By Alan Snel of LVSportsBiz.com
A major shortfall in hotel room tax revenues from the COVID-19 pandemic forced Clark County to tap a reserve fund big-time to the tune of more than $11.5 million Wednesday Thanksgiving Eve so that the county could make a $16 million payment on the stadium bonds Dec. 1.
Clark County spokesman Erik Pappa delivered the news in this statement, which read in part: “Fiscal Year ‘21 room tax collections are insufficient to pay the debt service payment due on December 1 for the Stadium Authority bonds. The total payment due is $16,057,500 of which $11,553,389 was needed from the reserve fund.”
Southern Nevada is contributing $750 million to the Raiders’ $2 billion stadium project, which lured the NFL team from Oakland to Las Vegas for its inaugural season in 2020. To help finance that $750 million contribution to stadium construction, there was $645.1 million in bonds floated by the county for the Las Vegas Stadium Authority. The Raiders officially run the stadium and pay consultant companies to manage the venue.
Here’s the official statement for what is referred to as the “unscheduled draw on debt service reserve.”
Pappa said $57,257,616 remains in the reserve fund. He said tapping the reserve fund was no surprise as the COVID-19 pandemic has limited tourism to Las Vegas-area hotels.
The Nevada Legislature, in 2016, approved a hotel room tax increase that would be charged by Southern Nevada’s hotels so that money could be collected to help pay for the public’s $750 million contribution for the Raiders’ 65,000-seat, domed stadium on the west side of I-15 across from Mandalay Bay.
“Today’s action was expected in light of the decline in tourism to Las Vegas. Fortunately, the financing for the Stadium Authority bonds included the funding of a debt service reserve fund to weather economic declines like the one Las Vegas is currently experiencing due to the pandemic,” Pappa said.
Jeremy Aguero, principal analyst at Las Vegas-based Applied Analysis who is a consultant guiding the Las Vegas Stadium Authority, said money was being placed in a reserve fund for two years for this very purpose.
In an email to LVSportsBiz.com, Aguero wrote, “The first year reserve was funded when the bonds were issued. The second year reserve was to be funded from interest earning as well as excess annual revenues up to $9.0 million annually, with the objective being to get to a two-year reserve. The Stadium Authority actually reserved more than what was anticipated prior to the COVID-19 crisis. While the hope was we would never require access to the reserve, the current situation is precisely why it was created.”
Stadium subsidy proponents argued that tourists would pay for the $750 million stadium subsidy.
But opponents warned that relying on tourism dollars is dangerous in a one-trick pony economy because that revenue stream could be devastated by a major economic downturn and Clark County and the public Stadium Authority would be left with the debt service repayments on the stadium bonds. Tourists spend discretionary dollars to come to Las Vegas and pay for hotel rooms — and those discretionary dollars are the first to be typically dropped when there is a national economic crisis.
In Allegiant Stadium’s inaugural season in 2020, no fans have attended Raiders games because of the COVID-19 pandemic, which has claimed the lives of more than a quarter-million Americans.
Tourism has been crushed in Las Vegas, especially in April and May when hotel-casinos went dark during shutdowns. Even now, there’s only 25 percent capacity in casinos because of high novel coronavirus infection rates in Clark County. Occupancy rates were about half of those in 2019 even after the hotels re-opened.
Raiders owner Mark Davis said if all fans can’t attend Raiders home games, then none will. UNLV was given permission by health officials to have 2,000 fans at each of the first two university football games at Allegiant Stadium.
But high COVID-19 case rates in metro Las Vegas prompted UNLV to not have any fans at the final two home games, including Friday’s scheduled UNLV vs Wyoming game at Allegiant Stadium.