Courtesy of MANICA Architechture
Wednesday, Sept. 7, 2016 | 2 a.m.
Las Vegas is no stranger to stadium pipe dreams.
Over the years, developers have proposed building a slew of eye-catching, if not improbable, stadiums. (Remember the complex pitched for land near the M Resort in Henderson? Or the UNLV Now project?)
Most ideas fizzled before any serious conversations occurred regarding their construction. That changed this year when the Las Vegas Sands Corp. and Majestic Realty Co. unveiled plans to build a 65,000-seat stadium near the resort corridor and lure the Oakland Raiders here. Football fans rejoiced, long public meetings ensued and both taxpayers and politicians have kept close tabs on the unfolding situation, which seems to be marching toward reality.
The stadium sites have been narrowed down to two locations — acreage west of Interstate 15 near Russell Road or on land now occupied by the Bali Hai golf course.
A group charged with vetting tourism-related projects has been busy hashing out the details with developers. Ultimately, the Southern Nevada Tourism Infrastructure Committee will issue a recommendation to the governor, which could set the stage for a special legislative session to approve a stadium deal.
Don’t go buy your Raiders gear yet. There are many loose ends to tie up, and questions to answer.
So how did we get to this point — and what’s next?
Gov. Brian Sandoval created the Southern Nevada Tourism Infrastructure Committee last year and charged it with identifying and evaluating tourism-related projects.
An NFL stadium — originally not even on the committee’s radar — quickly became a key focus, buoyed by media hype when the Las Vegas Sands Corp. and Majestic Realty Co. presented their plans early this year. Sands CEO Sheldon Adelson’s quest to build a stadium and bring the Oakland Raiders here garnered national attention, especially when soccer star David Beckham dropped by a committee meeting and pledged his support.
Since then, the infrastructure committee — made up of elected officials and representatives from gaming companies, UNLV and the state — has been vetting the developers’ proposal, which involves public and private investments.
The committee, however, is an advisory group only. It will not make the final decision about whether to green-light the project. By the end of September, the committee will issue its recommendations to the governor regarding the stadium and other tourist-related projects.
Sandoval then may convene a special legislative session to consider the bill draft prepared by the committee. The draft legislation is expected to detail financing for the stadium as well as the creation and powers of a stadium authority, which would own the facility and lease it to an operations company.
The developers have proposed financing the $1.9-billion project through three sources: their private investment of $650 million, $500 million from the football team and $750 million in public funding, which would be paid for by an 0.88 percent increase to the hotel room tax.
Here’s where things get complicated: The developers and Raiders want a special session by the end of this month. They say a deal needs to be finalized as soon as possible so the team's owners can begin crafting their relocation pitch to the NFL.
Given the looming election, that’s easier said than done. Even so, developers contend waiting too long could sour the whole deal.
“We think it’s critical,” said Andy Abboud, Sands senior vice president of government relations and community development. “Timing is everything.”
If and when state lawmakers convene for a special session, a two-thirds majority vote would be needed to pass the stadium-related legislation because it involves a tax hike. If that doesn’t seem possible, the Legislature could pursue a permissive vote — a situation requiring a simple-majority vote, which would empower local government to increase the tax.
Essentially, that type of legislative vote would punt the decision to the Clark County Commission. The commission, in turn, would need to muster a two-thirds majority vote to approve the room tax increase.
The next scheduled infrastructure committee meeting is Thursday.
Bottom line: Lots of moving parts need to fall in place for this project to move forward.
Who would receive profits generated by the stadium?
Profitability is the big unknown. At least initially, developers are forecasting minimal profits.
Even so, a revenue-sharing provision will be worked into any stadium legislation. The infrastructure committee and the developers haven't agreed to exact terms, but it could work similar to this:
The Stadium Authority — the public owner of the facility — would enter into an agreement with an operating company created by the developers. The operating company would run the stadium, handling everything from booking events to negotiating deals with merchants. All stadium expenses would be subtracted from total revenue to determine the net operating income, or profit.
Any annual profits above a certain threshold would be split between the public and the developers. The threshold to invoke the public-private split has not been determined, but it could be as high as 15 percent of the initial private investment.
That’s known as the preferred return. So if the developers pitch in $650 million and the preferred return is, say, 10 percent, they would receive the first $65 million cut of yearly profits. Anything beyond the $65 million would activate the revenue-sharing provision and potentially decrease the base upon which the preferred return is calculated in subsequent years.
