I remember as a young journalist, 30 years ago, interviewing a fellow who worked for the government “economic development” effort. To illustrate his point that the Las Vegas economy was completely dominated by tourism, he had me pull out my billfold and grab the first piece of green I found. In those days and that business, it didn’t take long.
He showed me where on currency you find which US Mint or which branch of the Federal Reserve had issued that bill. That told you what part of the country the tourist who tipped the dealer, etc, had come from. Turned out that there was a remarkable diversity of where the cash came from, even for a kid who worked in radio, paid from the advertising fees paid by local concerts, car dealers, and grocery stores. In many communities, that isn’t true.
So the when stadium promoters say the costs of stadium borrowing will be paid for with “tourist dollars” it sounds pretty painless.
Another example I offered a TV reporter last week – say Harrah’s buys commercials on your TV station. You get a paycheck. Is your paycheck tourist dollars or grocery dollars?
I first wrote about where the cash was coming from three and a half weeks ago.
It’s still accurate, as I write on Sept. 15.
The money to build the stadium will come from a combination of the developer, money taxpayers have on hand at the city, and money the city will have to borrow. which total $200M:
- The STAR Bond for $22-M that will be paid back.
- It’s to be paid from the sales tax generated by the latest expansion of the Downtown Factory Outlet Mall. Normally, this is distributed to many local government units by population: Clark County gets the most, followed by Las Vegas, Henderson, NLV, etc.
- Under the city’s plan, they all give up their share to the City of Las Vegas. This presents a potentially serious political obstacle – they might not want to give that revenue up.
- $44-M “soft costs” paid by the developer
- Soft Costs are very squishy. Generally, competent developers who work Government mark up their costs before charging them to the project.
- A gift from City taxpayers of $19-M
- No repayments. Taxpayers just give it away.
- Don’t forget the value of the land. The Promoters are leaving out the City’s six-figure (maybe 7) gift of the land. It’s probably about $ 20-million. Because the City is going to retain ownership, it effectively grants the promoters 100% property tax abatement forever.
- $115-M in “general obligation” bonds that will be paid back
- This is where taxpayers assume the biggest risk, as discussed below.
To pay back the $115-M, we’re going to pay cash, $7-M per year, for the first ten years. Then, for the next 20 years, it’s $8-M per year.
The plan is to use $3-M in “tourist dollars” plus $4-M in “Team/Stadium Profits” to pay the $7-M. If the “Team/Stadium Profits” fall short of its aggressive projections, the City Council will have to decide which services to cut, because the City is “guaranteeing” the team’s share of the payback.
The “team/stadium profits” category looks iffy, especially with the inexcusable errors found in the financial projections.
That leaves the $3-M/year “tourist money.” It’s a payment negotiated with the County, some years ago, whereby all the cities get a “commission” for the work of collecting room tax within its borders.
It is not stable enough to put up as collateral for any loan.
So the plan is to put up our future general fund revenues – our general tax income – as collateral.
The commission earned is kind-of “tourist money” but, by the terms of the “Interlococal Agreement” with Clark County, it must be (and always has been) dedicated to parks and park maintenance. It has never been pledged to cover any loan repayment.
The amount the cities get is fiercely negotiated every couple of years. It is so tenuous that it cannot be bonded against. It may get redirected by the county or state government for some other purpose, in which case city taxpayers would have too come up with it out of some other, existing program.
So that’s it. Which are “tourist dollars” and which are resident dollars?