Vegas stadium builders still have no idea how much public money they’re asking for

An article in Friday’s Las Vegas Sun revealed a few more details about the tax-increment financing plan that Sheldon Adelson, Mark Davis, and Majestic Realty have floated for a possible Oakland Raiders stadium in Vegas:

“We build a billion-four project, bring (an NFL) team, it now generates a substantial amount of incremental tax revenue … and so we would take that increment that we created by our investment there,” [Majestic Executive Vice President Craig] Cavileer said in an interview. “Without that increment, you would not be successful in your investment.”…

The district could theoretically include property taxes, live entertainment taxes paid on tickets at stadium concerts, sales taxes from merchandise sales and so on.

Details of the proposed tax district are still unclear, however, including exactly which taxes would be involved. But Guy Hobbs, managing director of Hobbs, Ong & Associates, said the district would likely not encompass any revenues that weren’t directly incidental to the stadium itself.

Hobbs, who sits on the infrastructure panel’s technical advisory committee, said tax increment revenue could flow into a pool of money that would also include funds from operating the stadium. All of that could be used to pay the stadium expenses, he said, and any remaining revenue could be used to help provide a financial return to Sands and Majestic.

Let’s break that down a bit: First off, “directly incidental to the stadium itself” is a strange way of putting it, but presumably means it would only involve taxes actually paid on the stadium site. (What about at a steakhouse built next door to the stadium as part of the same project? Neither Cavileer nor Hobbs said.) Sales tax increment financing isn’t actually legal in Nevada, according to Greg LeRoy of Good Jobs First, or at least hasn’t been used there previously, so that could be a tough lift, and sales tax would be by far the largest piece of any TIF district. And paying stadium expenses with tax money would be, of course, a subsidy in exactly the same way that paying for construction costs would be, since this would be a privately run stadium where the private companies involved got all the stadium revenues — which you’d think would be enough to provide their “financial return,” but maybe they’re saying this is such a horrible stadium deal that it can’t turn a profit without $750 million in cash subsidies plus hundreds of millions more in TIF money? Stop with the hard sell, guys!

Hobbs suggested that any TIF numbers should be “stress tested” to make sure the money involved doesn’t get to a point “where it’s perceived to be — or is — too high,” since “otherwise, you could have these unbridled returns, and I don’t think anybody is interested in that.” No, I have no idea how much additional tax money kicked back to a billionaire who’s already getting $750 million in tax money qualifies as “unbridled,” and I’m sure Hobbs doesn’t either, but this appears to be a way of setting up an argument that hey, sure, we’re kicking back taxes on hot dog sales, but not as much as we could have, okay? I’m sticking with the quote that I gave the Sun for the same article: ““The question for me is not whether this is a bad deal for Nevada — it’s how bad of a deal.”

Share this post:

14 comments on “Vegas stadium builders still have no idea how much public money they’re asking for

  1. How could they be suckered into TIF after handing out three quarters of a billion dollars? You’d think that would be a deal breaker for Vegas, not the other way around.

    1. Alex,
      There are some dumb politicians in Las Vegas and the State of Nevada. Adelson and his group could easily pay for the stadium. This is not about that. What this is about is Adelson wanting to severely weaken the Las Vegas Convention & Visitor Authority’s plans to expand the convention center, which is a direct competitor to Adelson’s convention center. From a business standpoint, it’s brilliant on his part. Outside of Steve Wynn, the LVCVA is Adelson’s top adversary and has been for decades. What better way to cripple your competitor than doing this.

      Now in regards to the citizens of Las Vegas and Nevada: there is no way this funding mechanism is going to work. In fact, good luck trying to pass any form of subsidy in this environment. Murders are up by 90%. Violent crime has skyrocketed. It’s gotten so bad the FBI is heading here to see what the problems are. Multi-billion dollar tax incentives have been handed out like the corporate welfare it is (Tesla, Faraday, Switch, Exelon, NV Energy). Squatters are over-running the city, now entrenching on high-end areas. There is a significant shortage in law enforcement personnel. Education is in the dumps (ranking next-to-last). The Chancellor of higher education just got popped forging documents and bypassing the legislature. Yet these greedy billionaires and a NFL franchise owner wants the public to fit the entire bill of an estimated $1.4 billion stadium.

