Steampunk Finance

The vote before the Las Vegas City Council is not about Soccer. We all want it and support it. The vote is about whether it is proper and prudent for government to pay for it, and, if so, about how much of it should be paid for by government.

This Forbes article written less than a year ago offers important insight for those analyzing the “non-binding term sheet” that proposes to put City of Las Vegas taxpayers at risk for three-fourths the cost of a proposed soccer-specific (MLS-specific) soccer stadium in Symphony Park.

The deal calls for the Las Vegas team to pay one of the highest rents of any MLS team in America out of its profits. Without those rents, the City won’t have enough money to make the loan payments. Therefore, if the MLS team can’t make the high rent, city Taxpayers will have to come out of pocket to make it good. That’s in addition to carving $3-million a year from the City’s parks budget and devoting it to additional loan payments.

The Forbes article says of the MLS’s 19 teams, 9 are not profitable. About half.

Similarly,  of the 19 teams, 9 have annual revenue less than the forecast for the Las Vegas teams. And 11 of the 19 teams have less profit (after rents) than the forecast.

The Las Vegas forecast calls for 18,000 sports fans. on average, to buy tickets to every home game (plus three more games?!?). So far, the hottest sport ticket in town has been the UNLV Rebels basketball team, with average  attendance of less than 16,000.

So the proposed stadium will be built on a set of financial assumptions that are risky: that the new start-up professional soccer team will enjoy above average profits on average gross revenue, with record attendance.

Two points of light in the constellation help gauge interest:

The City administration has been tweeting and facebooking its special webpage to promote the stadium – here it is. It was up for a month, and 57 people, most not from the City of Las Vegas (only 1 in 4 valley residents are City of Las Vegas residents), registered their support.

The developer has been offering free t-shirts to the first 500 supporters who will come downtown to City Hall tomorrow morning for the meeting – you can get yours here. So far, they’ve received 111 commitments.

If an enterprising and creative businessman thinks they can enjoy better-than-average profitability starting up a professional soccer team with record attendance, God bless ’em. But this deal puts the risk of failure on the wallets of taxpaying Las Vegans.

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