Ban on tax-exempt bonds would add $100m-plus to Nevada’s costs for Raiders stadium

That provision in the U.S. house tax bill to bar use of federally tax-exempt bonds for pro sports facilities is already starting to freak out proponents of the Oakland Raiders‘ planned $1.9 million stadium in Las Vegas, which is set to use $750 million in public bonding:

“We stress-tested the model for things like higher interest rates,” [Nevada economic analyst Jeremy] Aguero said. “We understand the potential that comes with either legislative risk, or interest-rate risk or development risk, for that matter. I wish I could tell you it’s going to cost X amount of dollars in order to make it work but we need to go through the exercise of making sure we understand all the components of that legislation because that’s not the only one that will affect municipal finance.”

Okay, sure, figuring out how exactly this bill’s passage would affect the Raiders stadium costs is complicated. Figuring out roughly how much it would affect it, though, is dirt easy: Tax-free bonds typically allow an interest rate 1-1.5% below taxable bonds. So adding that much to the financing costs on the state’s $750 million would mean an extra $7.5-11.25 million a year, which over 30 years, converted into present value … I get between $115 million and $173 million worth of added interest costs.

So that’s a hefty chunk of change, and the big question would be who would pay it: The state or Raiders owner Mark Davis? That all depends on what it says in the team’s stadium lease — and in all likelihood it just says “we’ll use tax-exempt bonds,” meaning the whole thing would need to be renegotiated to settle who’d be on the hook for the extra cash. That would certainly be interesting.

(Note: It’s also important to remember, as I almost didn’t while writing this headline, that this would not be an increased cost of the stadium — it would just be shifting $115 million to $173 million worth of costs from the federal treasury, which would have been subsidizing it with tax exemptions, back to the state. It would make a hidden subsidy less hidden, in other words, but somebody’s paying those costs regardless.)

Friday roundup: Raiders talk lease extension, Rams attendance woes may set record, and more!

Here’s what you missed this week, or rather what I missed, or rather what I saw at the time but left till Friday because there are only so many hours in the week, man:

Las Vegas Raiders to have fans park in Idaho, and other Friday stadium news

I’ve been busy this morning working on further research into Jeffrey Loria’s Miami Marlins windfall for an article set to run at Vice Sports on Monday, so rather than let the day slip away entirely, let’s do another round of news briefs:

Las Vegas study estimates Raiders stadium road costs to be “we’ll figure that out later”

Hey, remember when it was revealed that Las Vegas had yet to study the cost of transportation improvements needed to support a new Raiders stadium, and I noted that that was a terrible idea, given how “build first, study transportation later” had turned out in Cobb County? Well, now we have our first Las Vegas Raiders traffic study, and its estimated cost projection is “who the hell knows?”

The study lists close to 40 on-site and off-site transportation improvement measures that include widening Polaris Avenue, constructing multiple access roads to the stadium and creating traffic signal timing plans for games and other events.

But the county currently has no estimates on costs or timelines to complete the suggested improvements, most of which need to be ready by the 2020 NFL season.

“All of that is going to be determined later,” county spokesman Erik Pappa said. “A traffic study is only one part of the process, and it will have to be reviewed and accepted. Each proposed feature carries a cost and perhaps more traffic features will be sought by staff and the County Commission.”

Okay, then! Thought somebody might have wanted to know the cost before approving the stadium, or at least before the stadium is actually open and Clark County suddenly is faced with a bunch of unanticipated costs, but I guess that’s not how they roll in Vegas.

Also, how about the Las Vegas Review-Journal, actually reporting on potentially negative aspects of the Raiders stadium? Guess Sheldon Adelson doesn’t mind actually reporting on stadium cost news now that it’s no longer his stadium.

Las Vegas approves Raiders lease that will pay taxpayers $0 in rent for next 30 years

The Las Vegas Stadium Authority unanimously approved a lease with the Oakland Raiders yesterday, and it’s online and everything so we can look at it! Good news first:

  • The Raiders owners have to pay all maintenance and operating costs, as well as putting $2.5 million a year into a Stadium Authority Capital Projects Fund that they can then spend on themselves.
  • There doesn’t appear to be any kind of “state of the art” clause that would allow the team to break its lease if the county doesn’t provide stadium upgrades.

And the not-so-good news:

  • In exchange for its $750 million in construction subsidies, the public gets absolutely zero revenues from anything: ticket sales, naming rights, concessions, ad boards, you name it. The Raiders’ rumored $1 a year rent turns out not to be true; they will actually pay $0 a year.
  • The stadium, despite all of its revenues for the next 30 years being controlled by its private tenant, will pay no property taxes.

This isn’t quite as bad a lease as I’d feared — a state-of-the-art clause would have been a real disaster, since it would have allowed the Raiders owners to demand future upgrades in a decade or two under threat of moving again — but it’s still not very good for taxpayers. It was apparently finalized in a hurry because of the team’s threat to stay in Oakland for another year if a lease wasn’t worked out this week; Mark Davis may be bad at a lot of things, but he seems to have this whole gamesmanship thing worked out pretty well.

