Smooth Criminal (Use of Public Funds)

TL;dr How Vegas added sports to the entertainment mix. How we fund events and special projects though room tax. How the Raiders came to Vegas and got a stadium. The financial outline of the proposed A’s deal. Why the A’s numbers don’t make sense.

On Weds the A’s baseball franchise and Gov. Joe Lombardo announced a tentative deal to support the A’s move to Vegas using public money in part for building a new $1.5 billion retractable roof stadium. On Fri draft legislation was made public with the proposed details.

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Not so long ago major sports leagues shied from Vegas due to sports betting. We had minor league hockey and baseball and major league stock car and drag racing. The big leagues started to warm to the idea about 15 years ago when Thomas and Mack Center at UNLV hosted the 2007 NBA All Star Game. Like all NBA all star games it sold out but also brought another hundred thousand people to town. Yep, 100k. We host events this big all time with many larger. It was packed and not everyone had the same idea of having a good time. It was a cluster out in the resort corridor in terms of crowds and violence. To make it worse they weren’t spending any money.

The results were at least two fold. First it ushered in the era of “if you aren’t going to spend money here we don’t want you here”. Over crowding the gaming floor and other amenities with scores of people that are here for a hang and not spending money is bad for business. Some of the big casinos removed “front features”, for example the lion habitat at MGM Grand or anything else that didn’t specifically drive revenue. If you ain’t spending we don’t want you. That mindset continues to this day.

Second it let the leagues see that Vegas had enough pull to make it a major league sports town. Vegas had long been the leading destination for combat sports starting with boxing and now MMA. Soon college tournaments and MLB and NBA exhibitions were being played in town. Eventually we lost the hockey team due to losing a venue that was too big for them and they were never able to find another. However in 2017 things changed. MGM Resorts, AEG and Bill Foley teamed up to build what is now the T-Mobile arena to help land an expansion NHL team. MGM Resorts went a step further and bought the WNBA San Antonio Stars and moved them to town as the Las Vegas Aces. That would be the 2022 championship Las Vegas Aces. The motive for buying the Aces (five years later sold to Raiders owner Mark Davis) was to use them to drive attendance to the arena at Mandalay Bay on the south end of the Strip. Both deals were done with all private money. All. Private. Money.

Prior to that time the resorts and community leaders were looking for a solution to the problem with the aging Sam Boyd Stadium home of the UNLV Rebels football team. The place was small even by lower tier college standards and had poor infrastructure and fan amenities. It was on the other side of the valley a 20-30 minute car ride from the resort corridor and not exactly the best part of town. Sam Boyd was where we had dirt shows like Monster Trucks and Supercross plus the occasional concert. By now the huge shift in entertainment outside of casino showrooms and Cirque theaters was full tilt boogie. Many large events bypassed Vegas for lack of a venue though there was demand. We were in danger of losing some big events as they’d grown so much they needed a stadium sized venue.

The resorts and local benefactors started shopping around for a site for a new UNLV stadium this time in the resort corridor. It was figured to be $650-700 mil to build a state of the art college football stadium for a not so state of the art college football team. They weren’t (still aren’t) very good but we needed the venue and you’ve got to support your local university no matter how good they are.

The NFLs Raiders owner Mark Davis learned of the quest to build a new stadium. He was able to connect with the late casino magnate Sheldon Adelson of LV Sands fame and bend his ear about how if they built an NFL stadium they could let the Rebels play there and get the Raiders to move to Vegas. Soon they were in cahoots. The other resorts weren’t so keen on the idea of giving public money to a billionaire.

At the same time there was action to expand and modernize the Las Vegas Convention Center. Ol’ Shelly didn’t like that because he owned this run down shit hole of a convention center the Sands Expo. It was oddly shaped, a pain in the ass to load in and load out with aging infrastructure. Eventually Sands Expo got a remodel but the load it still sucks. And the building is still a weird shape. The rest of the mob bosses resorts agreed that if Adelson didn’t try to block the convention center upgrade they wouldn’t try to block the stadium. They had a deal. I kid comparing the mob to the current day resorts. The mob ran things differently. They kept their word and didn’t try to blow smoke up your ass.

We have a funding mechanism here to pay for things like event promotion. It’s run by the Las Vegas Convention and Visitors Authority. What Happens in Vegas Stays in Vegas is the work of the LVCVA or rather the ad company they hired. If it pro otes Vegas they’ve paid for it. In conjunction with Las Vegas Events they are funded by a portion of the hotel room tax. It’s a built in promotional fund and administrative arm (LVCVA) as well as a team of large scale event pros (LVE). If you’ve got a big dog event you want to have in town let either of them know and they’ll help you out. From everything like permitting, event coordination and even finding a suitable venue. If you’re big enough LVCVA may buy some sponsorship like the Visit Vegas banners and other activations you see on TV at the big events. LVCVA also polls visitors and tracks statistics about visitation and revenue in the most wonkiest ways. They are data driven.

