On June 23rd, the Southern Nevada Tourism and Infrastructure Committee (SNTIC) was presented with a document (this one in the link here and at the bottom of this post) that, if passed, would have lead to the recommendation to the Governor of Nevada and the State Legislature’s Infrastructure Committee of a stadium authority that would be the most powerful in America, and one that could have placed a possible $750 million bond debt default problem directly on the general fund of Clark County.
If you have doubt that this was the case, and still could be, read this language from the proposed stadium authority document and at Section 15, subparagraph (c):
c) The board of directors of the stadium authority determines that the proceeds of the taxes imposed by subsection 2 of section 10 of this act are sufficient to establish a debt service coverage ratio of at least X.X, to defray in whole or in part the cost to acquire, construct, lease, improve, equip, operate and maintain a large events center, the county in which the district is located, acting by and through the stadium authority, shall issue special obligations of the county in an amount not to exceed $XXXX payable solely from and secured solely by all or any portion of the proceeds of the taxes imposed by subsection 2 of section 10 of this act. The securities authorized by this subsection must be issued pursuant to the Local Government Securities Law.
Specifically, that part of the stadium authority creation document calls for Clark County to issue the NFL stadium bonds on behalf of the stadium authority. The bottom line is this: should the hotel tax, or what is called transient lodging tax, fall below projected levels that assure the bonds would be paid for, the Clark County General Fund would have to pay off the shortfall, not only because it issued the bonds, but also because the stadium authority document does not have any language that makes sure Clark County doesn’t have to pay that dollar amount. If the original funding request by the Raiders and Las Vegas Sands and Majestic Realty of $750 million held, then the County would be on the hook for as much as $750 million. Or if the amount was $550 million, Clark County would have to pay for that.
Of course, the designers of the stadium document and the proposed financing will talk about the debt coverage ratio, or the amount of revenue they expect to be collected over and above the bond debt cost, and they will claim nothing will happen. If anyone on the SNTIC raises the question, they should know that Clark County faced a large hotel tax revenue shortfall starting in 2008 and due to the economic crash.
At the June 23rd SNTIC meeting, no one raised the question, but fortunately the vote on the stadium authority was deadlocked – it didn’t pass and Clark County taxpayers dodged what could be a giant fiscal bullet. The sad news is the chance that the SNTIC puts Clark County in this position is coming back again on July 11th.
This entire effort is beginning to look like the famous 1995 Raiders Deal all over again – only three times bigger.
The First Raiders Deal
21 years ago, the Oakland Raiders agreed to return to its home city of the same first name, and from Los Angeles, and after having left Oakland for LA in 1981. The action that keyed the Raiders return to Oakland was the planned renovation of the Oakland-Alameda County Coliseum Stadium in such a way as to be acceptable to the wishes of the Silver and Black.
The way the stadium changes were paid for was by bonds floated by the then-new Oakland-Alameda County Joint Powers Authority, a stadium authority jointly created by the City of Oakland and the County of Alameda. In turn, the bonds were to be paid for by the sale of the then-new personal seat license. What Ezra Rapport, the then-Assistant City Manager of The City of Oakland assured the Oakland City Council was that the bonds would be paid for as he expected the excitement of Raider Nation to fuel purchase of the rights to buy season tickets.
How The City of Oakland got into that problem was because the deal was rushed. Like Las Vegas today, the Raiders tried to push through a deal to leave Los Angeles, and Oakland was full of residents hungry to regain their NFL team – and I was one of them.
Because of this, spreadsheet scenarios showing negative outcomes were never shown and talks about the installation of fiscal safeguards were never held. All of this – the getting of the Raiders back to Oakland, the PSL approach – was new and exciting. Everyone was ready to roll, and did.
That verbal guarantee was met by a cold reality: many Raiders fans just didn’t have the money to afford the total cost of the PSLs beyond the deposits they paid. When credit cards were ran, some came up declined. The total number of terminated PSL transactions was such that far less than the needed 83 percent sales rate was achieved – it was just under 60 percent, and that revenue gap triggered an annual $20 million bond default responsibility that comes out of the general funds of the City of Oakland and the County of Alameda to this day.
