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Raiders’ Las Vegas plan flimsy, Stanford economist says

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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.

STANFORD — Roger Noll, Stanford economics professor emeritus, understands the inflamed passions of pro football fans. But he warns emotions can cloud good financial decisions when it comes to moving the Raiders to Las Vegas.

Noll rejects the financial projections Nevada lawmakers used to pass a bill to contribute $750 million to a proposed $1.9 billion NFL stadium next to the Strip.

"It is a catenation of optimistic assumptions," he said. "The probability that it could happen isn't zero, but it is pretty close to zero."

Relying on economic forecasting studies, Nevada officials expect to draw 451,000 new visitors because of the 65,000-seat stadium. These tourists would spend an average of 3.2 nights per visit, leading to an additional $650,000 in annual income to the area.

The public contribution would come through the sales of bonds to be repaid over 30 years by a hotel room tax Clark County began collecting this month.

"Every single thing they made an assumption on has no prior experience anywhere else," said Noll, director of the Program in Regulatory Policy in the Stanford Institute for Economic Policy Research. "In defense of it, well this is different because this is Vegas, therefore, it must be true."

Although some of southern Nevada's most influential civic leaders have raised similar questions it has not dented their enthusiasm for the Raiders.

"The question is, why are they persisting?" Noll said. "Why would they go with this phony baloney stuff that Vegas is different. Why would they believe a half a million who would never visit Vegas would suddenly show up because there is a football stadium? It's so far out there it is a puzzle."

With NFL owners ready to approve the move Monday during their annual meetings in Phoenix, few are listening to warnings from Noll and other economists.

Raiders owner Mark Davis has secured a $650 million construction loan from Bank of America and will add $500 million that includes a $200 million loan from the NFL. The Raiders would pay off their portion through the sales of personal seat licenses, naming rights and other revenues generated from a new facility.

Davis has not publicly explained how the bank loan will work and NFL officials have yet to address the relocation fee, which is costing the Rams and the Chargers $65 million a year for 10 years to move to Los Angeles. (The Chargers received a debt waiver from the league to pay off part of the fees over a longer period). Sports Illustrated reported the Las Vegas relocation fee will be between $325 million and $375 million.

"If there was no NFL allowed anywhere else this might work," said Noll, the co-editor of "Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums. "It's not exactly that they have a unique innovation to cause all these people to go to the desert."

Supporters say Raiders fans are so devoted they will travel to Las Vegas 10 times a year. They expect a large contingent from Los Angeles, where the team played from 1982-94. Some officials also say Oakland fans will begrudgingly follow the Silver-and-Black to the desert despite current protestations.

The Bank of America loan is another point of contention because of a lack of public details. Eric Grubman, NFL's executive vice president, described it as a "traditionally structured" deal.

"Bank of America is in no way going to run the slightest risk of losing that money," Noll said. "Maybe behind the scenes, it is guaranteed by the county or state of Nevada. Mark Davis is not a rich enough person that he can afford to add another $650 million debt to this transaction on top of relocation fees and on top of what he already is contributing to it. So who is it?"

Determining who guarantees the loan is perhaps the most important aspect of getting the needed 24 of 32 owners to approve the Las Vegas move. The NFL has a debt limit of $250 million per team although owners have waived the limit for stadium construction projects.

"Would they approve relocation without knowing who is behind that debt? I doubt it," Noll said. "It doesn't pencil out as an investment unless someone guarantees it. You can't have a debt that size hinge on the profits of the stadium. It just won't work because stadiums are not that profitable."

Steve Sisolak, Clark County Commission chairman, also worries a new stadium cannot draw enough big events to make the financial formula work.

The Las Vegas Bowl would move to the new facility, but it draws between 30,000 fans and 40,000 fans. The 2006 game featuring BYU and Oregon drew 44,615 fans, the largest crowd to watch a team sporting event in Nevada.

UNLV's football team also would share the facility with the Raiders, but the Rebels averaged only 18,389 fans for six home games last year.

Also, Las Vegas already has four arenas that can handle most acts: 20,000-seat T-Mobile, 16,800-seat MGM Grand Garden, 12,000-seat Mandalay Bay Events Center and UNLV's 19,522-seat Thomas & Mack Center.

Noll is puzzled by the casinos' support for the NFL. Sheldon Adelson, chief executive of the Las Vegas Sands Corporation, provided the political muscle to get lawmakers to pass legislation for stadium funding. Adelson also pledged $650 million to the project before walking away from the deal because of a dispute with Davis.

"It's not in the casinos' interest for you to fly into Vegas for the weekend and then have you spend half a day at the football stadium," Noll said. "They attract you to gamble, go to the shows and eat at the expensive restaurants.

"If that's not what you're doing that's time and money they don't get."

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