The room tax not only pays for event promotion and advertising the city but also for things like education, public safety and infrastructure. As part of the stadium deal the room tax was increased to cover the bonds used to subsidize the build the football stadium. It’s a hit and unlike most other publicly funded football stadiums it’s turning a profit for the area by driving visitation. Most don’t make back what it costs the public to build them. Ours turned out to be a good deal. An expensive deal but good none the less. We know this stadium is driving revenue because the data gurus at LVCVA crank these sorts of stats out on a regular basis. It’s not guess work by the resorts and locals it’s a Mount Everest of data accumulated over the years as well as current data that is meticulously trolled to extract every detail. Using that data and counting the money we can tell.

We now find ourselves trying to do a deal with the Oakland A’s to become the Las Vegas A’s. They are on track to have the worst record of any major team in the history of MLB. But they’re also gunning for the lowest ever attendance of an MLB team in a season. So they got that going for them. The owners and management group of the team have won over no fans or civic leaders from Oakland. Hence coming to Vegas hat in hand. So far they’re not doing real well here.

There were rumblings of wanting to try and get a future MLB expansion team for the area. That hasn’t really panned out as there isn’t anyone at the moment to back such a venture. The A’s have been trying to beat a deal out of Oakland for years. I’m not against adding an MLB team. Unlike the Raiders deal we don’t have a dire need for a venue that size. Or any need. For the football stadium were were going to spend almost that much on a bit smaller (but still quite nice) college stadium and for the extra money we got a bigger venue and the benefit of getting an NFL team. If you can call getting the Raiders a benefit.

Personally I’d have been happy with the college stadium. We needed a bigger room to attract new events and keep some of the growing events we have. Table games, sports betting and slots, while having fantastic margins, don’t drive visitation or the bulk of revenue anymore. Entertainment, hospitality and conventions/meetings do. Now sports is adding to that as well.

The proposed A’s deal calls for the state to provide $180 mil in transferable tax credits. That means if you don’t use them you can sell them to someone else. Half of that is able to be rebated (meaning they get cash) if they don’t hit that tax threshold. That may be a gift of $90 mil depending on how well they do tax wise. Business taxes aren’t that heavy here in spite of what some of the businesses say.

The county part of the deal calls for $120 million in bonds backed by a taxing district that encompasses the stadium. Under the legislation the state would mandate the county issue the bonds bypassing a vote from the county commissioners. It’s a dick move from a governor that ran on low taxes and cutting red tape. That means that any tax funds the county would get from the site go back to paying the bonds. It also means if the tax revenue is short the county picks up the tab probably through property taxes for me and my fellow Clark County property owners. There is a 30 year property tax abatement as well as a $25 million infrastructure grant for egress improvements and utilities. The property tax abatement isn’t unheard of for large businesses moving to the state. Tesla and Amazon have such deals. Taxing districts aren’t new either though less common. Tesla and the Raiders have such deals.

The taxing zone and the amount is another issue. There may not be enough tax revenue generated in that area to pay the bonds. The visitor stats the A’s, their economists (who aren’t economists more like lobbyists) and the property owner (GLPI) and site tenant (Bally’s) have given ridiculous estimates of 2.5 million out of area visitors a year all while saying 70% of the baseball attendees will be locals. Those numbers don’t add up. To hit the 2.5 mil mark alone you’d need to have over 30k attendees at each home game. This is a team that averages just under 10k per home game attendance. Last week they had a couple of games in the 2500 range. The Dodgers average 47k per home game.

Bally’s and the A’s say the out of towners are going to be largely from the other events they’ll host at the ballpark. They offer no specifics of other potential events other than at 30k seats it fits between the arena at 20k and the stadium at 65k. As a number it is between the capacity of T-Mobile and the stadium. As a metric for how events compare at the other venues it’s almost gaslighting. It’s like they’re peeing on my leg and telling me it’s raining. For most concerts at the stadium it’s in the 30-40k range. The arena regularly sells out at 20k. The stadium easily does 30k in a reduced size though Garth, Taylor or Beyonce and the like will do full boat 65k.

Logistics will be a hassle. Load ins and outs at baseball stadiums being a pain in the ass as you can’t get the trucks to the stage much of the time and certainly can’t drive them on the grass even if there was a tunnel. Even if you put down some sort of geotech on the field natural turf is no match for a rock box. Those costs are non-trivial when a stage that size and capacity has to be built. Even at that the gap between tours doing 20k and 30k is slim. Mostly you’re either doing arenas or stadiums though I’ve done some arena/stadium combo tours.

So what else is there? Dirt shows? Doubtful as they need access for tractors and dump trucks. The set and strike times aren’t conducive to in season play as it blocks out almost two weeks. Baseball isn’t the right config for most trade events. I’m not seeing anything that fits easily in the space. It would need at least a single tunnel and the ability to drive on the outfield. You could do festivals but we’ve got a ton of those so anything moving from whatever festival site here to the ballpark is cannibalization not growth.

I’m not seeing a place for it in the market where it adds anything except baseball. That’s going to be a tough nut to make back on baseball. Particularly when it’s the shittiest team in a single season in the history of baseball.

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