      Neil the one quote that stood out to me in this farce was this: “We build a billion-four project, bring (an NFL) team, it now generates a substantial amount of incremental tax revenue … and so we would take that increment that we created by our investment there,” [Majestic Executive Vice President Craig] Cavileer said in an interview. “Without that increment, you would not be successful in your investment.”… – So in essence, they are not just satisfied with having more than half of the stadium publicly-financed, they want to ensure they recoup their investment through the taxpayer. Of course they would want the excess revenue capped because heaven forbid the public gets a RoI on its investment.

      Out of all the ridiculous funding proposals that has surfaced in Las Vegas (and there have been plenty), this is the most brazen on yet. I thought the Lucky Dragon one was bad; this one dwarfs it. Counting the days when I leave this place.

      1. Why build a casino when you could build a lemonade stand next door….. The stadium becomes a decoy to collect that sweet, sweet TIF

        Like when Malcolm Gladwell said, “Why doesn’t Yale spin off its university division and concentrate on its core money management business?”

  2. I almost hate to have to agree with Neil, here, but a TIF for this Las Vegas dome is over the top. The re-routing of tourist taxes to help pay for the dome is a great idea, however.

    1. No it’s not because we need that money to pay for the severe shortage in public and social services the city is presently experiencing. Jails are overcrowded, crime is out of control, police is understaffed and overworked, schools are overcrowded, etc. It’s starting to turn into a hellhole here.

      1. Which sadly makes it the perfect market for the Raiders regardless of how they finance the stadium.

    2. “The re-routing of tourist taxes to help pay for the dome is a great idea…”

      Nah. Marginal increase in tourism due to a stadium. Dumb to “re-route” existing tax income to pay for it.

    3. Also, it wouldn’t be rerouting existing tax revenue, it would be tacking on an additional tax surcharge. (Albeit a surcharge that the convention center is looking to tack on for its own purposes.)

      1. The City should work out a “fair” deal for everyone.
        What they are buying is not just a stadium, it is a seat at the table of sports respectability.
        They get an NFL team and nothing goes drastically wrong, then a SuperBowl, which opens the door to the BCS, Final Four tournaments, etc.
        Everything they put on at Jerry’s world could be happening in Vegas (except Cowboy games, thankfully).

        Here is what for the life of me I can’t understand from the Anti-public money stadium side.
        If the team puts up half and they City puts up the other half, the City creates a tax to pay for the other half that the City borrows from Goldman-Sachs or whoever.
        The Stadium is owned and operated by a public Stadium Autority.
        So the team sells PSL’s through the Stadium Authority to help pay for their share and get the tax dodge because the PSL’s are sold through the public entity.
        The Team then pays 30 million a year (49ers lease for Levi’s) Lease that also go towards the City’s loan.
        The NFL team keeps game day profits for 10 games 8 regular + 2 home games (plus playoff games).
        The team make the Luxury box revenue for game day.
        The City County make the tax from the revenue earned on teams game day revenue.
        Them the stadium Autority makes all/most of the revenue for other events, perhaps a concessions or parking split with the team.
        In Vegas, I would hope you could at least book the venue 20 more times throughout the year, twice as many dates as the NFL teams are using it.

        Not to mention the Jobs created or the boost in economy from a 1.5 billion dollar construction job.
        Or the the tax revenue on the team merchandise sold by the team.
        Or the City seat tax, luxury tax, etc. on each ticket.

        How do NFL teams make a killing on their half a billion dollar investment and a City (by reports) lose money on a half a billion dollar (tax free) investment?
        I realize in this instance, they were asking for 750 million dollars, but the question still has relevance.
        How does the NFL team make money on their investment, paying rent and only making profits from half the number of events that the Stadium Authority is booking?
        It doesn’t make sense?
        Shouldn’t partnering with an NFL team to co-finance, co-own, co-manage, a stadium be a great investment for both partners?

        Why is one side printing money and the other side says they are losing money, when the losing side is making the majority of the profits on twice as many events and their profits are not taxed?
        I don’t get it?
        It seems in a business partnership, structured this way, both sides should be making money?

