When the Las Vegas Raiders kick off in 2020, they’ll be playing in the most expensive stadium in the world. The total projected cost of the site checks in at around $1.9 billion, a number topped only by the Rams’ and Chargers’ new complex in Inglewood that will cost approximately $2.1B, though that number reflects the complete redevelopment of a section of Los Angeles including the construction of retail and commercial space. The team’s decision to move to the desert follows a protracted waltz between Raiders owner Mark Davis, the city of Oakland, the NFL, and Las Vegas power brokers like casino magnate and Republican mega-donor Sheldon Adelson. In three years the United States’ 40th largest media market—it sits behind such metropolises as Hartford and West Palm Beach—will be building a $1.9B stadium in the middle of the desert for a team that will take the field eight to 10 times a year. Nevada taxpayers will be shelling out for nearly half of the project.
The Las Vegas stadium is the new champion when it comes to extracting public largesse for private benefit, a distinguished title lineage that includes the Vikings’ new stadium, which was supposed to be paid for with electronic gambling that raised precisely zero dollars in its first year, or $35M less than expected; the new Braves’ stadium, upon which which Cobb County spent money earmarked for public parks; and Marlins Park, the skyrocketing costs of which will be costing Miami-Dade County through 2048.
At $750 million, it’s the largest direct public subsidy for a stadium ever granted, and Clark County will soon be floating a bond to raise all that money and raising hotel room taxes on the Strip by 0.88% in order to pay back their debt holders over the next 30 years. (A thing to keep in mind with all stadium subsidies: Even when the money comes from tourist taxes or a general fund, the opportunity cost of losing what that money could have been spent on is just as real.)
Clark County’s decision to shunt the tax burden onto tourists isn’t the worst tactic in the world—after all plenty of stadiums are built on the back of sales taxes and interest-free loans, which are bald ways of saying “fuck you” to taxpayers. Las Vegas appears to be a good fit for this particular brand of debt vehicle because so much of its economy is based on people who don’t live there permanently. The massive—and constant—influx of tourists pay a smattering of taxes on hotel rooms, gambling, alcohol, and entertainment that account for nearly half of the state’s general fund revenue; hotel room taxes make up nearly 17 cents of every dollar in Nevada’s general budget by themselves.
But here’s the problem: 30 years is a long time and recessions hit the hotel and entertainment industries especially hard—no one wants to pay $200 to see Celine Dion when they’re behind on their mortgage payments. Hotel revenues on the Strip took a nosedive during the 2008 housing crash, only reaching pre-recession levels in 2014, according to a database kept by the UNLV Center for Gaming Research. Another recession—or, really, a set of recessions since we’re talking about three decades—will send those tax revenues south and leave the county and state scrambling to pay their debt installments one way or another. And, since Clark County has forfeited the right to collect any rent, solicit property taxes, or collect additional revenue streams from the stadium they’re shelling out three quarters of a billion dollars to build, that could spell disaster. (Cincinnati had to sell a public hospital in order to pay off loans for the Bengals’ Stadium, so yes, this scenario has embarrassing precedent.)
Even more money will be sunk into this project. The total public cost will eventually balloon by at least another $200M thanks to infrastructure improvements in the area surrounding the site, including reconfiguring intersections and building additional highway ramps to relieve traffic near the stadium. That cost will be paid through another set of bonds backed by gasolines taxes, a dwindling revenue pool that is pledged to transportation projects like roadway maintenance. Nevada voters approved a considerable fuel tax hike that will phase in over the next decade in order to pay for some much-needed maintenance projects back in November of 2016. Two weeks ago, Clark County officials “implored” transportation officials to put the stadium-area improvements on an accelerated schedule.
These sort of ancillary handouts hardly ever get mentioned in the national press due to what I suspect is a genuine disinterest in the minutiae of city planning and traffic studies. (As a professional planner myself I am insulted by that apathy.) But when a stadium gets a dedicated highway exit or a subway stop or a reorganized traffic pattern that lets people enter and exit the grounds quickly, it becomes an indirect subsidy that directly benefits a single business owner at the expense of all taxpayers.
The incompetence—or skullduggery, depending on your perspective—of this deal really comes into focus when you consider how little leverage Mark Davis had in the first place and how badly the citizens of Clark County got screwed by the people elected to represent them.
