By Alan Snel, LVSportsBiz.com Publisher-Writer
LAS VEGAS, Nevada — University of Colorado at Denver professor Geoffrey Propheter has read about 200 public stadium funding deals, including the one between the NFL Las Vegas Raiders and the Las Vegas Stadium Authority for six-year-old Allegiant Stadium. He maintains a repository of team leases and development agreements across the five major leagues.
Propheter tracks the intersection of pro sports and public policy, focusing on the politics and policy of subsidies, taxes, and land development. LVSportsBiz.com thought Propheter would be a good outside source for a Q and A on the Raiders’ plan to build a $158 million Allegiant Stadium entrance plaza on the stadium’s north side.
The Raiders said they want to use $75 million in public dollars for the $158 million plaza project from a fund the team says was created for stadium improvements. (The fund can also be used to pay down the public stadium bond debt and pay for Clark County projects related to the stadium like road signs.)
Let’s dive into our Q and A:
LVSportsBiz.com: How common is it for a “public-private” stadium deal to include language that allows extra funding money to be used by the team for stadium improvements?
Geoffrey Propheter: Reserve funds for maintenance, repairs, and improvements are common. Reserve funds for maintenance, repairs, and improvements where a team makes trivial contribution to said funds is rare. The Raiders pay no rent but pay $2.5m (indexed by the cpi) annually into the authority’s capital projects fund. $2.5m is a trivial amount—-not to you or I, regular people, but to a billionaire and billionaire organization it is. Far more common is that a team pays rent and makes annual contributions to a repair fund.
The conditions required for a team to seek reimbursement for repairs or improvements are spelled out in leases, as I’m guessing you know, and the language of these terms are always broad enough to allow any expenditure on any durable element to be eligible. Team lawyers negotiating lease terms would not have it any other way, and state and local lawmakers have demonstrated a persistent willingness to happily grant such favorable terms to teams.
It is atypical for a team to seek a major improvement so early into a facility’s life. It’s a clear sign the team did a poor job of planning crowd movements, and the authority did a poor job of monitoring the team’s plans. That being said, congestion is a common economic problem, and there are certainly cheaper ways to reduce congestion than the $158 million price tag (that will almost certainly increase in price because people always underestimate repair costs). If you want to reduce congestion, provide entrance times, for instance. Or add a surcharge for using a specific entrance, or provide a subsidy for using an entrance other than the over-congested one. There are many ways to achieve any policy goal, and the team’s first plan, like every other socialized business, is to ask for taxpayer subsidies because it reduces the team’s cost by at least 50%, a cost paid by everyone else since that money could be spent on reducing debt service.
It is atypical for a team to seek a major improvement so early into a facility’s life. It’s a clear sign the team did a poor job of planning crowd movements, and the authority did a poor job of monitoring the team’s plans.
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LVSB: The team says it needs a new welcome entrance and plaza to better serve the fans who crowd into the stadium from this side of the stadium — but is this more of an issue where the Raiders stadium planners simply did a poor job at planning infrastructure for the fan flow to and from the stadium.
GP: I support this interpretation, and I would add it’s the authority’s job to monitor and contribute to design conversations, even though final decision making on design elements is usually (and stupidly) reserved for teams. But the authority has blame here too, and as a quasi-governmental entity that, on paper at least, is supposed to act like they care about taxpayers a little, they should be held to a higher standard than the team.
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LVSB: Why didn’t the Raiders simply build an entrance plaza when it opened the stadium in 2020?
GP: I suppose if you wanted to be generous one could argue that the team contracted with smart minds to plan crowd flows and spent considerable time researching crowd flows at other facilities as part of their decision to not have this improvement. Perhaps they genuinely didn’t know people would react as they have. Humans are fallible.
But I don’t buy that story. I buy the story where the team looked at SB1 and saw in Section 34(4) that excess hotel tax revenue can’t be used for improvements until clauses 4(a) thru 4(3) are fed first (eg, UNLV gets cash to compensate for closing Sam Boyd, debt service reserve needs $9m a year until it gets to be 2x annual debt service, which it has reached). So now that about 6 years have passed, the capital projects fund has gotten nice and juicy, or wastefully distended depending on one’s perspective, but ripe for the Raiders to, well, raid it. Haha, it’s pretty poetic. With a team name like the Raiders no one should ever be surprised when the team goes pillaging for others’ resources. I suppose the Las Vegas Conservators or Las Vegas Taxpayer Protectors doesn’t have the same ring.
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LVSB: The public is raising more than $1 billion to pay the debt on the $750 million Southern Nevada contributed to the stadium construction — will this language allow the Raiders to simply come back every five or six years to scoop up money for improvements when there’s extra funding money in this waterfall fund?
