Clark County Taxpayer Backing Makes Oakland Raiders Las Vegas NFL Stadium Bonds Sellable Even With Hotel Tax Problem
At the Las Vegas Stadium Authority Meeting of last week, January 11th 2018, Oakland Raiders President Marc Badain said he expected Clark County to start the sale of bonds associated with the proposed $750 million subsidy in April. According to my friends in the sports stadium and league financing industry, given the problems with the County’s stadium hotel tax revenue to date, the only way the bonds could be sold is with the backing of the Clark County General Fund. In other words, with the help of Clark County’s taxpayers.
To put it simply, as long as the county’s backing the bonds, meaning the taxpayers, the bond underwriters don’t care what happens to the hotel tax. And they can raise the tax if they want to. That’s even as Jeremy Aguero, the Applied Analysis Las Vegas consultant who has served as one of the staffers to the Stadium Authority, said to me on video that he believed it was “highly unlikely” the Nevada Legislaure would increase the tax rate.
The fact is, that Clark County taxpayers were always the base of support for the ‘Raiders Bonds Las Vegas Version’ is not news if one has paid attention to the legislative process that created the financing, and were not afraid to ask questions about it, or do research associated with it. Indeed, the description of the very law called The Southern Nevada Tourism and Investment Act (SNTIA) points to Clark County, and not the Las Vegas Stadium Authority, as the issuer of the Raiders Bonds: “issuance of general obligations of Clark County for the financing of a National Football League stadium project or a college football stadium project under certain circumstances.”
Note, even though the Stadium Hotel Tax was established for the purpose of collecting money for the public subsidy, because the bond is not a “revenue bond”, it’s basically a kind of trick – a procedural slight-of-hand designed to make sure the bond issue of $750 million can be sold, even if the revenue from the stadium tax happens to fall short of required levels over the course of time.
For example Investopedia calls a revenue bond this:
“A revenue bond is a municipal bond supported by the revenue from a specific project, such as a toll bridge, highway or local stadium. Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source. Typically, revenue bonds can be issued by any government agency or fund that is managed in the manner of a business, such as entities having both operating revenues and expenses.
So, if the Raiders Las Vegas Bonds were revenue bonds, then the Clark County Hotel Stadium Tax would be the dedicated revenue source, not the Clark County General Fund combined with the stadium tax.
Investopedia calls a general obligation bond, of which the Raiders Las Vegas Bonds are, this:
“A general obligation bond (GO) is a municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project. General obligation bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are used as collateral.
In the example of the Houston Texans Harris County Bond issue, those were hotel tax-backed revenue bonds, and the reason was the State of Texas has a law against using a county general fund in the way it’s used in the case of the Raiders Bonds.
So, when the Harris County Stadium Bonds were facing default, the County said to the bond uunderwriters, “we can’t help you” – the bonds were eventually restructured, and the payment structure adjusted, but the taxpayer was protected.
In the case of the Raiders Las Vegas Bonds, the taxpayer has no real protection of that kind. There’s nothing to stop the use of the taxpayer coffers, because the bond allows the use of Clark County taxpayer coffers.
I stop here to say the Clark County taxpayer was clearly suckered: a bond issue that they did not vote for and that could dip into monies for other county services if the Stadium Tax Revenue continues to be less than what the bond debt service calls for: an average of $5 million per month – at the least. The Clark County Hotel Stadium Tax Revenue has been at $4.194 million to date – that would be $806,000 per month, or $9.6 million each year or $290.1 million the Clark County taxpayer would be responsible for paying.