Las Vegas Stadium: it has been four months since the NFL owners, 31-1, approved the Raiders to move to Las Vegas.
Coincidentally, it has also been four months since the 0.88 cent hotel tax increase has been in effect as well. The Winter Report dives into what has happened, is happening, and will happen in Las Vegas in this update on the stadium project.
The Hotel Tax
The .88 cent increase to the hotel tax began last March and has collected just over 16 million dollars. That is a small sample, but four out of four months, the coverage exceeded 1.5 times the expected economic projections.
Initial projections are 30 million a year in bond payments over 30 years and expected to begin in 2019 from an estimated 45-48 million a year in hotel tax collections. This is the money pool that will be used to fund the public’s portion of the Las Vegas Stadium; this fund will be used as PayGo initially and then, it will be used to pay off the bonds that are issued. PayGo means directly funding the project at first and before the bonds are issued.
Another thing the hotel tax is responsible for is the Las Vegas Stadium Authority (LVSA) boards’ two million dollar budget as well as providing five million annually. It is also expected to provide up to nine million a year to be set aside in a “waterfall” fund until there is enough to pay two full years of annual bond payments.
Over the course of the bond life, roughly 30 years, the annual payments will increase just as the expected hotel tax revenue will increase. However, should the economy take a 2008 type dive, the revenue from the hotel tax is still expected to cover the annual payments at a minimum of 1.17 times coverage rate until full economic recovery.
Something else that is being addressed is paying down the bonds as fast as fiscally possible. That will be slow at first with the “waterfall” reserve being filled, but once it is, expect the LVSA to aggressively pay back the bonds over and above the 30-year schedule. Southern Nevada Tourism and Infrastructure (SNTIC) recommendations expect the bonds to be paid back as early as 2037, as long as the projected economic conditions prevail.
Local and State revenue is expected to exceed 30 million annually
As a reminder, the local and state tax revenue is not to be confused with the hotel tax. The hotel tax is designed to pay the public’s portion of the stadium. The local and state revenue is expected revenue that the stadium will generate, directly, indirectly, and on an annual basis. Roughly one-third of this revenue is expected to go directly to education. These break down as follows:
- Sales Tax 11.2 million
- Room Tax 13.7 million
- Live Entertainment Tax 3.8 million
- Gaming Tax 4.3 million
- Transportation Taxes 2 million
These estimates are from the final SNTIC recommendation found here, and do not include modified business tax or commerce tax. This study is also based on a model of 46 live events. Of course, more events equals more tax revenue and less events equal less tax revenue. The minimum events expected are 30, and the maximum could be well over 100.
Both NRG and ATT Stadium host over 100 events per year; lawmakers and local leaders are banking on those types of numbers, at least 46 events, to push overall stadium attendance over 2 million annually, with more than 450 thousand new visitors per year. Remember, that figure is for all events and not just Raider or UNLV football.
What happens if the economy has another “Great Recession”?
Lawmakers have designed this project to withstand a major economic reversal. However, should Economic Armageddon arrive and all the designs fail, Clark County residents will be on the hook for any shortfalls to repaying the bonds. That being said and to get to that point, a type of economic event that has not happened since the Great Depression would be required.
First, it would require hotel occupancy to drop below 60%, and for an extended period of time. During the recession of 2008-2009, hotel occupancy never dipped below 80%. The “waterfall” reserve would kick in to make up the shortfall and would be able to make two full years of bond payments. If that fund were depleted, there would then be the tax revenue generated by the stadium itself which is expected to be over 30 million annually as stated above. Again, this revenue is “New” money; that means that even if this revenue stream had to be used, it would still not impact existing funding or existing programs.
Only if all those fail to cover the bond payments would the tax payers of Clark County become responsible for the debt, and only for so long as economic crises continued.
In the end, this hotel tax is not just for the Raiders
The businesses that are being financially affected by this tax the most are casinos and those who operate them and voted unanimously for this tax. They did this because they believe that this project will not only pay for itself, but it will increase their profits above the $50 million their companies will pay in annual hotel taxes as well.
There is also the direct benefit to UNLV. Currently, the school is doing everything it can for its program to be included in one of the big conferences. Right now, UNLV receives around three million a year from the NCAA in media revenue. Should the program be accepted into the PAC, for example, its media revenue would exceed 30 million a year and all of that new revenue would not just be spent on athletics.
Then there is the direct revenue that a state of the art stadium brings with new sponsors and increased attendance. UNLV is a program on the rise, and this new facility will be needed to accommodate the new fans in a climate controlled environment, something currently lacking at Sam Boyd Stadium, their current home. Similarly, the stadium will be much closer to the campus as well.
This article is part of a weekly series that will update various aspect of the overall stadium project. The next LVSA meeting with be August 17th. You can listen to Scott Winter explain this article on air 10pm Sunday July 30th on Fox Sports Radio 98.9 FM and 1340 AM. Give them a Follow.