Las Vegas Sun

March 19, 2024

Analysis:

Las Vegas stadium about an ego boost, not economic one

Sandoval Signs Bills For Stadium and More Cops

Steve Marcus

Raiders owner Mark Davis poses with Raiders fans during a bill signing ceremony at UNLV Monday, Oct. 17, 2016. The bill will increase hotel room tax to help finance a $1.9 billion stadium.

On Monday, before flying to Houston for a two-day NFL owners meeting, Oakland Raiders owner Mark Davis took a little trip to Las Vegas. He was not there to gamble, but to celebrate.

The previous week, the Nevada Legislature held a short special session, called by Gov. Brian Sandoval, to pass a bill that would commit a stunning $750 million in tax dollars to a proposed $1.9 billion football stadium.

Although the bill had plenty of opposition, all the big corporate interests in Las Vegas, especially the casinos, wanted the stadium, which was intended to lure the Raiders. (The Oakland Coliseum, which the team shares with Major League Baseball’s Athletics, is 50 years old.) Davis was on record as saying that if Las Vegas built it, he would come. The bill passed Oct. 14.

The governor’s signing ceremony Monday, which Davis had jetted in for, was a raucous event, by all accounts; it included cheerleaders shaking pom-poms and a marching band that played “Viva Las Vegas” when Sandoval signed the bill into law. Afterward, Davis reiterated that Las Vegas was where his team was headed: “I made a commitment to the governor of Nevada,” he said. “I’ve never used another city as leverage.”

It’s not hard to understand why Las Vegas would want an NFL team. It has never had top-tier professional sports; until recently, the various major leagues refused to consider it because gambling was so central to its economy. (Next year, however, the city will have an NHL expansion team.)

With gambling now so widespread, that stigma is largely gone. But an NFL franchise could still help erase the Sin City image that Las Vegas has been trying to shed. “There is a huge inferiority complex in Las Vegas” because of its history, said Richard Davies, professor emeritus at the University of Nevada, Reno. “I read an article within the last few days that quotes several people in Las Vegas saying: ‘We are now in the big leagues. We needed a big-league team to be a big-league city.'”

“My point of comparison is with the Dodgers moving to Los Angeles,” said Michael Green, an associate professor of history at the University of Nevada, Las Vegas. “To a lot of people in Southern California, it marked the city’s arrival.”

The problem for cities like Las Vegas, desperate to land an NFL franchise — or cities trying to hold on to a team that is demanding a new, state-of-the-art stadium — is that the billionaire owners of these franchises usually expect the municipalities to pick up part of the tab for the new arena. There are few municipalities that don’t succumb (though Oakland, it turns out, is one of them, which is why Davis wants to move). To justify using tax dollars to subsidize NFL owners, officials invariably point to the new jobs that will be added, the infrastructure that will be improved and the economic activity that will ensue.

And in almost every case, these benefits are overstated or bogus. The academic literature on this point is nearly unanimous. Brad Humphreys, who has done a number of such studies as an economics professor at West Virginia University, told me bluntly that a new stadium brings “no economic benefit.” All it does is move spending to a football game that was otherwise being spent somewhere else.

You can make an argument that the psychological uplift that the Raiders would bring to Las Vegas is rationale enough; this is a town, after all, that hasn’t had a sports team to rally around since those great Jerry Tarkanian UNLV basketball teams of the 1980s and early 1990s. And maybe the Las Vegas bigwigs backing the stadium should have just said that. Because rarely have the economic rationales for a new stadium been as flimsy as they are in the case of Las Vegas — and never has the subsidy been as high.

The wheels were first set in motion last summer when Sandoval created something called the Southern Nevada Tourism Infrastructure Committee. Its job was to chart what infrastructure improvements needed to be made to keep tourism humming in Las Vegas. The majority of its 11 members were from the casino industry, including the president of two properties belonging to Las Vegas Sands Corp., whose chairman and chief executive is Sheldon Adelson, the most powerful man in the city. (Last year, he added the biggest newspaper in town, the Las Vegas Review-Journal, to his holdings.)

