A couple years ago when UNLV was presenting its on-site stadium, I prepared most of the financial and economic projections so I wanted to share a basic overview of financing a stadium of this size. Mainly because of Murren's comments about not wanting the hotel room tax to be diverted from new convention center renovations and additions. I had help with the Finance side of things but just wanted to share my knowledge.
For the last stadium proposal it would be all owned by UNLV so it would have been funded with pretty much all taxpayer money. This one will be privately owned, so the financing will be a little different and I am not involved this time around so don't know the specifics but this should help people understand what goes on.
The money used for construction needs to be spent all during the construction time, say 3 to 4 years. So in order to raise that much money at once they need to sell bonds. But bonds have interest rates and the interest rate is tied directly to the type of tax used to pay the bonds off. So the tax needs to cover the construction cost amortized over 30 or so years and the interest payments.
Sales taxes are the lowest risk and therefore have the smallest interest rate so it can raise more for the construction. A Live Entertainment Tax or Hotel Room Tax would have a higher interest rate. Also, the tax itself would have to cover the entire bond payment. So it wouldn't work if tax diverted to the stadium wasn't enough to cover the bond payments.
Its a been a while since I have crunched the numbers but basically the best bet was the sales tax, even if it is a tax district around the strip and downtown as they would directly benefit from the stadium. Certain exclusions could be made as far as how they draw the tax district boundary. Unless a lot of private money was used, the Live Entertainment Tax would have to be raised a substantial amount to cover the bond payments.
Also, Las Vegas has no problem getting visitors here during the weekends. It is the weekdays that need filling rooms. So new football games on Saturday or Sunday are great, but they don't really get new people here, room rates on those days might increase like what happens on New Years, but that wouldn't occur often enough to really impact anything. That is why there is such as big push for the new convention center space. It isn't so much the amount of space, but the type of space to handle certain things. Tractor conventions or other conventions that showcase large equipment have special needs. I didn't look that much into that issue but that was what they said at least.
The biggest complaints I was hearing back then was that all the big players were sold on the economic benefits and need for Las Vegas to have a big stadium, but UNLV didn't really sell itself as to why it needed to be the owner of a stadium that large. In fact, I would say it failed misearably in that regard. It did a great job saying Vegas needs a stadium but when it came time to answer "Why does UNLV need a stadium?" the answer was pretty much "It will enhance the student experience" seriously!? after all of the budget cuts and need for a new medical school we are now spending over a Billion Dollars just to enhance the student experience? As much as I wanted the new stadium I myself had to think it just wasn't worth it if that was the only argument they could make.
Also, like I said above, the big issue right now is getting people here on weekdays all year long and the convention center renovations addressed that issue more than a stadium. But it looks more like the two can be funded at the same time if a sales tax district is used for the stadium, or if enough private money is used so that the Live Entertainment Tax can afford to make the bond payments.
So hopefully with a casino company backing this and putting up enough money to make the bond payments more manageable it has a better chance!
For the last stadium proposal it would be all owned by UNLV so it would have been funded with pretty much all taxpayer money. This one will be privately owned, so the financing will be a little different and I am not involved this time around so don't know the specifics but this should help people understand what goes on.
The money used for construction needs to be spent all during the construction time, say 3 to 4 years. So in order to raise that much money at once they need to sell bonds. But bonds have interest rates and the interest rate is tied directly to the type of tax used to pay the bonds off. So the tax needs to cover the construction cost amortized over 30 or so years and the interest payments.
Sales taxes are the lowest risk and therefore have the smallest interest rate so it can raise more for the construction. A Live Entertainment Tax or Hotel Room Tax would have a higher interest rate. Also, the tax itself would have to cover the entire bond payment. So it wouldn't work if tax diverted to the stadium wasn't enough to cover the bond payments.
Its a been a while since I have crunched the numbers but basically the best bet was the sales tax, even if it is a tax district around the strip and downtown as they would directly benefit from the stadium. Certain exclusions could be made as far as how they draw the tax district boundary. Unless a lot of private money was used, the Live Entertainment Tax would have to be raised a substantial amount to cover the bond payments.
Also, Las Vegas has no problem getting visitors here during the weekends. It is the weekdays that need filling rooms. So new football games on Saturday or Sunday are great, but they don't really get new people here, room rates on those days might increase like what happens on New Years, but that wouldn't occur often enough to really impact anything. That is why there is such as big push for the new convention center space. It isn't so much the amount of space, but the type of space to handle certain things. Tractor conventions or other conventions that showcase large equipment have special needs. I didn't look that much into that issue but that was what they said at least.
The biggest complaints I was hearing back then was that all the big players were sold on the economic benefits and need for Las Vegas to have a big stadium, but UNLV didn't really sell itself as to why it needed to be the owner of a stadium that large. In fact, I would say it failed misearably in that regard. It did a great job saying Vegas needs a stadium but when it came time to answer "Why does UNLV need a stadium?" the answer was pretty much "It will enhance the student experience" seriously!? after all of the budget cuts and need for a new medical school we are now spending over a Billion Dollars just to enhance the student experience? As much as I wanted the new stadium I myself had to think it just wasn't worth it if that was the only argument they could make.
Also, like I said above, the big issue right now is getting people here on weekdays all year long and the convention center renovations addressed that issue more than a stadium. But it looks more like the two can be funded at the same time if a sales tax district is used for the stadium, or if enough private money is used so that the Live Entertainment Tax can afford to make the bond payments.
So hopefully with a casino company backing this and putting up enough money to make the bond payments more manageable it has a better chance!
