Raiders’ lease blocks Nevada from levying ticket taxes, we’ve heard this song before

The Washington Times had a big article yesterday on the Oakland Raiders‘ lease for their new stadium in Las Vegas, and how it contains a provision that would prevent the state from trying to recoup its $750 million in stadium costs by levying new taxes on the team down the road:

An unusual provision in the Raiders agreement with the state allows the team, currently playing its final seasons in Oakland, to break the lease and look for another home if Nevada attempts to impose new taxes over the next three decades on the team, stadium, fans or players. That includes visiting teams and fans as well.

The provision applies to any “targeted tax” aimed at collecting revenue specifically from players or fans. It would not protect the team or its fans from any new taxes applied generally on businesses or individuals across Nevada, however.

I’m quote in this article, calling the lease clause “adding insult to injury” since it “makes sure Nevada taxpayers never see a penny from the stadium.” Which is true, but what the Times left out was that I mentioned this isn’t unheard of — other teams have leases that prohibit local governments from levying team-specific taxes as well. This is probably because I didn’t actually cite any examples to the Times reporter — I was busy and couldn’t look any up — but a quick search through the FoS archives reveals two examples right off the bat:

  • The Cincinnati Bengals and Reds owners have lease clauses that allow them to block ticket tax surcharges during the course of their leases, and did so in 2010.
  • The owners of Minnesota United asked for limits on that state’s ability to impose future taxes on the team, though I’m having a hard time confirming whether that provision made it into the final lease agreement. (The world really needs a database of stadium leases. Get right on that, world, okay?)

I realize this isn’t overwhelming evidence, but it is a sign that the Raiders clause isn’t entirely unprecedented, even if the Times reports that Temple economist Michael Leeds said, in the paper’s words, that this provision “goes beyond anything he has ever seen.” And it makes sense that team owners would try to forestall ticket surcharges: As we’ve covered before, targeted ticket taxes tend to mostly come out of team owners’ pockets because, unlike other taxes, they reduce the amount of money an owner can get away with charging for tickets. So if you sign a 30-year lease and then the state turns around and says, “Hey, $10 surcharge on all your tickets, we get the money!” and you can’t get out of the lease, that’s a huge chunk of change that is suddenly going out of your pocket and into the public’s.

Which, of course, is exactly why it’s so disappointing that the Raiders lease contains this clause — with the state already on the hook for $750 million, a ticket tax would have been one of the only ways for taxpayers to get some of that money back. But the Raiders had smart contract lawyers, so that’s not going to be happening. Evidence really is accumulating that Mark Davis may be smarter than he looks.

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 where to buy lorazepam online 0 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.