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October 23, 2017

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L.V. leaders hot on getting NFL team, aren’t sold on public funding for stadium

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Steve Marcus

Oakland Raiders owner Mark Davis stands with local Raiders fans after a meeting of the Southern Nevada Tourism Infrastructure Committee on Thursday, April 28, 2016, at UNLV.

Backers of a proposed 65,000-seat football stadium have presented local tourism leaders with a tricky question: How badly do they want to bring an NFL team to Las Vegas, and how much public money do they want to recommend using to make that happen?

The answer to the first part is relatively clear, as officials have expressed widespread support for having the NFL in the valley. The second part of the question, however, remains up for debate.

The Southern Nevada Tourism Infrastructure Committee is in the process of developing an answer as it vets plans for a $1.4 billion domed stadium that could house an NFL franchise, the UNLV football team and a range of other large events. The committee already has heard about the proposal at its last two meetings, and it’s expected to return to the issue this month.

Supporters of the stadium project, which is being backed by Las Vegas Sands Corp. and Majestic Realty Co., have said it would have a huge positive effect on the local economy and help drive more visitation to the valley. Yet the plan presented to the infrastructure committee two weeks ago included a steep price: $750 million in public money, potentially from hotel room taxes paid largely by tourists.

Oakland Raiders owner Mark Davis made it clear to the committee that if the stadium project were to reach fruition, he would do everything he could to make that venue his team’s new home. Davis pledged $500 million to support the project, with $200 million of that coming from an NFL loan.

The remaining $150 million in private funds for the stadium would come from Sands and Majestic. Plans also have called for the creation of a tax increment district, which Majestic Executive Vice President Craig Cavileer has characterized as a mechanism that would help the stadium’s private backers get a return on their investment.

“We build a billion-four project, bring (an NFL) team, it now generates a substantial amount of incremental tax revenue ... and so we would take that increment that we created by our investment there,” Cavileer said in an interview. “Without that increment, you would not be successful in your investment.”

Generally speaking, the district could allow the stadium to retain some tax revenue generated by the venue, the rationale being that the revenue wouldn't have existed without the stadium being built and therefore isn't a loss to taxpayers. The district could theoretically include property taxes, live entertainment taxes paid on tickets at stadium concerts, sales taxes from merchandise sales and so on.

Details of the proposed tax district are still unclear, however, including exactly which taxes would be involved. But Guy Hobbs, managing director of Hobbs, Ong & Associates, said the district would likely not encompass any revenues that weren’t directly incidental to the stadium itself.

Hobbs, who sits on the infrastructure panel’s technical advisory committee, said tax increment revenue could flow into a pool of money that would also include funds from operating the stadium. All of that could be used to pay the stadium expenses, he said, and any remaining revenue could be used to help provide a financial return to Sands and Majestic.

Hobbs also noted that the private backers would be responsible for covering any operating shortfalls and construction cost overruns at the stadium. And he said it would be important to “stress test” the tax increment numbers to consider what an appropriate return would look like.

“If that number gets to a point where it’s perceived to be — or is — too high, then there could be a revenue-sharing arrangement at certain levels, where part of that goes to a return to the equity investors and part of that goes back to the public,” Hobbs said. “Otherwise, you could have these unbridled returns, and I don’t think anybody is interested in that. This whole notion of the tax increment flowing in and somehow enriching the equity investors beyond reason is not going to happen.”

Still, the idea of the tax increment district has already drawn some skepticism, including from Neil deMause, co-author of the book “Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit.” DeMause has written critically about the recent Las Vegas stadium proposal, and he’s been particularly wary of the proposed tax district.

DeMause said there were “tons of examples” of tax increment financing either falling short of projections or causing other negative repercussions. For the Sands-Majestic proposal, he admitted that problems with a tax district would depend on what stadium backers asked for, but remained strongly opposed to the general idea of asking for $750 million in public funding.

“That’s an awfully high starting point,” deMause said. “The question for me is not whether this is a bad deal for Nevada — it’s how bad of a deal.”

Figures vary on the exact share of public financing for stadiums in other cities. But data provided at the infrastructure committee’s March meeting indicated that stadium projects undertaken in recent years — such as Levi’s Stadium in Northern California — generally have not required the amount of public funding initially proposed in the Sands-Majestic plan.

But the specific amount of public funding requested by the Las Vegas stadium backers could easily change, given that the infrastructure committee should consider a separate analysis in the future.

