Nevada officials haggling over Raiders stadium are the worst hagglers in Haggletown

Last week I picked on Nevada officials for focusing on relative trivialities in Oakland Raiders stadium negotiations instead of the bigger question of whether spending $950 million in tax money on an NFL stadium makes a damn bit of sense. But I didn’t realize just how trivial they were thinking — check out this latest report from the Las Vegas Review-Journal (a fully owned subsidiary of would-be stadium builder Sheldon Adelson):

One of the financing options before the committee includes that 39 percent cap and would set the developers’ “preferred return” at 10 percent on up to $650 million.

That option also calls for a 50-50 split of the cash flow after the 10 percent return between the developers and a capital improvement fund for the stadium project. It would not allow operating shortfalls or overruns in construction costs to be added to the preferred return calculation.

The 39% cap I discussed last week: Basically it would cut the public’s costs if the stadium came in under budget, but that never happens anyway, so it’s not worth worrying about. Getting taxpayers a share of the stadium cash flow sounds like a great idea — we’re spending a lot of the money, we should get some of the proceeds! — until you think about the details of how this would work: The first $65 million a year in profit would go to the developers (that’s a 10% return on $650 million), after which the public would get half of the remaining profits — but only to use on future stadium improvements. Hands up, anyone who thinks that 1) an NFL stadium is really going to throw off more than $65 million a year in profits after paying off construction costs, and 2) if it somehow does, the owners of the Raiders and Adelson’s casino company won’t find some way of hiding the money in one of their other pockets to avoid sharing any of it with the public?

So far Adelson and Raiders owner Mark Davis have rejected both these proposals, but to be honest, Nevada lawmakers shouldn’t sweat over either of them, because they’re next to worthless for the public. If public officials want to get a slice of money set aside for future stadium improvements, they should just put it in the damn lease that Adelson and Davis have to pay for future stadium improvements since they’ll be running the place, and not worry about slicing off slivers of future mythical profits. And if they’re concerned about the cost of construction, don’t worry about what happens if it comes in too low — rather, start by not opening your bidding at the $950 million that was the opening ask of the guys across the table. Especially when the starting bid of the city you’re competing with is zero.

Sure, “That sounds too rich for our blood, would you take, say, $250 million?” is going to get a huffy reaction from Davis and Adelson, but then, asking for anything is getting a huffy reaction from those guys, so might as well ask for something that’s actually worthwhile. As usual, elected officials are proving that they’re really terrible at this stuff.

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13 comments on “Nevada officials haggling over Raiders stadium are the worst hagglers in Haggletown

  1. I wanted to comment, but you’ve pretty much captured it. Nothing more to say on this topic. Only recourse is battling matching movie scenes.

    Star Wars #1: At the Mos Eisley space port….

    Adelson: “This isn’t the financing we are looking for.”
    Committee: “This isn’t the financing they are looking for. Okay. Where do we sign.”

    Star Wars #2: In Cloud City…

    Committee: “This deal’s getting worse all the time!”

  2. The SNTIC has unanimously approved the proposal. They are sending this taxpayer rip off to the Governor and state legislature. If they approve the plan as is, whomever votes for it should be immediately recalled from public office.

    1. Agreed. The lawmakers up for re-election have already gotten the memo: vote for this and goodbye political career. The hilarity in this is the moment that Sands Executive started showing his arrogance the negotiations would have ended post-haste.

      I was consulting a client on the importance his next business venture is to the State of Nevada. The research I conducted was incredibly disappointed. The state is at the very bottom in every major economic and educational metric. Yet instead of addressing the problem, its politicians are getting punked into wasting over $1 billion on a facility in which the public not only doesn’t receives any direct financial benefit, but will be on the hook for the difference; because we all know there is no way that building will generate nearly enough money to pay off a $50-$60 million yearly nut. What these dumb uneducated non-business people don’t understand is there are 3 greedy mouths to feed, mouths that will never ever take a loss. In order to be “competitive” in today’s NFL, the team must generate between $65-$75 million in revenue from the stadium in ticket sales. That’s one mouth. Then you have another mouth; the developer/partner. It wants its cut in the $30-$40 million range. Then you have the fat kid at the table, who wants the biggest cut of all. Tack on another 10-15% for a CIF (Capital Improvement Fund), and we’re looking at roughly $200 million that stadium must produce before it even begins paying off the bonds. Remember, these mouths will never go hungry.

      As for the non-cap on the public’s contribution: -100000 says the project goes over budget by at least $500 million. This boondoggle will end up costing $2.5 billion to construct. So the lack of a cap means the $750 million will be close to $1 billion, not including the TIF since the private investors need to make a profit.

      You know what I’m going to do: I’m going to go to the bank and ask them not to charge interest on my business loan since they are not suppose to enjoy a profit; rather, be satisfied in the fact that they assisted a private enterprise in starting a business. Let’s see how far that conversation goes.

    2. If there’s one thing I’ve learned it’s that they never get recalled, ever.

      At $750M and no chance of repercussions, I think this is over.

      1. Recalled? This wasn’t a legislative body. It was just a task force that agreed to send the deal to the legislature for a vote.

      2. Not that this absolutely won’t pass the legislature, but you can’t tell that from what these guys did.

  3. All pols are either a) morons when it comes to matters of business, thus eminently fleecable, or b) available for purchase

    I love the smell of Public Stadium Cash in the morning!

  4. Note that hardly anyone on the SNTIC is actually a member of the state legislature or county commission that will have eventual say over this. A lot of them aren’t even elected at all. (Lots of casino execs.)

  5. As someone who actively wants the Raiders gone from Oakland, and as someone who won’t be affected by Nevada being stupid and giving the team a huge public subsidy, I’m rooting for this to go through. There’s no fiscal way it’s a good idea, but oh well. Sorry people of Nevada, but in this case and for selfish reasons, I hope you get screwed.

  6. Too many people here are in love with the idea of a football team. There’s only a few pols on the SNTIC, and one is the LV Mayor who had an election fight on her hands for an MLS stadium. And her husband suggesting building a football stadium just because and seeing if we could then, after construction, see if we could get the NFL to host the big game here every single continuous year. Never mind that the NFL is the most casino-averse league in pro sports.

    I don’t get it, but I also am not a fan; while I am an MLB/NHL/NBA fan to varying degrees. So it’s probably personal taste. Everyone else around me really only gets fired up for football. (Well, that and NASCAR.) Many of them will give away everything for football.

    This giveaway is absolutely insulting timing, coming after MGM saw the state’s attitude for taxes and corporate welfare and decided to build an indoor arena on it’s own. But then MGM hasn’t quite donated so much to politicians in a quest to make the state it’s servant. Likewise, Davis would have had a harder time negotiating if his partner was anything less than the man who has been funding one-half of the state political systems for years (and now owns a significant stake in the press.)

    If they want to get this done before Election Day, then we can get started early voting the supporters out.

    1. That would be a good start. Let those in Carson City know this stadium proposal is asking for too much and that Nevada has greater priorities than an NFL stadium. This amounts to a blank check for those who want to build a home for the Raiders in Las Vegas.

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