Stadium money trail brings Raiders to Las Vegas

The finances behind this $2bn move are scary...

Stadium money trail brings Raiders to Las Vegas

Ben Margot/AP/Press Association Images

The soon-to-be former Oakland Raiders are quitting the city for the second time (after leaving for LA in 1982 - before returning in 1995) to migrate east to Las Vegas.

"The Raider nation is the last of the blue-collar, salt-of-the-earth fan bases, and it absolutely breaks my heart to lose this team," Libby Schaaf, the mayor of Oakland said after the news broke.

As Raider bosses surveyed their future options she said that the city could offer land for a new stadium and infrastructure upgrades to service it, but there was no possibility of tax revenue being handed over to the private football franchise to subsidise the building costs.

Incentives

"As you know, there’s been a stadium situation in Oakland that we felt needed to be addressed. I think even our friends in Oakland agree that it needed to be resolved for the long-term issue of the team, and frankly, the community. This has been an issue for well over a decade," NFL Commissioner Rodger Goodell commented during the opening statements of his press conference announcing the move.

That 'stadium situation' will be addressed as the team develops what will be the world's most expensive arena at a cost of almost $2bn - which will be subsidised by local taxes.

$750m in public funds from Clark County (where Las Vegas is situated) will be pumped into the project which is set to be completed in 2020.

Stanford economist Roger Noll has described the move as "the worst deal for a city I have ever seen."

The money will come from a new 'room tax' levied on the booming Las Vegas tourism industry.

Cost management

There is already a room tax in Vegas - part of which is used to finance public amenities such as schools and transport services and it remains to be seen what impact this new tax will have.

If hotels reduce their pre-tax prices to avoid increases in costs which could turn off potential visitors, this could lead to a reduction in the funds going into these public services (as the new tax is built-in as the overall price stays the same - so the cut given to these services falls).

Alternatively, room price increases could reduce demand.

The franchise will be dependant on fans flying into the city (in the same way Britney is at the Planet Hollywood resort down the road) - it expects one-third of tickets to be sold to away fans. No other team manages to draw more than 10%.

Cash per seat

While it has a massive fan base in Oakland and the local economy is booming, the Raiders 90's stadium lacks the high-earning suites which bring in big money.

Its shiny new Vegas home will be engineered to maximise earning potential.

Back in Oakland...

Mayor Schaaf is standing by her decisions: "I am proud that we stood firm in refusing to use public money to subsidise stadium construction ... As a lifelong Oaklander, my heart aches today for Raider Nation. These are the most committed and passionate fans any city or team could hope to have. They deserved better," she added yesterday.

When the team came back to Oakland in 1995 the county subsidised the cost of extending the Oakland–Alameda County Coliseum where the team currently plays.

As the team prepares to go, taxpayers in Oakland still owe $85m in stadium debt repayments from those renovations.