The Las Vegas Stadium Authority has a money problem, and it’s evident in the agenda for the Thursday, September 20th 2018 1PM PST meeting.
First, the once common report on the hotel stadium tax revenue and Las Vegas Stadium Authority Budget is not present. There’s no agenda item that focuses on it, and no attachment that gives an updated report. The last time the Las Vegas Stadium Authority had a meeting was July 19th, and they only presented the money coming in through June. And even the stadium cost information stops at July 15th 2018 – it’s September 20th, 2018, now.
And even then, at the July 19th meeting, the news was awful: $3,529,152 and an average monthly stadium hotel tax revenue of $4,000,404.78 – each month through the 19 months of collection of the stadium room tax of 88/100th of one percent. A tax rate this blogger has consistently said since April of 2017 was too small for the planned bond issue of $750 million, and even too small at $650 million, which turned out to be the size of the bond the Las Vegas Stadium Authority eventually floated in April of this year.
The stadium hotel tax needed to throw off $5 million each month to be able to afford the monthly bond debt times the debt coverage ratio of 1.5 – the average of $4,000,404.78 is $999,595.22 less than what it needs to be to even expect to clear the stadium bond obligations.
In my blog post called “Oakland Raiders Las Vegas NFL Stadium Bond Debt Not Covered By Hotel Tax Revenue: A Detailed Look,” and published at Oakland News Now August 22, 2018, I wrote the following:
As explained on the Monday night, August 20th 2018 Zennie62 on YouTube Livestream Show, a municipal investment banker admitted that the $650 million bonds issued would be ultimately paid for by the “Las Vegas taxpayer”, and because the stadium tax rate was not large enough to raise money to cover the monthly bond debt.
The municipal investment banker friend of mine has been in the business for about two decades, and did not want his name or company name mentioned here. As I stated on Monday, he finally took a look at my analysis, and texted back this message: “The article was post sale. Also, the bds are a ltgo. So, any shortfall will be covered by property taxes. Not the general fund. Not to say this isn’t a bad deal. Most publicly financed stadiums are. But, if this deal goes belly up. Home owners in lv on the hook for it. ”
To which I replied back via text…”Which is exactly my point. Jessica Colvin, Clark County Finance Director, SPECIFICALLY TOLD me that would not happen, on the record, and as a reaction to my assertion it would. Because that is the political issue in Nevada. The stadium tax revenue is not covering the bond debt and it will not. This comes as the Clark County School District laid off 500 people as a result of two $60 million deficits. So the next step is to keep your name out of this. And report the problem.”
He texted back “Nice. Just keep me/firm out of it.“
In other words, contrary to the claims of Clark County Officials, the stadium tax revenue was not great enough nor was in going to be large enough to pay the bond debt when the debt coverage ratio of 1.5 is multiplied times the bond debt itself. And in that, the normal debt coverage ratio for a municipal bond of the type that was created to pay for part of the construction of Las VegasStadium is generally 2 (or 2 to 1), and not 1.5 to 1.
Steven Rice writes “A debt service coverage ratio of less than 2 to 1 may indicate that the municipality may have problems meeting its debt obligations,” in “What You Should Know About Revenue Bonds For The Series 7 Exam.”
The fact is, the stadium hotel tax revenue, which has actually shrank by two percent over a 12 month period, is also too small to produce a base of money that can pay for the $650 million bond issue, with its monthly debt coverage ratio. But it’s OK – Clark County Taxpayers will foot the bill, contrary to what they were told.
The problem, again, is simple: the average monthly revenue from the stadium tax is smaller than the average monthly bond debt when the debt coverage ratio of 1.5 is applied to the bond debt. This spreadsheet table that you can open here using this link, compares the two.
The Las Vegas Stadium Authority Meeting Agenda Is Missing Some Information
As I talked about on Zennie62 on YouTube Live last night at the 52:53 mark of the stream:
So, guess what’s on the Las Vegas Stadium Authority Meeting Agenda this time?
This: “Budget Transfers Between Functions” Or, what the heck is that? Well, the document tells nothing by word, but everything by number.
It contains a lot of language that reads like this: “That the Clark County Stadium Authority Board of Directors in accordance with NRS 354.598005 authorize the May 2018 transfers of appropriations between functions within various funds as shown on Exhibit B. (For possible action)”
“As prescribed by NRS 354.59805, the governing body shall be advised of the action to transfer appropriations between functions or programs within a fund. This action does not increase the total appropriations and is not in conflict with any other statutory provisions. The exact amounts transferred and the accounts, functions and funds affected are noted in the attachment. The purpose of the transfer is to realign appropriations with functional needs to manage Stadium Authority funds.”
Now, the NRS number refers to Nevada Law as it applies to local government budgets. Or, this: “NRS 354.598005 Procedures and requirements for augmenting or amending budget. 1 If anticipated resources actually available during a budget period exceed those estimated, a local government may augment a budget in the following manner:” And then it goes into detail:
(a) If it is desired to augment the appropriations of a fund to which ad valorem taxes are allocated as a source of revenue, the governing body shall, by majority vote of all members of the governing body, adopt a resolution reciting the appropriations to be augmented, and the nature of the unanticipated resources intended to be used for the augmentation. Before the adoption of the resolution, the governing body shall publish notice of its intention to act thereon in a newspaper of general circulation in the county for at least one publication. No vote may be taken upon the resolution until 3 days after the publication of the notice.
(b) If it is desired to augment the budget of any fund other than a fund described in paragraph (a) or an enterprise or internal service fund, the governing body shall adopt, by majority vote of all members of the governing body, a resolution providing therefor at a regular meeting of the body.
And then this language: “From Service and Supplies to Transfers Out to move interest to Debt Service Fund” – and a table above it showing $1.7 million. So that means, they’re putting $1.7 million into the Debt Service Fund.
Which is all well and good, but why not show us what the Stadium Authority Budget is at this point? Is it at a place where $1.7 million is needed to fix an anticipated shortfall? Moreover, since there’s no budget update between July and September, what’s this really all about?
Is this all to avoid telling us the Stadium Authority Budget has a shortfall? Is it $1.7 million? Why not tell us?
For all the world, it looks like the Las Vegas Stadium Authority is trying to bend over backwards to avoid stating the obvious: it has a money problem. The stadium hotel tax rate is too small to bring in enough revenue to cover future bond debt and because of the Las Vegas Vistor Decline Problem of the last year and four months.
It would be nice if this problem were just plain addressed out in the open. Clark County, Nevada Taxpayers deserve the consideration. Heck, since the County takes up 70 percent of the State’s population, we might as well say the whole dang State of Nevada.
Zennie Abraham is the CEO of Zennie62Media