The Stadium Authority Language Lacks Safeguards To Protect Clark County Taxpayers
The main problem with the language in Section 15 as a whole, let alone subparagraph (c), is that it lacks any provisions that would protect Clark County taxpayers. The proposal only allows for a bond that draws from the hotel tax revenue and is floated by the Clark County for the stadium authority – it does not have any alternative subparagraph that allows for the use of industrial development bonds, where the revenues from the stadium and surrounding developments pay for a type of private but tax exempt bond issue. There’s no option to allow the use of financing approaches that leave Clark County’s coffers alone, or at the very least limit their exposure. It really is Raiders Deal 2 as of this writing.
The SNTIC Should Not Rush An NFL Stadium Deal
Last year in December, the SNTIC never knew it would have the chance to form a plan to bring the NFL to Las Vegas and Nevada. Now, and after January, it does, but just like 21 years ago in Oakland, the Raiders are forcing everyone to rush the job. Meanwhile, the City of Oakland and the County of Alameda are quietly working with former Raider and San Francisco 49ers Legend Ronnie Lott on a far more carefully designed fiscal plan that has the open support of NFL Commissioner Roger Goodell. Like it or not, the Raiders and Las Vegas Sands and Majestic appear to be trying to make Las Vegas beat Oakland, and don’t seem to mind that the city and Clark County and the SNTIC are careless in their work toward that objective.
The SNTIC needs to slow down and take its time with this. The stadium authority document needs to be reevaluated and rewritten and for a host of reasons. Aside from the Clark County general fund threat, the document allows the authority to be able to build property and acquire land within a 25-mile radiius of the NFL stadium.
Have doubts? Look at this:
SECTION 10. 1. In each county whose population is 700,000 or more, there is hereby created a district to finance a large events center. The district consists of all property that is within the county and within each city in the county and that is located within a radius of 25 miles from the center of the location or proposed location of a large events center constructed or to be constructed in the county.
And Section 8, where it reads in part,
1. Except as otherwise provided in section 9, the stadium authority may: (a) Enter into any contracts and other agreements with any person or other entity that the Board determines to be necessary or desirable to conduct the business of the Authority. (b) Sue and be sued. (c) Acquire and own land and the improvements upon that land. (d) Proceed with any undertaking and enter into any contracts or other agreements that the stadium authority determines to be necessary or desirable. The contracts and other agreements authorized by this subsection: (1) May include, without limitation, contracts or other agreements relating to the design, planning, construction, acquisition, lease, lease-purchase, gift, equipment, maintenance, insurance, operation, management, promotion or advertising of any undertaking or any part thereof; and (2) Are not subject to the limitations of subsection 1 of NRS 354.626. (e) Enter into a lease, ground lease or management agreement with any party authorizing the stadium authority to lease any portion of the land in the tax increment area owned by any party and any improvements thereon or, in the case of land that is owned or controlled by the Nevada System of Higher Education, to manage such land or improvements for the Nevada System of Higher Education on such terms as may be acceptable to the stadium authority and the Board of Regents and which do not violate any covenants concerning any securities issued by the Board of Regents. (f) Receive any public and private resources necessary to fund, finance and develop the undertaking. (g) Approve, in consultation with the development partners, the site selected for the undertaking…
Got that? So the Stadium Authority, which has members of the developer team on it, can go on a property buying spree around and within the 25-mile radius. There’s no language to stop this giant land grab engine.
On top of that, where the much-talked about Tax Increment Revenue is focused on, in Section 14, there is no check on how large it can be – the words only read that it include the “large events center” (which is the NFL Stadium) and the associated practice facilities. That leaves the stadium authority with the ability to form a giant and non-contiguous tax increment district that consists of various properties within the 25 mile radius. Is this a way for Las Vegas Sands and Majestic to use their current Vegas property holdings as the basis for stadium authority revenue generation, and then add to them by buying more buildings and land?
In my opinion, the answer is that such an outcome is possible. There’s nothing to stop it except the Governor or the Nevada Legislature’s Infrastructure Committee.
Or the SNTIC itself can reject the document and save the Governor and the Nevada Legislature from the embarrassment of having to deal with it.
Clark County Taxpayers Are Not Protected In This Stadium Authority Proposal
In closing and contrary to the view of some, this Clark County Stadium Authority as proposed does nothing to protect the interests of taxpayers. It’s too bad the Oakland Raiders are involved in this because they are going to get stuck with the “Raiders Deal” tag all over again, and after 21 years.
Only this time the Raiders can’t blame Oakland for it.