Anatomy Of A Bad Deal: Behind The -$815 Million Deficit On The Oakland Raiders Las Vegas NFL Stadium Project

On Thursday, August 17th at 1 PM PST, the Clark County Las Vegas Stadium Authority will hold another meeting on the Oakland Raiders Las Vegas NFL Stadium Project. The body is overseeing the planning and approvals process toward a new NFL stadium in Sin City both for the Raiders and the University of Nevada, Las Vegas.

But this meeting promises to be a humdinger: a number of document agreements which form the overall stadium lease should have been done, but are outstanding: the joint-use agreement with the University of Nevada Las Vegas, the construction labor agreement, the land-transfer agreement, the financing agreement, and the development agreement, to name five of the 12 items of paperwork, are not done. They all have to be finished by October 1, 2017, or the much-talked-about NFL Season 2020 opening deadline is all but toast.

On top of that, the much talked about Bank of America Sports Financing Team is set to make a presentation.

Just when it looked like the road to a Las Vegas Stadium should have been downhill for the Oakland Raiders, it’s uphill, and the pitch of the road is only getting steeper. Why? Well, let’s see where we are first, and then work backward to see how we got here.

Oakland Raiders Las Vegas NFL Stadium Spreadsheet by Zennie Abraham by Zennie Abraham on Scribd

Right now, the overall project cost is estimated by this blogger to be $2.915 bilion, and the total funding sources for it only ad up to $2.1 billion – a $815 million deficit. How did this happen? Because, new considerations, ones where the cost was not known for the most part, were and continue to be added, thus continously forcing the Raiders / UNLV Stadium price tag upward. When the project was first presented just over a year ago, this wasn’t the case.

At the Southern Nevada Tourism and Infrastructure Committee Meetings (SNTIC) of 2016, the original project team of Las Vegas Sands, Majestic Realty, and The Oakland Raiders were looking at a total cost of $1.4 billion – or something like $1.519 billion below what the total Oakland Raiders Las Vegas NFL Stadium cost is right now, and when the $370 million relocation fee is included.

Looking at the SNTIC report for May 2016, the stadium had just hard and soft cost, and then there was the practice facility. But the SNTIC report had this:

Developer Assumes Construction and Operating Risk:

1) Developer assumes the risk in the event of construction cost overages
2) Land acquisition is not currently reflected in the model; this is likely to increase the developer cost.
3) There are other potential cost elements (i.e., team relocation fee) that are not included; developer assumes the risk for the additional costs not otherwise noted.

Considerations Outside the Model

1) Third parties, including the NFL, event promoters and concessionaires, receive revenue from stadium activities but are not fully analyzed in the model
1) Potential implications for UNLV not fully reflected in the model
2) Ancillary infrastructure costs on state and local government not reflected in the mode

So, while the project was being developed via the SNTIC, additional cost issues that came up were literally brushed aside after Las Vegas Sands officials said they would pay for them. (Adelson once called the price tag a “rounding error” compared to his vast wealth). That most notably included off-site transportation infrastructure: upgrades in highways and other related arteries that were eventually called for by the State of Nevada Department of Transportation (NDOT), like the off-site transportation infrastructure costs.

Indeed, the the off-site transportation costs sat there like a bomb waiting to go off, which happened on October 14th 2016, when the Nevada Legislature got a hold of the new NDOT report that was released on October 4th but hidden from public view until it was leaked to the Las Vegas Review Journal. That was when the $900 million cost for off-site transportation infrastructure upgrades scared everyone. Everyone accept Sheldon Adelson, who pledged to help pay for the work that needed to be done. (And got Majestic to step away from the project on September 13th, 2016.)

That was fine until in February of 2016, Adelson, feeling like Marc Badain and Mark Davis were trying to double-cross him, and upset over the Raiders reportedly bad treatment of UNLV, pulled out of the project – and taking the millions of needed investment dollars with him.

After getting over the shock of Sheldon Adelson departing, Raiders brass focused on getting Bank of America to “replace” Adelson – but one big difference: Bank of America wants its line of credit back, and Adelson didn’t really care. He called his investment a “gift”.

So, suddenly, the Raiders found themselves having to pay for the highway costs Sheldon Adelson was covering. But, then there was another cost that did not rear its head until this year: the parking lot costs based on Clark County law. That says there has to be 1 parking space for every four stadium seats in the facility – that comes to 16,250 spaces. But guess what? The stadium takes up so much of the 70 acres available that only enough parking is available for 2,450 cars next to the stadium. So, the Raiders have to go find 14,000 more spaces – which means more land aquired.

Ever took a look at land costs? On the Strip, near the stadium, a parcel of land was purchased for $2.9 million per acre – thus setting the tone for the future. That translates to $195 million for the whole parking part of the problem (sqft of one parking space, times total spaces, divided by one acre in sqft, times cost of land per acres, which is $2.9 million per acre).

So, in my spreadsheet, I only added the $195 million, when the cost to install light standards and sidewalks will certainly push the price higher, I just don’t yet know how much and when.

We also do not know what upgrades to the project the Clark County Water Reclamation District will ask for? The site is in the middle of what was once designated as a flood risk area; what mitigation measures are being taken?

And what will the FAA ask for?

So, that should paint the proper picture of an NFL stadium project where its going to a place that’s so under-developed it takes about $1 billion to bring it up to where the freeways and roads around the Oakland Coliseum are today.

This was not something the Raiders really anticipated, and it’s hard to see how they can realistically afford it.

Stay tuned.

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