Photo credit: Katherine Carey / Shutterstock.com
In 2016, the football team now called the Las Vegas Raiders received the largest stadium subsidy in American history — $750 million — to ditch their allegiance to Oakland, California and relocate to Sin City. The state legislature approved the $750 million, which contributed to the $2 billion tab to build the team’s current home, Allegiant Stadium.
But the money ultimately came from Clark County where the new stadium and most of the Vegas Strip is actually located. Clark County raised the funds by selling bonds, which would, according to the plan, be paid back by an additional tax levied on those booking hotel rooms.
But things are not going according to plan. For the second time in six months, Nevada’s Clark County has to pull millions of dollars from its reserve funds to meet a payment on the Las Vegas Raiders’ one-year-old stadium. The county recently disclosed in regulatory filings that it will make an unscheduled draw of $11.7 million, so it can cover bond payments due on the $645 million in bonds issued in 2018 that helped finance Allegiant Stadium. This follows a similar action last November, when Clark County also had to dip into its stadium reserve fund to cover $11.6 million in bond payments.
The pandemic decimated the Las Vegas tourism industry. Hotel bookings were down by 36 percent in March compared to 2019, even with a slight, presumably vaccine-inspired rebound. The result? The hotel room occupancy taxes that were supposed to cover payments on the stadium debt aren’t being collected in the projected amounts.
While the city hasn’t had to dip into its general fund yet to cover bond payments, that possibility — though remote — always exists. And including interest payments, the total cost to Clark County for these bonds between now and when they mature in 2048 is going to be about $1.3 billion. That’s some real money! Then there’s this kicker, per Bloomberg News: “If the county does end up needing to back the bonds, any financial blow to Clark County will be eased by an infusion of federal aid for municipalities from the Biden administration’s American Rescue Plan.” So we’re all in this huddle together.
There were those of us who warned at the time that Vegas’s gamble on football was a chancy bet. It was also ridiculous. Shortly before the Raiders received their publicly-funded stadium, the Las Vegas Golden Knights of the NHL started playing in an arena that was paid for with private money, right down the street. As a result, there was clear evidence the presence of live professional sports in Vegas was an enticing enough business proposition that investors would get involved even minus the financial support of state and local government. Nonetheless, the Raiders received their money anyway. with local officials claiming it was a necessary move to juice job creation and keep Las Vegas competitive as a tourist destination.
Now, you may be saying, “Pat, this isn’t really fair. No one expected a pandemic to shut down tourism for a year or make it impossible for people to attend sporting events in person for a time.” And while it’s true that there was a massive, unanticipated interruption in the business Clark County was counting on to boost its revenue, that’s also the point: The climate for a particular business changes all the time for reasons legitimate and nefarious, external or internal, and thus long arrangements between a particular business and the government are always going to be risky for taxpayers.
Vegas’ plan for football being an economic driver is very dependent on not just tourism, but increasing it since the population there is a lot smaller than that of most metro areas that host pro sports teams. Any change in tourist proclivities, whether due to external events such as a pandemic or simply changing interests and preferences over the years, could render the deal a much worse one than it was on paper. Don’t believe that tourist interests can change enough to turn a previous hot spot into an economic wasteland? Just ask Atlantic City, once a premier tourist destination but now a place where they dynamite abandoned casinos, how things are going. And since the bonds that helped fund aren’t fully paid off until 2048, which is plenty of time for things to go completely sideways for Las Vegas and Allegiant Stadium.
The saddest thing about this, to me, is that for a while Vegas did things right when it comes to stadium subsidies, while most of the rest of America was doing it all wrong. Not only did Vegas refuse to put taxpayers on the hook for the Golden Knights’ arena, a coalition of concerned citizens and elected officials there blunted a push to build a publicly-funded Major League Soccer stadium in downtown Las Vegas proper. (I detailed the particulars of that debate and some of the people involved in my book, for those who are interested.) But when it came to football, legislators there forgot what recent history has shown us: Elected officials and taxpayers have more power over sports leagues and owners than they think. Instead, Clark County went ahead and made the same mistake so many other cities made, betting on sports as an economic driver despite the fact that a considerable body of evidence shows they are no such thing.
Nonetheless, it’s possible Nevada and Clark County didn’t learn their lesson. Once the public subsidy spigot is open, everyone wants a piece. Exhibit A: The ownership of Major League Baseball’s Oakland A’s has been visiting Vegas and talking about a new stadium. This could very well just be a stalking horse to get Oakland to fund a new ballpark, but could also be serious. The local Las Vegas press already suggesting ways it could be funded by taxpayers. Time will tell. But if the A’s are intent on moving, paying for a baseball stadium would be another roll of the dice Nevada really can’t afford.
Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.