Will Las Vegas hit Blackjack with the Raiders... or Bust?

With the National Football League (NFL) and the team owners approving the relocation of the Raiders from Oakland to Las Vegas, there are some serious concerns regarding the funding and the costs of building a $1.9 billion stadium in the desert. Many analysts have questioned whether the project can stay on budget due to recent estimates. Taxpayers should be alarmed by the new stadium in Las Vegas would require $750 million in public funding; Las Vegas would be on the receiving end of the highest level of public-financing for any stadium in the country. The experience of other cities that used public funding for stadiums should serve as a warning to the citizens of Las Vegas before they throw their money down.

To finance the new project, state officials declared they will be hiking hotel room taxes on the Las Vegas Strip (and adjacent areas) by 0.88% for the next 30 years; this tax mainly targets tourists. Although taxing hotel rooms in Vegas seems to be a viable revenue stream, occupancy rates haven’t recovered to levels before the 2008 crisis. In 2016, the rate was 90.8% compared to 94% in 2007. Additionally, the change in occupancy rate seems to have a cyclical correlation tied to GDP. Critics of the stadium highlight this relationship in order to show that tax revenue will not reach its projected payments levels. They are skeptical of the future market size of the city, and its ability to attract vacationers in the future as well.


(Data collected and manipulated from Statista)

On the other hand, the Tourism Infrastructure Committee forecasts that hotel room tax revenue would be sufficient to match or exceed the annual debt payments, even in the event of an economic downturn. The Las Vegas Convention and Visitors Authority (LVCVA) projected that the added tax would generate $50 million in revenue in 2018. The LVCVA indicates that the added tax would have little effect on the occupancy rate because the tax rate is still competitive with other vacation destinations.

An additional tax hike will be necessary to pay for a $200 million redesign of the local roads to accommodate expected traffic around the new stadium, which will come from an added fuel tax, which would raise $3 billion over the next 10 years. With all these new taxes, the new stadium may become more of a burden than a viable investment opportunity for the tourists and residents of Las Vegas.

According to the Las Vegas Stadium Project Senate Bill 1 Summary, the stadium will stimulate the local economy and boost revenues. The Tourism Infrastructure Committee estimated that there would be 6,000 permanent jobs created with an average wage of $38,500, plus an additional 18,700 construction jobs. In total, they project $35 million in government revenue, and a $620 million annual economic impact. The most updated figures suggests 15% of small businesses would be subcontracted in the development of the stadium. Most of these estimates are based on assumptions of annual attendance, the quantity of events played in the stadium, and the state of the economy.

Although these estimates seem enticing, in many instances stadiums in other cities have failed to leave their mark economically. Stanford Professor of Economics Roger Noll, warns, “NFL stadiums do not generate significant local economic growth, and the incremental tax revenue is not sufficient to cover any significant financial contribution by the city.” He later addresses that most sports teams leave cities with a considerable amount of debt. Oakland taxpayers will be on the hook for $83 million, even though they will have been abandoned by their football team. Sports teams tend to prey on the locals for funding, but they later move to find another venue, which leaves the taxpayers with considerable amounts of debt. At this point, the stadium may not reach its benchmarks due to the history of other stadiums.

With the construction of the new stadium under development, taxpayers should be wary of the new project and its ability to stimulate the local economy. In too many cases, stadiums fail to live up to their hype and only allow the select few to enjoy the benefits of watching a NFL game. As a result, cities shouldn’t waste their tax dollars to appease the wealthiest of Americans who have the ability to privately invest in the stadiums themselves; the construction of new stadiums has become a new form of corporate welfare.

The Raiders organization cannot be easily blamed for this disastrous deal. A line from the Raider’s unofficial poem, “The Autumn Wind,” tells taxpayers exactly what is coming: “The Autumn Wind is a Raider,/ Pillaging just for fun.” Taxpayers should not sit back and allow the Raiders, the NFL, and the Nevada government to pillage them in the name of a public investment that historically has failed to provide what has been promised.