Oakland Raiders Las Vegas NFL Stadium Bonds Get More Visitor Data Bad News: March 2018
The Las Vegas Convention and Visitors Authority (LVCVA) released its updated visitor statistics just moments ago, today, and they report the continuance of a bad trend: visitors to Las Vegas down again for the 10th month in a row compared to the previous year.
In this case, Las Vegas, Mesquite, and Laughlin hotels that comprise the LVCVA report total visitors down by -.09 percent: 3,749,800 for March 2018 versus 3,783,900 for March 2017. The main cause of the reduction was what the LVCVA reported as the loss of 129,000 convention goers due to the “rotation out” of the Con Expo / Con Agg event.
But even if the loss of those 129,000 convention attendees was added back in to the total number of convention goers, thus bringing that total from 652,400 to 781,400, that would put 2018 over 2017 by 24,000 visitors, yet not be enough to make March 2018 better than March 2017: it’s still down by 10,000 visitors. But why, you may ask, is all of this important with respect to the stadium bonds?
The public side of the financing for the Raiders / UNLV stadium is the much-talked-about $750 million bond issue. It’s a financial instrument designed such that a special hotel stadium tax was approved by the Nevada Legislature and signed into law by Govenor Brian Sandoval October 16th 2016. For over a year, I’ve told anyone who would even not listen that the tax rate approved by the Nevada Legislature of 88 100ths of 1 percent is not large enough to bring in enough money to retire the monthly bond debt service for that $750 million.
Toi get around the problem of the too small tax rate, the consultants to the Southern Nevada Tourism and Infrastructure Committee, or “SNTIC”, that formed the large and detailed set of recommendations that became what’s called “Senate Bill One”, formed a plan to collect stadium money for two years before bonds were actually floated. Then, they reduced the size of the actual bond issue from $750 milllion to $650 million. I argued that was still too small – one of the SNTIC consultants told me I didn’t know what I was talking about. (As a note, that was not Guy Hobbs, who’s as class an act as you’re going to find in this business.)
The problem is that when the actual monthly revenue from the hotel stadium tax came in, it wasnt’ even enough to cover what’s called a “level monthly debt service” (where the monthly debt service remains the same through the 30-year tax collection period). In anticipation of this problem, the SNTIC Consultants made the monthly debt service not level: it starts out lower than the average, and then increases to a point where, about 15 years down the road, it is higher than the average. But the bottom line remains: because there’s not enough money being collected, the tax shortfall problem is effectively kicked down the road.
The more this visitor problem continues, the closer Clark County comes to having the stadium bond tax revenue need be so great it calls for using tax dollars from the Clark County General Fund. At this rate, that Clark County taxpayer money will be used will happen – it’s just a matter of when. For the present, it’s also clear that the March 2018 revenue from the hotel stadium tax will be less than the $5.015 million of 2017, it’s just a matter of how much less. March of 2017 marked the best year for revenue collected from the tax in the short history of the stadium project. Three months later, the beginning of what has to be called a long-term economic problem started.
From June 2017 to March of 2018 there has been an unbroken string from 10 months of decline in hotel vistation rates for Las Vegas – a problem not seen since the great recession. The problem causing this for Las Vegas are generally seen as a combination of the following: the development of casino resort alternatives in America and China, the rise of Internet gambling, and the constantly increasing Las Vegas Strip hotel room resort fees, as well as the high room charges levied during big conventions, like CES Las Vegas.
All of that combined with high housing costs in California (the number one source of tourists for Las Vegas) and a metropolitan population still a million short of where it needs to be contributes to this problem where Las Vegas hotel visitor rates are on the decline.
Some Las Vegas economists argue that new hotel resorts will dig the region out of the problem. But there are also hotel closures, too. In the end, the number of new hotel rooms will not be enough to offset what is a glacial trend. It’s took over Reno, and is due to take over Las Vegas, too: the decline of Nevada’s rule over the casino tourism industry.
And the Raiders are trapped in the middle of it.
Stay tuned.
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