In December of last year, Oakland officials voted to negotiate the development of a new $1.3B stadium to replace the dilapidated Oakland Coliseum. Alameda county and the city of Oakland only agreed to kick in $350M from public coffers: a land grant worth $150M and infrastructure improvements worth $200M. The deal to stay in Oakland, while still threaded with significant public subsidies, was the only one Davis had on the table at the time, giving Las Vegas and Clark County prime position to push for more concessions. Instead, they tripped over themselves writing the Raiders a check for $750 million and promising a mess of additional revenue streams. “They were negotiating with a team owner who had few other good options,” Neil deMause, editor of the site Field of Schemes and author of a book of the same name, told me via email. “They could have driven a much tougher bargain and didn’t.”
There’s no secret as to why the Raiders are trying to keep every cent the stadium will eventually make: Mark Davis is broke. Well, as broke as an NFL owner can be at least. He’s still worth $500 million, but, unlike Jerry Jones or Robert Kraft, Davis’s team represents almost the entirety of his wealth. (Davis once complained to the New York Times that all the other owners “think I have no money.”) Davis wouldn’t share revenue from personal seat licenses (PSLs) or naming rights or parking because he quite honestly couldn’t afford to, lest he be forced out of the league. So he had his team write up a lease that pointed every revenue stream back to the Raiders and kicked Sheldon Adelson— the billionaire casino mogul with every Nevada politician in his pocket, the guy that was instrumental in securing a $750M public subsidy for a new stadium—to the curb.
In case you’ve forgotten, Adelson isn’t really the type of guy you just fuck over in Las Vegas. He’s the city’s richest resident, and a guy who has isn’t interested in the gentle science of optics, based on his recent purchase of the Las Vegas Review-Journal, the city’s largest paper. Several senior staff members quit following Adelson’s purchase of the daily, and it was reported by Politico that the paper’s new publisher has been retroactively removing critical facts about the construction and funding of the stadium.
Adelson claims he was kept in the dark when Mark Davis released a bonkers draft lease proposal that siphoned every available revenue stream directly back to the Raiders and demanded the team play in the stadium rent-free for 30 years. “”[The agreement] was certainly shocking to the Adelson family,” Adelson said in a statement days after the lease proposal was handed over to the county commission, “We were not only excluded from the proposed agreement; we weren’t even aware of its existence.”
“Give Mark Davis credit,” said deMause, “He dumped Adelson, the guy who had absolutely everything when it comes to political and financial leverage. Adelson was stupid. He thought they were going to be partners and that they’d figure out how to split the revenues after the stadium deal was done.” DeMause acknowledges that Davis has a reputation around the league for being a dingus, but believes the Raiders owner outmaneuvered some of the most cutthroat folks in America on his way to a cherry stadium deal.
“It was like the shit that happens in a heist movie: the partner shoots the other guy and takes all the money,” deMause said, “Congratulations to Mark Davis who had no way to extract a lot of money from any city and yet managed to play everyone.”
(Davis’s bilking of Adelson was expertly memorialized by Seth Wickersham and Don Van Natta Jr. for ESPN The Magazine back in April. The whole saga is worth your time if only to read about Adelson getting fucked over by a guy who does all his business at the bar at P.F. Chang’s.)
But Davis’s one-sided lease deal is only part of the story. After Bank of America stepped in at the 11th hour to fill Adelson’s funding gap with a $650M loan, Clark County Commissioner Steve Sisolak openly questioned the source of the bank’s confidence in the Raiders’ ability to repay their debt on schedule. In March, Sisolak told the San Jose Mercury News that “Adelson said he couldn’t get a 2% return on his $650 million. That is $13 million a year. A regularly structured deal on $650 million amortized over 30 years, the principal is $20 million a year. With just a 4% interest rate it would cost an additional $26 million annually,” he said, “Where are they going to get $46 million a year?”
I know you just saw a lot of numbers, so let me try and explain: Adelson likely wouldn’t have walked out on the deal if he thought he was going to get a good return for his family’s investment, even if he wasn’t entitled to other revenue streams like PSLs or naming rights. Sisolak, who was reportedly instrumental in connecting Davis and Adelson, and was a vigorous booster of the Las Vegas stadium project from the outset, is saying here that this stadium is such a bad investment that a 2% return was infeasible. Two percent. That sort of yield is what you’d expect from the most secure debt in the world—think Swedish or Norwegian treasury bills—not from a $1.9B dome in the middle of the desert. Sisolak is claiming, bluntly, that whatever revenue projections the Raiders have come up with are either misleading or ignorant or both.