Over the years, Davis had mentioned Las Vegas as a possible relocation site. In January, after the Raiders’ plans to move to Los Angeles were thwarted by NFL owners, who went with the Rams instead, some Sands executives approached Davis. The deal they eventually struck called for the Raiders to put up $500 million for a new stadium, most of which would have to come from the NFL, since Davis lacks the wealth of many of his fellow owners. Adelson would contribute $650 million, and the final piece, $750 million, would come from Clark County, where Las Vegas sits. What Adelson would be getting for his $650 million was not explained.

The group then went to the tourism committee, which, of course, included one of the presidents in Adelson’s company. Not surprisingly, it wholeheartedly embraced the stadium idea and commissioned an economic study. The study concluded — shocker! — that the combination of a small increase in the hotel tax and the upsurge in economic activity thanks to the new stadium would cover the county’s $750 million commitment. Indeed, because it was a hotel tax, the tourists would be paying, not the Las Vegas taxpayers. It was the equivalent of a free lunch.

Or was it? Getting to that number required some rather unusual assumptions. One was that a third of the 65,000 fans at any Raiders game — including preseason games — would not be Las Vegans but out-of-towners. They would stay in a hotel for 3.2 days and spend, on an annual basis, $375 million. In other words, some 217,000 people each year would fly to Las Vegas for the primary purpose of watching the Raiders play football. Even if there were that many seats set aside for tourists (highly unlikely), this seems implausible.

The tourism committee also accepted assumptions that the new stadium would attract a second bowl game in addition to the one it has now — and that the attendance would double. It would attract two neutral-site college football games each year. (There are usually fewer than a dozen each year.) Oh, and it would land signature events like the NCAA Final Four, the Republican National Convention and the Academy Awards ceremony (seriously).

And then there were the job assumptions, which swayed many Democrats. “They said it would take 25,000 people to build it, when it is usually more like 3,000,” said Roger Noll, a Stanford University sports economist who advised some stadium opponents. “They claim it will add 40,000 permanent jobs,” he added. “No sane person would believe a number like that.”

Noll concluded: “The fix was in.”

And so it would seem. When the tourism committee held a meeting to allow critics to have their say, they were given three minutes each. After the committee issued its report, the governor called the legislature into a special session to ram through the bill authorizing the $750 million expenditure. Only after the session began were legislators informed that the stadium would require nearly $900 million in road improvements. That meant that other, overdue improvements would continue to be delayed.

The bill required a two-thirds vote. In the assembly, the stadium supporters appeared to be short several votes. But at the last minute, after some behind-the-scenes lobbying, some “nays” became “yeas,” and it passed by one vote.

At the owners meeting in Houston, Davis insisted that he was going to move to Las Vegas, and he told his fellow owners that he would submit his relocation plans in January. Roger Goodell, the NFL commissioner, pushed back and said that all things being equal, the league would prefer to keep the Raiders in Oakland. Davis, who is not the most-liked owner, can’t move the team without getting the votes of 24 of the league’s 32 owners.

Still, so long as Oakland won’t hand Davis a public subsidy, chances are the Raiders will move in a few years, once the Las Vegas stadium is completed. We still don’t know what Adelson’s role is — though one can assume he is not putting up $650 million out of the goodness of his heart. Indeed, we know very little about the deal. What we do know is that if the Raiders move, it will be one sweet deal for Davis. Despite handing over the largest public subsidy in the history of arenas, Clark County will get none of the cash flow from the stadium, none from the parking, none from the naming rights, none from the gate — nothing. It all goes to the team.

And if the economic projections turn out to be pie in the sky, as many believe they will, and the hotel tax can’t cover the $750 million, the Clark County taxpayers will be on the hook.

Welcome to the big leagues, Las Vegas.

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