        I see the PSL publicly sold benefit, and the advantages for a bank loan for a public entity, makes the public-partnering very attractive to a NFL team, most private financing would ask for collateral from a team for that much money or try to use it to get part of the NFL teams.

        I just don’t see how the Cities don’t come out ahead on these deals, before you even start to factor economic impact, jobs, civic pride, etc.

        It would almost be like a city saying they are losing money on a lottery?
        How the hell do you lose money on that?

        When you look at Vegas, they will attract events, they couldn’t attract before by having a size of venue they don’t currently have and by attracting events that were “Vegas shy” before.
        How much money could the Stadium Authority theoretically be raking in, if the the Stadium was used a 100 dates a year?
        How much other money would that create?
        In addition, The Chargers plan for their stadium is to have it double as an extension to their convention center, if this was possible with the Raiders Stadium, how valuable would that be?

        1. Because the NFL team is getting all the big-money revenues: PSLs, naming rights, season ticket sales, concessions for NFL games. And their only real cost is player salaries, which are paid off before they sell a thing by national TV money.

          It’s extremely unlikely you’re going to get 20 major non-football events a year there, and even then, Bruce Springsteen isn’t going to give you 100% of his ticket revenue, let alone all those other things. If the public and private sides were evenly splitting the revenues, it would be a very different deal, but they’re not. (If they were, I’d expect both sides would be losing money, given the obscene construction cost.)

          Finally, remember that Adelson and Co. aren’t really offering to put up half the cost, even. We don’t know how much the TIF will come to, but it’ll end up reducing the private share to well less than 50%.

  3. I tend to avoid Vegas, but it strikes me that when Vegas succeeds it does so by doing what isn’t done elsewhere.

    Since legalized gambling appears to be spreading all over America, and boxing is dying–the city does need a new act. Putting any money towards NFL football–the most overhyped and least enjoyable spectator sport in America–seems to work against Vegas’s traditional strengths.

    If I were them, I’d stick with the MMA-stuff and the e-Sports gaming, which brings in a lot more money with a lot less outlay.

  4. “We build a billion-four project, bring (an NFL) team, it now generates a substantial amount of incremental tax revenue … and so we would take that increment that we created by our investment there,” [Majestic Executive Vice President Craig] Cavileer

    Am I the only one who finds it absolutely hilarious that the guy who just nonchalantly says “yeah, we’ll just siphon off 100% of the tax revenue from a development project” is named Cavileer, because that sounds pretty darn cavalier to me.

    1. Think about this for a second. $750 million from taxpayers, $300 million from Davis (allegedly), $200 million from the NFL’s G-4 program (I’ll get to that in a bit), and $150 million from billionaire Adelson, Majestic, and possibly billionaires Wynn and the Fertittas. Mind you, Adelson first proposed footing half the bill before Davis came along. Now it’s reduced to $150 million. Like I said earlier, this is more about the LVCVA than anything else.

      Now in regards to that extra $200 million from the NFL? That fund has been exhausted from the Falcons’ stadium. The players have to approve any replenishment of G-4 in the form of a reduction of the salary cap. Is anyone confident they will do that since they just caught the NFL stealing upwards of $120 million? The last time the players trusted the owners to right by them (increasing salaries across the board by instituting a salary cap), the opposite occurred, as salaries were slashed.

  5. What Jay said above about the LVCVC is interesting.

    I don’t know any of the details surrounding the convention centre myself, but I must say it does seem odd that a Casino mogul is willing to invest (ok, invest maybe a third of what they will get in tax kickbacks/breaks overall, but still) in a business that would seem to directly compete with his primary revenue generator.

    If there was another casino in the stadium, maybe. Or video poker terminals instead of interactive concession menus at each seat, maybe. It’s just hard to see how he thinks he will generate a bigger margin at a football stadium than he does letting people put money into machines and get (virtually) nothing out. As a business plan, that’s pretty hard to top.

    Unless Adelson just has a deep and abiding love for professional football (if so, it hasn’t been evident to this point), I can’t think of a reason why he would want a competing attraction coming in. Maybe he believes it’s coming anyway and it’s better to be in than out?

    I’ll stop there before I get into full fledged Godfather quotes… and have to pay somebody a rights fee for using them in “print”.

Comments are closed.