WASHINGTON – Preliminary plans to relocate the National Football League's Oakland Raiders to Las Vegas call for the creation of a Clark County, Nev. Stadium Authority that would issue up to $750 million of bonds to help finance a new $1.4 billion stadium under a public-private partnership agreement.
The P3 financing package, which is still being developed, according to Guy Hobbs, managing director of Las Vegas-based financial advisory firm Hobbs, Ong & Associates, Inc., an advisor on the project, has drawn fans and critics.
The fans include Las Vegas Mayor Carolyn Goodman. "This has been such a long time coming," she told local reporters. "We have been dreaming of this for 17 hard years because this city is ready."
But Nevada reporter and television host Jon Ralston was less enthused. "I hope they move to Las Vegas. But not at any cost, and especially not if the public is being asked to kick in $750 million of the $1.4 billion price tag," he said.
The proposed 65,000-seat domed stadium in Las Vegas would be financed with up to $750 million of bonds, backed by taxes, as well as $650 million in private funds, according to documents presented to local officials.
Speaking before the Southern Nevada Tourism Infrastructure Committee on Thursday, Raiders team owner Mark Davis said the bonds would be generated by hotel and other tourism taxes. As a result, stadium backers claim the bonds would be paid by tourists and not local residents.
Davis has pledged $500 million toward financing the stadium. Of that amount, $200 million would come in the form of a loan from the NFL.
The remaining $150 million in private money would come from casino developer Las Vegas Sands Corp. (Sands) and Los Angeles-based property developer Majestic Realty Co. (Majestic), the equity partners who would serve as the developers and operators of the Las Vegas stadium, according to documents from the committee.
A workshop for the project's equity investors was scheduled to be held on Tuesday to hammer out the details of the $650 million in private funding, according to Hobbs.
The stadium authority, which would be responsible for financing, would have to be approved by the Nevada state legislature. Plans call for the authority to have five members -- two appointed by Sands/Majestic, two appointed by Nevada Gov. Brian Sandoval, and one appointed by the Clark County Commission, according to documents.
Similar to Las Vegas' existing Convention & Visitors Authority, the stadium authority would have the power to issue bonds and collect revenue supporting debt through Clark County, Hobbs said. "It's analogous to the convention authority, which receives certain revenues," Hobbs said. "It's up to the county if they attach them to general obligation bonds."
Hobbs said the construction schedule would drive the bond issuances, but added it would "probably happen in two tranches."
Hobbs said it is not yet clear how many bonds would be issued to finance the stadium, but that debt service would be roughly $45 million per year without consideration given to coverage and capitalized interest.
The bond issuances would occur over an estimated 30-36 month design-build period, he said. Design-build projects allow the designer and builder to work simultaneously. He added that numbers given so far are "cursory" with respect to the size of the project.
The proposal estimated the public portion would be covered in $50 million annual debt service payments over the next three decades raised from an increased lodging tax, which is currently at 12%.
A proposed tax increment district would allow for the collection of state and county tax revenues generated by the stadium, which the Clark County Stadium Authority would then allocate to Sands/Majestic.
The developer would then use those funds to secure project debt, repay equity and debt, pay for operating and marketing costs, and pay for capital expenses, according to project plans.
A handout presented to committee members, claimed that the project would bring in $2.7 billion in gross tax revenue over 30 years.
It would generate, among other things, an estimated: $24.4 million in county and state sales tax revenue, $20.9 million of which would come from out-of-stadium sources; $8.4 million of county and state hotel tax revenue; $4.6 million of gaming tax revenue; $3 million in state modified business tax revenue; and $1.5 million of county and state car rental tax revenue.
It also estimated the project would provide the county with: $530 million in net new direct spending; $335 million in net new earnings, $870 million in net new total output; as well as the creation of nearly 8,000 new jobs.
The 11-member Southern Nevada Tourism Infrastructure Committee that heard the proposal last week includes state and local government officials, gaming and casino leaders and others. The group is responsible for reviewing the plans and providing recommendations to Sandoval and the state legislature.
The public financing portion, including the increased hotel tax, would have to be approved by the Nevada state legislature. Ultimately, 24 of the NFL's 32 team owners would also have to approve the move.
