Las Vegas Sun

February 9, 2016

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Expert says look for final cost of new stadium or arena to exceed sticker price

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The proposed Silver State Arena may never happen.

With price tags ranging from hundreds of millions of dollars to upwards of $2 billion, the costs of building any of several proposed stadium projects in the Las Vegas Valley will be staggering.

But even the high sticker prices aren’t likely to account for all the costs of building such a facility, said Daniel Rascher, president of the consulting firm SportsEconomics.

“The initial budget is usually lower than it will end up being. People don’t want it to seem too big when going before the public,” Rascher said.

A range of costs, from infrastructure to long-term maintenance, can drive the overall price of stadiums higher than the figure presented to the public, Rascher said.

“I’ve hardly ever seen a stadium or arena come in on budget. One of the hidden costs is it always ends up costing more than everybody thinks,” he said.

In an attempt to limit their reliance on public dollars, some of the proposed Las Vegas-area stadiums would use tools like tax-increment financing districts, which capture sales tax or property tax revenue and recycle it to cover the costs of construction.

Joel Maxcy, a professor and sports economist at Temple University’s Sports Industry Research Center, said special taxing districts often rely on speculative projections for how much revenue they will generate, and any shortfall can fall on the broader public.

“They’re almost always based on speculation. You’ll have a stadium, and that will increase property taxes, and the difference will be used to pay off the bonds,” he said. “That’s the lure of a revenue bond in these situations. But if it doesn’t come through, the taxpayers are on the hook for it.”

Infrastructure costs, such as adding highway exits, rerouting surface streets or installing sewer lines, also can be left out of a project’s total cost.

“These are things people don’t always think about,” Maxcy said. “Even when they say it’s going to be 100 percent privately financed, there’s almost always going to be some infrastructure costs ... and depending on the location, those can be fairly significant.”

Maintenance and renovations needed to keep a stadium up-to-date over the course of its multidecade lifespan also add up, Rascher said, and it’s important governments and developers agree on who’s responsible for covering those costs. At some point, every stadium will have to be torn down, Rascher said, another cost many fail to account for in their infancy.

Regardless of some of the hidden costs, Rascher said he thinks a new stadium or arena would have the potential to be successful in Las Vegas.

“It seems like there’s enough casinos, there’s enough retail. As far as having a diverse mix of entertainment options, an arena could make sense,” he said.

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