Profits are never guaranteed, though, and initially are expected to land well below the threshold that would trigger the revenue-sharing provision.
“The profit from the stadium itself is probably going to be minimal,” said Steve Hill, chairman of the Southern Nevada Tourism Infrastructure Committee.
Stadiums generally are built more as community amenities than money-making machines, Hill said.
What would the economic impact of the project be?
This, quite literally, is the multimillion-dollar question.
Stadium developers say the economic impact to the region would be significant, given the expected increase in tourists visiting Las Vegas to attend a football game, concert or other event at the stadium — and spending their money while here. The creation of new jobs would aid the local economy as well, they say.
But stadium critics argue that’s misguided because, according to their calculations, it just causes a shift in spending: People will spend their money going to games or stadium events as opposed to other entertainment offerings.
“If you buy dinner at the stadium instead of at the casino, then we’re just taking money out of one pocket and putting it in another,” said Michael Leeds, a Temple University economics professor who specializes in sports.
Any economic gain would be reliant on new visitors coming to Las Vegas specifically for stadium-related events, Leeds said.
Mark Rosentraub, who directs the University of Michigan’s Center for Sport and Policy, thinks that’s possible. In an assessment he conducted for UNLV, Rosentraub estimated the economic impact of a stadium based on new visitors it would attract to Las Vegas, excluding spending by local residents and revenue generated by the existence of an NFL team.
Because an NFL team likely would boost revenue, he said the figures below are his most conservative estimates:
If a Las Vegas stadium were built and hosted 15 events — five existing and 10 new events — Rosentraub estimates the total economic output would be close to $665 million. That includes direct spending (salaries, construction expenditures, visitor spending) and indirect and induced effects (money generated by the stadium and spent elsewhere in the community).
The total tax revenue generated by that same scenario would be roughly $45.6 million, Rosentraub said. That money would go toward schools, transportation and public safety, among other causes.
Rosentraub, who has criticized other stadium plans, said this one benefits residents because tourists will pay for the construction. The developers have proposed raising the hotel room tax by 0.88 percent to fund the public’s $750 million contribution.
“You’re not paying for the stadium, but you’re getting all the tax revenue,” Rosentraub said. “... There are a lot of deals that are not very good. This one works. There are no losers.”
Leeds, however, isn’t so sure a stadium would serve as the tourist magnet the developers envision.
“It’s there, but is it significant?” he said. “I’m dubious.”
The infrastructure committee has been working with Applied Analysis, a local economic research firm, to conduct its own economic analysis. Those estimates have not yet been released.
Will residents get to vote on whether a stadium should be built with public money?
No. Conversations about building an NFL-scale stadium and luring the Oakland Raiders here began less than one year ago. Raiders officials want to present a relocation plan to the NFL in January, meaning the window of time to pursue a ballot initiative is too small.
Political strategy also likely played a role in that decision. The developers may think they’ll have more luck persuading state legislators to back the stadium proposal versus querying the general public.
Tax-related ballot measures aren’t very popular in Nevada because, as Clark County Commission Chairman Steve Sisolak pointed out, “Frankly, most people don’t vote for tax increases themselves.”
Asking the public to weigh in on stadium funding isn’t entirely far-fetched. In November, San Diego voters will decide whether to raise hotel room taxes from 12.5 percent to 16.5 percent to build an estimated $1.8 billion football stadium for the Chargers.
OK, so a stadium rises from the desert dust. What might surround it?
It really depends on the site chosen. Are there existing buildings, or is it open land ripe for development?
If it’s the latter, some sort of stadium district could sprout in the area. Think along the lines of LA Live, the entertainment area around the Staples Center and Microsoft Theater in Los Angeles that includes restaurants, music venues, movie theaters and a bowling alley, among other offerings.
The Southern Nevada Tourism Infrastructure Committee presented LA Live, Downtown Disney in Anaheim, Disney Springs in Orlando and Westgate Entertainment District in Glendale, Ariz., as ancillary development examples that could serve as a model for any Las Vegas stadium.
Jeremy Aguero of Applied Analysis pointed to The Park outside T-Mobile Arena as a local example. The retail, dining and entertainment corridor between the New York-New York and Monte Carlo casinos offers arena-goers a place to hang out before or after events, he said.
But in a city so flush with entertainment options, would a stadium district be sustainable? Aguero said that’s a difficult question to answer, but he thinks there’s potential depending on the dynamics of the location.
“The tailgating experience has become part of the (football) event itself,” Aguero said. “I think there’s an advantage to that close proximity.”