher turnover problem. But maybe the teachers will be more excited to stay in Las Vegas when the Raiders (who have not won a playoff game since 2002) come to town.