Steve Hill, executive director of the Governor’s Office of Economic Development who chairs the committee, said it was important for the panel to have its own information so that it wasn’t relying strictly on figures provided by Sands and Majestic.

Part of the committee’s analysis will include looking at how much of the stadium’s impact would “simply be a replacement for something else,” Hill said.

“For example, how many tourists — incrementally new tourists — would come to Las Vegas as a result of the stadium, versus how many would come and just displace somebody different who would have come and paid the same amount for a room, or close, and spent the same amount of money in town?” Hill said. “All of that information is what we’re trying to put together.”

Hill said that work may not be totally wrapped up by the committee meeting this month, but he expected to have a significant amount of it completed by then.

While the stadium figures have yet to be fully vetted, even the early numbers have been received critically by some prominent casino executives.

MGM Resorts International CEO Jim Murren said he was “extraordinarily receptive to the idea” of a stadium for an NFL team, but he called the idea proposed in April “financially untenable,” noting particular concern about the proposed tax increment district.

Murren also said that funding the $1.4 billion expansion and renovation of the Las Vegas Convention Center — which he called “the single most important economic engine of the entire valley” — was more pressing. He said improved transportation infrastructure should be another top priority because “there’s no point in building a stadium if no one can drive or walk to it.”

Murren is not unilaterally opposed to getting a stadium built, however.

“A stadium is absolutely in the conversation, and one that I’m welcoming because of my personal belief that football is awesome and it would be just another great way of elevating Las Vegas,” Murren said in an interview. “We’ll dedicate a lot of time to helping the proponents of that type of idea move their plan forward. We’re certainly not going to obstruct anything. We just want to understand this, and get to at least the requisite amount of information that a billion-plus type of investment deserves, and I think we just don’t have that right now.”

Similarly, Jan Jones Blackhurst, Caesars Entertainment Corp.’s executive vice president of government relations and corporate responsibility, said she would “love the Raiders to come to Las Vegas.” But she had reservations about using public money.

“I’d have to have some very compelling reasons to support using public money to build a stadium,” Jones Blackhurst, a former Las Vegas mayor, said in an interview. She said she possibly would be willing to consider supporting “some portion” if the Raiders’ coming to Las Vegas were a certainty, but indicated that she wasn’t yet convinced of that.

Importantly, neither Murren nor Jones Blackhurst sit on the infrastructure committee — other representatives of their companies are on the panel. And the stadium proposal has drawn strong support from Las Vegas Mayor Carolyn Goodman, who does sit on the committee.

Goodman recently told ESPN that “the Raiders will come if Nevada handles this properly,” and she relayed a similarly positive sentiment at the infrastructure committee meeting in April. Casino mogul Steve Wynn also has spoken to Davis about the possibility of the Raiders in Las Vegas, and he reportedly supports the idea as well.

Even if support from the committee translates into a favorable funding recommendation, the stadium project would face other obstacles. One is that Gov. Brian Sandoval would likely need to call a special session of the state Legislature in order to get the project’s funding secured in a timely manner.

Cavileer said he’d already felt a lot of support from public officials for the concept of bringing the Raiders to Las Vegas.

“They want to know more details. They’re watching with a keen eye, as they should, and they need to evaluate the project,” he said. “(But) I haven’t found anyone who doesn’t think the idea is terrific.”

Another hurdle facing the stadium is that, in order to make the Raiders a sure thing, 24 of 32 NFL team owners would have to approve the move. Dallas Cowboys owner Jerry Jones added positive momentum on that front this week when he said he wasn’t opposed to having a team in Las Vegas.

Jones said the “gambling aspect” of Las Vegas was “far overshadowed by the entertainment value” and that the city “does not have disfavor with me, in my opinion, relative to being an NFL city,” Sports Xchange reported.

Yet working through the funding plans and getting a favorable recommendation from the infrastructure committee is still the most immediate hurdle the stadium project has to clear.

Clark County Commission Chairman Steve Sisolak, a member of the infrastructure panel, has raised a number of questions about the stadium plans. He said in an interview that, moving forward, he wants to hear more about what the return would be for the public’s investment in the stadium.

“If the public is going to put in $750 million, there’s gotta be some return on that,” he said. Sisolak said he did not think the return should go entirely to private backers, but added that “we’ll have to look at what they propose.”

Still, if the committee can approve a suitable funding recommendation for the stadium, Sisolak said he was confident that the venue would benefit Las Vegas tourism and the local economy — “no doubt about it.”

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