GP: Yes. The UNLV 10-year compensation period is almost over, so that’ll remove one of the mouths the excess hotel tax has to feed first, which just means the pot of money for improvements/repairs grows faster. The only real mechanism that will slow the team’s reimbursement requests is itself. At some point around the halfway mark of the lease the team will start its call for major renovations. The standard economic obsolescence arguments begin. As hotel prices increases, the reserve will accrue more cash for the Raiders to use, but there will not be enough cash to fully cash-finance a mid-lease major renovation if the team keeps going back to raid the coffers every 5 years or so. Based on recent renovation deals, I wouldn’t be surprised for the team to demand a mid-lease renovation in the $500-$800m range. And that would have to be debt financed. Whether or not hotel prices are high enough in 10 years to be able to pay debt on the outstanding initial bonds plus any new debt only time will tell.
At some point around the halfway mark of the lease the team will start its call for major renovations. The standard economic obsolescence arguments begin.
It’s possible the team believes the county or state will throw money at them for a mid-lease renovation. If I know I’m getting my $500m-$800m no matter what in years 15-20, then I’ll ask for reimbursements from the authority for improvements every year. Maybe not at amounts that get this much attention but enough to make me happy. The team doesn’t care about taxpayer costs (ie reducing debt service) nor does the Authority members. The team’s goal is to get as much money from others as possible and the authority’s reason for existing is to help the team do it.
The idea of a capital reserve is solid for assets that have social value. (Whether or not a stadium has social value is uncontroversial—-it doesn’t expect when it’s taken over during a natural disaster or something along those lines. It’s also a depreciating asset that will soon turn into a giant paper weight when the team decides it wants a new stadium in 20 years.) But who contributes to the capital reserve should be in proportion to who benefits from the asset. The Raiders contribute a stupidly low amount, enough for basic annual maintenance only. And of course they contribute a stupidly low amount because lawmakers were fine with that and voters were fine with supporting lawmakers. And yet the Raiders and stadium users benefit disproportionately from the capital reserve. The $75 million ask feels like a junk punch because it’s symptomatic of sports teams’ relationship with lawmakers: teams take and lawmakers happily give.
The team’s goal is to get as much money from others as possible and the authority’s reason for existing is to help the team do it.
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LVSB: The Raiders stadium plan was submitted to Clark County government, which approved it. What role did Clark County planning have in evaluating the stadium’s fan flow, Uber/ride share and infrastructure at that north side of the stadium where the Raiders are planning this welcome, entrance way plaza?
GP: This doesn’t have a single clear answer. SB1 came first, and that says that each member of the stadium authority board of directors must have, among other things, “experience in the design, engineering and construction of major commercial projects and estimating the costs of the construction of major commercial projects.” Furthermore, clark county commissioners are required to appointed three of the nine voting members of the authority. If you accept that designing the stadium includes considerations of fan flow, ride sharing, and so on—-I do—-then the county commissioners picked one-third of the people that were supposed to have discussed, considered, flagged, explored, whatever ingress and egress issues. That’s not a trivial role.
Keep in mind that the county had the wherewithal to include in the development agreement stipulations that the team (as developer) be required to design the stadium to allow adequate ingress and egress for police and fire. It stretches credulity that the county would have simply forgot about fan flows, since these impact police and fire entry and exit.
Curiously, as part of the stadium’s building permit, the team (as developer) was required to do a laundry list of things. The county commissioners approved the laundry list Sept 6, 2017 and the list was published by the Department of Comprehensive Planning Sept 14. One of the bullet points in this list is the following (hopefully the screen shot comes through—you can see the whole list starting on page 136 of 303 in the development agreement):
This sounds an awful lot like the sort of analysis that would have flagged fan flows sooner than later. Did the analysis ever happen? Did the public hearing for the analysis ever happen? I don’t know. But obviously the first nfl season at allegiant had no fans, which in theory means there’s no fan flows to analyze. The county commissioners could have directed the DCP to revise these terms at its sole power as a regulatory body and required the analysis to be within 2 months after the first nfl season with fans. So unless fans are doing stuff different today than they were four years ago, which is possible I guess but seems suspect, the regulatory groundwork was there to catch fan ingress and egress problems and deal with them sooner (and thus cheaper).
Your question was about the county’s role. I’ve attempted to highlight touchpoints where the county and the authority had (and still have) influence over what the team built, when, and how. Whether anyone interprets this body of evidence as rising to the level of culpability in a public relations/political optics sense I suppose is a judgment call.
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