Raiders threaten to delay own stadium in order to get lease concessions from Nevada

It’s two-minute warning time for the Las Vegas Raiders stadium lease, according to Raiders execs:

Raiders President Marc Badain on Thursday said the lease agreement is on the agenda of the NFL league owners’ meetings scheduled to begin later this month. If one is not presented, there is a “distinct possibility” that team’s move to Sin City could be pushed until the 2021 season, Badain said.

“In order to approve a lease, you need full membership, and the league has four meetings a year: one in March, one in May, one in October and one in December,” Badain said after a public meeting of the Las Vegas Stadium Authority board. “So, if you miss the May deadline, you push to October, we would lose a year, and everybody wants to get this project going everybody wants to get these guys to work. So we didn’t want to miss that deadline.”

This is clearly meant to pressure the Nevada Stadium Authority into approving all their lease demands like only paying $1 a year in rent, out of fear the team would otherwise stay in Oakland for another year. Though really, you’d think it’d be the Raiders management that would be feeling pressure, given that they’re facing possible eviction from the Oakland Coliseum in 2019, and presumably wouldn’t want to have to go play in the street for a year. One wouldn’t think that too hard, though, because stadium leverage seldom has to make sense to work.

Public cost of Las Vegas Raiders stadium could rise, thanks to transportation projects

Okay, one more quick one: The bills are starting to come in for the Raiders stadium project in Las Vegas, and they could end up adding to the $750 million in public subsidies the stadium is getting for construction costs. First up: $200 million to rebuild a highway interchange near the stadium site, to be financed with state bonds and repaid with gas taxes.

This highway project has been in the works for a while, so you can’t really say that it’s the result of the stadium project, though the stadium will certainly benefit from it. But there could be more to come: Clark County still needs to study transportation, parking, utility, and other needs, and given that construction is set to be on a tight 30-month timetable — “of the last four domed NFL stadiums built, none have been completed within 30 months,” notes the Las Vegas Review-Journal — one has to be concerned that the studies will be rushed, or even put off until after construction has started, as we saw happen with Cobb County’s Atlanta Braves stadium, to ill effect. This looked like a bad idea at the time the state voted to approve the stadium before doing transportation studies, and it’s not looking any better after the fact.

Raiders buy stadium land, spark imaginary increase in value of surrounding property

Oakland/Las Vegas Raiders owner Mark Davis has closed on the purchase of 62 acres of Las Vegas land, spending $77.5 million for property on which to put a new football stadium, plus a bunch of giant parking lots where Raiders fans will presumably want to tailgate briefly before dying in the desert heat. And boy, are local property owners excited!

As of Monday, the Review-Journal reported the property’s valuation at $40 million, but it was sold for $77.5 million, nearly doubling its price.  The overnight spike is expected to bring the surrounding property values up along with it, and this is before any dirt is ever turned.

Okay, really it’s just Las Vegas Now (the website of the local CBS affiliate) that’s excited, since they don’t actually quote any property owners as saying that they expect their property values to go up as well. As well they shouldn’t, since everyone is expected to drive to the game and park in those parking lots (or maybe take the monorail, if it’s extended to Mandalay Bay, and then walk across a highway to get to the stadium), so it’s not like there’ll be a ton of football fans eager for other places to eat and shop nearby — and even if there are, it’ll only be for eight days a year, so, really, no, don’t count on a ton of new development surrounding the stadium.

Anyway, here’s what the future home of the Las Vegas Raiders looks like today:

I can’t find any coverage of why this plot of land remains vacant when everything around it has been built on, beyond a mention that the banks that sold it to Davis foreclosed on it back in 2008. Any Vegas natives with a sense of local history, please speak up!

Nevada stadium authority chair: Raiders paying no rent in exchange for $750m sounds about right

Hey, remember how Oakland Raiders owner Mark Davis proposed paying $1 a year rent to the state of Nevada in exchange for $750 million in stadium subsidies, and we all thought, “Okay, sure he’s going to ask for that, but there’s no reason the state stadium authority needs to take him seriously”? Well, the stadium authority board chair now says $1 a year rent sounds just fine to him:

“It’s based on the fact that the Raiders are going to be investing up to $1.15 billion and certainly taking the risk for any overruns,” board chairman Steve Hill said after the meeting. “So, in order to make that agreement make financial sense, the revenue from the stadium needed to flow to those investors.”

Yes, Davis and his private investors are putting up a lot of money. You know who else is putting up a lot of money? The people of Nevada. And where Davis’s side will have lots of revenue streams like all of the naming rights and ad sales from the stadium to help pay off their share, the state will only have whatever new tax money flows from tourists who weren’t going to go to Las Vegas just because it’s Las Vegas, but now will because it’s Las Vegas with the Raiders, about which sports economist Roger Noll has already said don’t hold your breath. But hey, the main concern of state officials is to cut deals to ensure the profitability of private corporations, right? I’m pretty sure I read that somewhere.

