Tax exempt bonds financed from a hotel charge on Las Vegas casino resorts being used to build Raiders Stadium could increase the cost if a provision in federal tax code legislation is approved. House Republicans unveiled their tax plan Thursday, and part of the proposal would eliminate the ability of stadiums to use the popular method of paying for such facilities.
The current projected cost of a new Raiders Stadium, slated to be built just west of the Strip, across the I-15 from Mandalay Bay, is $1.9 billion. Raiders owner Mark Davis is paying $500 million, while Bank of America has pledged $650 million. The remaining $750 million will come from the city.
To cover this amount, the Las Vegas Stadium Authority and Southern Nevada Tourism Infrastructure Committee successfully lobbied for an add-on to room charges that could be converted to bonds.
Under terms of the stadium agreement, that money was expected to be tax-exempt. But the proposed GOP tax plan alters the calculus, as it seeks to disallow such funding mechanisms. Instead, if the tax reform as currently written were to become law, these bonds would be taxed, adding another $100 million to the final stadium price tag.
“The stadium, as designed, appears to meet the definition of a project that could not use tax-exempt bonds,” Jeremy Aguero, a consultant on the stadium project for Applied Analysis, told the Las Vegas Review-Journal. “That could potentially affect the financial models we have been using in estimating the potential cost of the project.”
Aguero also noted there’s no applicable grandfather clause for bonds issued after Nov. 2, even though the deal that brought the Raiders to Las Vegas was signed in March, and the parties involved had no indication such a new tax was a possibility.
Construction on the Las Vegas Raiders Stadium is scheduled to begin in December.
The original plan called for a fee of 0.88 percent to be added to room charges for venues on and near the Strip. So far that fee has add, on average, an extra $1.50 a night to the typical visitor’s hotel bill. Other hotels in Clark County that are further out from the Strip are paying their share of stadium fees by charging customers an extra 0.5 percent.
The Nevada Legislature approved the tax add-on in October of 2016, and visitors began paying it on March 1 of this year. The Stadium Authority and Infrastructure Committee assured state legislators that the increase in room fees would be enough to cover the $750 million.
Richard Jost, a lawyer and professor at UNLV, and expert in these types of financial dealings, told the Review-Journal that this piece of the tax reform was unexpected and seemingly out of nowhere.
“All of the people who claimed to be in the inner circle and in the know in Washington had been pretty adamant about what was going to be in it and what was not going to be in it,” he said. “I think the vast majority thought state and local government debt issuance for public-purpose projects was not in the bill at all.”
With politicos parsing through the Republican House tax bill, to explain the sudden inclusion of state and local bonds as a matter of federal tax reform some people are looking at Las Vegas’s Sheldon Adelson.
The Republican megadonor, identified in the new Paradise Papers as one of the most influential people in GOP policy, initially had an interest in bringing the Raiders to Las Vegas. In 2016, he had agreed to put $650 million toward the project, but backed out in January 2017 as negotiations with the Raiders spun apart. The team then replaced that money with the Bank of America investment.
Whether or not this tax bill makes its way to the President’s desk with the bond issue intact, the stadium itself is moving forward. Activity at the future 65,000-seat venue just west of the Strip at the south end of town began in September and is (literally) ramping up for the big dig in December.
Crews and heavy machinery can be seen prepping the vacant land for an effort that will have the Raiders new home ready for the start of the 2020 season, while the fight begins to see if Stadium investors will have to pay the federal government an extra $100 million for the privilege.