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March 28, 2017

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What’s behind the $1.9 billion price tag for NFL stadium in Las Vegas?

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Courtesy of MANICA Architechture

An artist’s illustration of a stadium on Russell Road and Las Vegas Boulevard was revealed during a Southern Nevada Tourism Infrastructure Committee meeting at UNLV Thursday, Aug. 25, 2016.

Even a figure as massive as $1.9 billion can sound downright mundane after being repeated in discourse for months.

Even casual followers of the Oakland Raiders' pursuit of relocation to Las Vegas instantly identify the dollar amount that represents the country’s second-most expensive professional sports stadium, behind the $2.6 billion Los Angeles project for the Rams and Chargers. What comprises an amount so significant remains far murkier than the estimated cost itself.

The Las Vegas Stadium Authority board gathers Thursday for its first meeting since the Raiders reportedly secured Bank of America as their new financing partner to replace the $650 million commitment withdrawn in January by casino magnate Sheldon Adelson. The board will revisit the draft stadium lease agreement submitted in January by the Raiders and since revised by the team after an initial review the local officials.

Before the stadium can be leased, it must be built. What exactly does $1.9 billion buy you these days?

“Whenever anyone reads about stadium costs, almost invariably no one really knows what is really within that number,” said Peter Knowles, executive vice president for Rider Levett Bucknall of North America, an international firm specializing in construction cost analysis. “A $1.9 billion project could be construction costs plus all soft costs, could be construction costs plus a certain amount of land acquisition costs.

“There are so many variables for each single project that unless you can really get down into the weeds with these budgets, sometimes it’s a little bit irresponsible to say this one is costing a little bit more than that one.”

Hard costs refer to the actual construction of the stadium, which is expected to seat 65,000 people when completed in 2020. Soft costs typically include design and engineering fees, equipment and fit-out costs.

“With facilities like stadiums, that would include the major scoreboards,” Knowles said. “In arenas, there’d be ribbon boards and all sorts of other low-voltage signage, and other audio-visual systems that need to go in.”

Knowles emphasized that the cost of modern high-end sports facilities rises with owners’ demand for high-end furnishings like restaurants and bars that drive increased revenue. As suites replace bleachers and steaks push aside hot dogs, the price tag of a stadium climbs.

“The fan experience is something that figures really large in the owner’s mind, and the design being able to have 75,000 fans on Wi-Fi concurrently is translating into big dollars these days, and has to be built into a budget,” Knowles said.

The most recent cost breakdown supplied by research firm Applied Analysis in its Frequently Asked Questions section on the authority board website lists $1.325 billion for stadium construction, $375 million for land, infrastructure and siting, $100 million in contingency, and $100 million for a separate practice facility. With regard to land, the Raiders continue to pursue their preferred site near Russell Road and Interstate 15.

Board chairman Steve Hill said at February’s meeting not to expect the cost of the stadium to veer significantly from the $1.9 billion estimate, though some cautioned against settling on a number this early in the process.

“Financing a stadium is dependent on a lot of variables,” said Mark Conrad, director of the Sports Business Program at Fordham University. “That’s why it’s very hard to budget it. What we say is $1.9 billion now could easily go up.

“A 5 percent increase in concrete can just drive your budget up. It’s something you don’t think about.”

A July presentation to the Southern Nevada Tourism Infrastructure Committee estimated the stadium would contain 75-100 private suites, 6,000-8,000 club seats, 25-50 loge boxes and 5,000-10,000 standing-room-only capacity. A total square footage of 1.8 million on a site totaling between 50 and 64 acres is planned, which puts the stadium in line with the last few National Football League facilities constructed in Houston, Detroit, Phoenix, Indianapolis, Dallas and New Jersey. The most expensive of those is MetLife Stadium in New Jersey, which cost $1.6 billion in 2010.

What rests above the stadium could present the largest remaining cost variance. Developers must settle on a retractable roof, which experts said could add from $50-150 million to the bill, or a fixed, translucent covering like the one featured in original renderings of the facility from Manica Architecture.

NFL owners could vote on the Raiders relocation application as soon as March 26-29 at league meetings in Phoenix. The team would need 24 of 32 votes to approve the move.

Any delay in that vote could push back the timeline for stadium construction, but Knowles anticipates only a modest 3-3.5 percent per annum increase in costs for 2018 and 2019.

“Certainly for the next couple of years, we expect the construction industry to be buoyant, meaning there is likely to be a lot of work in the marketplace,” Knowles said. “Back in 2008, 2009, 2010, the volume of construction activity was really diminished. Obviously we were at the height of the global financial crisis, no one was building anything and we saw prices decrease.”

The $1.9 billion bill will be split among a $750 million public contribution from increased room tax revenue, $500 million in a combination of NFL loans, naming rights and seat-license sales from the Raiders, and $650 million from Bank of America, potentially in the form of a large loan.

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