The Raiders’ Secret Stadium Scam
A loan made by Bank of America to the Raiders remains hidden from the public and bodes poorly for Las Vegas
Mark Davis, while filthy rich, is not quite as wealthy as the rest of the oligarchs that count a National Football League team as part of their portfolio. Meaning, that in order to build his glittering $1.9 billion-dollar palace for the soon-to-be Las Vegas Raiders in the Nevada desert, Davis had to go running to Bank of America hat in hand to secure a $650 million loan.
The NFL Board of Governors signed off the move in March, despite the fact that they never got a chance to see what the actual terms of the loan were. Neither will the general public, thanks to Senate Bill 1, the legislation that created the generous – to say the least – $750 million bond via an 0.88 percent room tax increase, also included language that will keep the fine print of Bank of America’s loan a secret.
Via the Nevada Independent:
Per language in the legislation authorizing public funding for the facility, information the team demonstrates is “proprietary” or “confidential,” such as its finances, cannot be shared beyond the Stadium Authority.
“A big part of the information that the board will get will be confidential,” said Steve Hill, who chairs the Stadium Authority and leads the Governor’s Office of Economic Development. “The Raiders’ financial situation is not going to be a public document. We’ll get a framework for that at a board meeting, but the individual board members will get a more thorough briefing outside the public.”
Why would the Raiders and Bank of America not want prying eyes poring over the loan? Because it might let the public know that Bank of America isn’t 100 percent sure that the Raiders are going to drive swarms of tourists to visit Las Vegas, which is how the city justified this boondoggle. Clark County Commissioner Steve Sisolak, who played a major role in helping to ensure that the Raiders’ move and the new stadium became a reality, doesn’t think the math adds up.
“A regularly structured deal on $650 million amortized over 30 years, the principal is $20 million a year,” Sisolak said in an interview with the San Jose Mercury-Tribune. “With just a 4 percent interest rate it would cost an additional $26 million annually. Where are they going to get $46 million a year? I don’t understand this.”
One way is if Davis promised Bank of America a taste of the revenue streams that the Las Vegas Stadium Authority and Clark County plan to hand over to Davis as part of the lease agreement. As sports economist Roger Noll told Deadspin, because Davis is cash- and asset-poor (relative to his NFL brethren) the only way that Bank of America would sign off on this is if, “[Davis] puts up the PSLs, the stadium naming rights, the sponsorships, etc. and you start getting near the loan threshold with all those things,” he said. (Sisolak too hinted that this must have played a role in Bank of America’s calculations.)
But PSL fees and the other goodies aren’t driven by attendance, and while sponsorship agreements might wane should the Raiders find themselves playing in a half-empty stadium, the city of Las Vegas can’t afford that risk. Again, via Noll, Las Vegas is laboring under the delusion that the Raiders’ presence will draw upwards of half a million additional tourists per year in order to arrive at the conclusion that the city won’t suffer serious financial harm paying back the bond.
“Why would they go with this phony baloney stuff that Vegas is different. Why would they believe a half a million who would never visit Vegas would suddenly show up because there is a football stadium? It’s so far out there it is a puzzle,” he said. “The probability that it could happen isn’t zero, but it is pretty close to zero.”
Even in the event that the worst-case scenario plays out, Davis still comes out ahead, just because when he does eventually to cash out, he’ll be selling a sweetheart lease agreement, a guaranteed NFL broadcast deal, and all the other locked-in revenue streams. Plus, a new bar has been set for publicly-funded stadiums, which is why the NFL was so eager to okay the move and Davis’s entire motivation for ditching Oakland to begin with.