Sisolak isn’t the only one trying to make sense of the team’s fuzzy math. Roger Noll, director of the Program in Regulatory Policy in the Stanford Institute for Economic Policy Research and author of Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums, has said the stadium plan was the “worst deal for a city” he had ever seen, and that the revenue projections are a “a catenation of optimistic assumptions” with a “probability…pretty close to zero.”
“In order for this deal not to be a direct transfer of $750 million to Mark Davis,” Noll told me, “the numbers need to bear out. The problem is they won’t. So the issue then becomes: How badly do the numbers miss their targets?”
Noll thinks that the new loan deal the Raiders struck with Bank of America was the only way Davis could come out of this with positive cash flow, and that the only conceivable way they were able to secure that much debt would be to put up the same revenue streams that Adelson coveted as collateral. “Davis has no collateral he can put up,” Noll told me, “so he puts up the PSLs, the stadium naming rights, the sponsorships, etc. and you start getting near the loan threshold with all those things.”
And remember, the Raiders will be playing in this shiny new dome completely free during the term of their lease, which dampens the team’s risk even more. “They just need to sell enough tickets and popcorn to break even,” Noll said, “Davis made a deal that allows him to come out on the other side making a lot of money.”
The loan details haven’t been made public, but the NFL’s executive vice president has said the deal is “traditionally structured” which means Davis must have pledged enough collateral to make Bank of America comfortable with the deal. It’s widely assumed that the $650M loan will be paid back with the aforementioned PSL sales and other concessions over the next 30 years. What’s important to understand about the stadium’s funding mechanism is that there is a massive partitioning of risk: Unless the NFL ceases to exist in its current form, Mark Davis and his backers aren’t in serious jeopardy of losing any money. Davis will sell the seat licenses, he’ll overcharge for parking, he’ll get Soylent or Juicero to buy the naming rights, and Bank of America, the League, and the Raiders will come out ahead. The $750M that Clark County is putting up is much more precarious. They’re betting on a single stadium shifting consumer attitudes on a national scale, that tourists will flock to Vegas just to watch Derek Carr go 9-7 for the next half-dozen years. This deal is only risky for one party, and it’s not the one with the $15 haircut.
They say Las Vegas loves a sucker; this time it is the sucker. But is this the single most disastrous stadium deal in American history? Roger Noll at Stanford thinks it just may be, given Nevada and Clark County’s dependence on taxes reaped from the casino industry. “There will be a diminutive effect on hotels and tourism with the new bed tax,” he said, “if these people aren’t spending money on gambling that’s a real hit to the public coffer and the state will lose a significant amount of money.”
The tax hike may be modest but even small shifts in hotel occupancy rates could end up affecting the ability of the stadium authority to pay back its debt holders. “The viability of the project hinges on whether these additional events actually draw new tourists,” Noll said, “and the notion that tourism will be a big part of this is just silly. It was something convince local politicians that it was good for them.”
Noll has spent his career analyzing the economic impact of stadiums, and sees the Las Vegas Stadium project as an especially galling example of sunny projections used to fend off public criticisms. He told the Mercury News in March that, “Every single thing they made an assumption on has no prior experience anywhere else” and questioned the argument that the new stadium would draw considerably more tourists to the desert. “Why would they believe a half a million who would never visit Vegas would suddenly show up because there is a football stadium?”
That criticism is echoed by Neil deMause, though on the question of where this ranks among stadium swindles, he’s more circumspect after covering them for more than two decades. “That’s a tough competition,” he said, “Is the Raiders’ deal worse than the one the Indiana Pacers got where the public gave them a free arena and then paid hundred of millions more in operating expenses to keep the team? Is it worse than the St. Louis Rams ditching their lease agreement? Or the Yankees claiming they would build a new stadium with entirely private money that ended up costing the public over a billion dollars?”
DeMause’s point is well taken. The Las Vegas stadium isn’t some sort of unencroachable peak that public officials will point to and say “well at least we didn’t do that.” It’s just how stadiums are built now. They are direct donations from taxpayers to private industry, handouts to the richest people on earth who think nothing of charging you $13 for a shitty beer. It doesn’t matter whether this stadium is the worst deal in American history, because even if it is, it won’t be for very long.
T.M. Brown is an urban planner and freelance journalist living in New York. You can follow him on Twitter @TM_Brown.