It’s up to the stadium authority to determine and sign the lease, with no further input from the state legislature, so Nevada taxpayers are probably doomed. One hopes that at least they’ll manage to get an ironclad non-relocation clause without any “state of the art” loopholes, but with bright lights like Hill in charge, one shouldn’t hope too hard. Too bad Las Vegas doesn’t have anyone living there who has experience negotiating exactly these sorts of clauses and could be brought on to consult on this.

No, USA Today, NFL teams aren’t moving because of revenue disparities, you got snookered

An exec for the Cincinnati Bengals said a thing! A USA Today reporter believed him! Let’s investigate whether any of it makes sense.

First, the thing:

The revenue disparity between teams is “the largest it’s ever been in NFL history,” [Bengals vice president Troy] Blackburn told USA TODAY Sports. Even though teams equally share the revenues of NFL television contracts and a portion of ticket sales, they don’t share other local stadium revenues with each other, leading to the rising gap…

“Right now, you’ve got many of the small markets paying over 60-plus percent of their revenues on players, and many of the large markets are paying 40 percent of revenue on players,” said Blackburn, who previously was the team’s director of stadium development and is the son-in-law of Bengals owner Mike Brown. “Something that could be done that narrowed that gap would be helpful, and it would make it easier for the small-market teams to stay where they are and not have to explore relocation.”

USA Today’s took that and spun it into an article claiming that the reason the St. Louis Rams, San Diego Chargers, and Oakland Raiders have all moved in the last year is because of these rising disparities between small- and large-market NFL teams, and more (unspecified, but presumably including the Bengals) teams could relocate if nothing is done about it.

Now, this is an odd premise to begin with, seeing as that it’s well known why these three teams moved now: Rams owner Stan Kroenke finally pulled the trigger on calling dibs on the long-vacant Los Angeles market, then the Chargers and Raiders owners rushed to get in on it too lest their only leverage on their current cities disappear, then the Chargers agreed to move in with the Rams because they couldn’t get a big-ass new stadium subsidy in San Diego while the Raiders got a big-ass stadium subsidy from Las Vegas, the end. But let’s set aside everything that our eyes tell us and see if the notion that NFL revenues are unsustainably unequal is supported by the data.

Here’s the latest Forbes team value and revenue figureshttps://www.forbes.com/nfl-valuations/list/#tab:overall. If you take a look at the “Revenue” column (we want gross revenues, not profits, which is what the “Operating Income” column shows), you’ll see that the Dallas Cowboys are crazy outliers at $700 million a year, while the rest of the league sits between $523 million and $301 million a year, meaning the top non-Dallas team earned 74% more than the lowest-revenue team.

If we go back to, say, 2011, the Cowboys are still outliers at $406 million, and the spread for the rest of the NFL is $352 million to $217 million, for a 62% disparity. So the distance between the haves and have-nots is increasing, yes, but note hugely. (You’ll also notice that every team in the league currently turns at least a $26 million profit, so while small-market team owners may be sad that they don’t own the New England Patriots, they can still be happy that they own an NFL team and not pretty much anything else.)

Now, let’s take a look at other sports. For baseball, lopping off the New York Yankees as the Cowboys analogue, we get a $462 million to $205 million revenue spread — a whopping 125%. For the NBA, taking out the New York Knicks, it’s $333 million to $140 million, 137%. For the NHL, omitting the New York Rangers, it’s $202 million to $99 million, 104%.

So while you can quibble with the Forbes numbers (or my methodology), it’s pretty clear that NFL revenue disparities aren’t any worse than those of other leagues that aren’t seeing massive team defections. Which is as to be expected, since the NFL has the strongest revenue-sharing program of any major sports league in North America, in the form of the national TV contract system put together by Pete Rozelle way back in the 1960s. In the NFL, owners get whopping checks just by virtue of owning a team — the only way to get ahead of your competitors isn’t to be in a bigger city with the chance for big cable contracts (the reason why all those New York teams sit atop the revenue charts for other leagues), but to get a more lucrative stadium deal. Which predicts that you’ll see more city-hopping in search of those, which is precisely what’s been happening.

So now that we’ve established that USA Today doesn’t have any fact-checkers on staff, what’s Blackburn’s angle? Is he just feeling whiny that the Bengals play in Cincinnati in a stadium that was a gift from taxpayers 17 whole years ago? Or does he have a specific play in mind:

“If the league is serious about franchise stability, maybe it should consider a new G-3 styled program that would help keep teams in small markets,” Blackburn said. “If it did it once, it can certainly do it again, if it truly cares about the issue.”

Ah, now we’re talking — the Bengals owners are upset that big-market teams are getting league grant money (or were, since both the G-3 fund and its successor G-4 are now depleted), and they’re not. So this whole exercise turns out to have been one NFL owner using the pages of USA Today to convince his fellow NFL owners to give him some of their money, because c’mon guys, you have so much of it!

Of course, the original G-3 program was actually limited to teams in the six biggest markets, in order to provide a check against teams moving to smaller cities in search of those sweet stadium deals mentioned above — with #6 included specifically because Patriots owner Robert Kraft played in the 6th-biggest market, and was threatening to move to Hartford at the time, and was the chair of the committee that designed G-3. So, pretty much the exact opposite of what Blackburn says it was. Oh, fact-checking.