Thursday's presentation, which was held at the University of Nevada-Las Vegas, was made prior to the opening night of the NFL's annual player draft in Chicago.
It also follows proposals made by a House lawmaker and President Obama to halt tax-exempt financings for professional sports stadiums.
Rep. Steve Russell, R-Okla., on March 22, introduced a bill in the House that would prohibit the use of tax-exempt bonds to build or subsidize professional sports stadiums and for-profit entertainment arenas.
The No Tax Subsidies for Stadiums Act (H.R. 4838) would prevent sports franchises from seeking federal taxpayer money for stadium construction. It was referred to the House Ways and Means Committee. Russell's bill defines a professional entertainment facility as a location that serves as either a stadium or arena for professional sports games or training and seats more than 100 people for at least five days of the year.
President Obama, in his fiscal 2016 and 2017 budget requests, also proposed prohibiting tax-exempt bonds to be used for financing private sports facilities by eliminating the private payment test for them. As a result, bonds would be taxable private-activity bonds if more than 10% of the facility was used by private parties. The Office of Management and Budget has estimated that repealing tax-exempt bond financing stadiums would lower the budget deficit by $542 million over the next decade.
Professional sports franchises often seek federal, tax-free funding to construct new stadiums, but critics say using tax-exempt bonds are an ineffective means of spending public funds. Supporters stress the money the stadiums and teams can generate for cities.
Since 2006, 263 tax-exempt bond issues totaling $16.9 billion have been sold to finance stadiums and sports arenas, according to figures compiled in March by Thomson Reuters.
"I would expect there would be concerns with regard to the use of public funding," Hobbs said. "You get a level of scrutiny every time you use public dollars."
The Las Vegas proposal also comes roughly a month after the San Diego Chargers released their own proposal for a $1.8 billion joint use stadium-convention center in downtown San Diego. That plan includes the issuance of $1.15 billion of tax-exempt bonds backed by a hike in the city's hotel tax. It needs 66,477 signatures from San Diego voters by mid-June to make it onto the city's November ballot.
The Chargers and Raiders had been involved in plans to share a proposed $1.7 billon stadium in Carson, Calif, but they were put on hold this year. Like the Chargers, the Raiders play in a dated home stadium in need of renovation.
The former St. Louis Rams announced their relocation to Los Angeles for the upcoming season, where they will play home games at Los Angeles Memorial Coliseum until an estimated $2.6 billion stadium is completed in nearby Inglewood, prior to 2019.
Should the Chargers successfully complete a new stadium deal in San Diego and the Raiders' plans fall through in Las Vegas, the Raiders could opt to share the Inglewood stadium with the Rams.
In February, the Raiders signed a one-year lease to stay at the Oakland-Alameda County Coliseum for the 2016 season. That stadium, opened in 1966, is also home to Major League Baseball's Oakland Athletics.
The new Las Vegas stadium would be able to host up to ten Raiders home games per season, as well as 36 concerts and other sporting events, according to the preliminary plans. It would also serve as the home stadium for the University of Nevada-Las Vegas football team.
Team officials estimated an annual stadium attendance of 1.8 million and net new overnight attendance in the county would total roughly 845,000.
"The Raiders would like to thank the Southern Nevada Tourism Infrastructure Committee and [Las Vegas] Mayor [Carolyn] Goodman for their time today as we continue to explore options for a permanent stadium," team officials said in a statement last Thursday. "We appreciate the support and passion of Raiders fans everywhere."
Several local officials expressed support for the Raiders move, which comes after several previous failed attempts to bring a professional football team to Las Vegas.
Representatives from the Nevada Governor's Office of Economic Development could not be reached for comment this week.
"It's unquestionably an exciting opportunity for Las Vegas," Hobbs said.
A construction timeline was not set, but it is expected the Raiders would play at UNLV's Sam Boyd Stadium while the proposed stadium is being built. The new stadium would be built on a 42-acre site owned by the University of Nevada-Las Vegas.
Las Vegas is also currently exploring a $1.4 billion plan to expand its convention center, which would also require funding from an increased hotel room tax rate.