ONN – Allegiant Stadium Debt Service Reserve In Trouble, Stadium Already Late To Open
Las Vegas Stadium, AKA Allegiant Stadium and the future home of the former Oakland Raiders, has been the focus of more unnecessary fake news than any major stadium in history. The two most persistent examples are the bond financing and the time it will open.
Last night, Jeremy Aguero of Applied Analysis in Las Vegas was the latest to issue fake news about Allegiant Stadium. This time, on FOX5 Las Vegas Local News. He had to assure everyone that the Nevada Legislature-approved $750 million subsidy crafted to help pay for stadium construction, and itself paid for by a 88/100ths of 1 percent tax on hotel rooms in a 25 mile radius, would not fall on Clark County taxpayers. Here’s Jeremy…
This concern is just, because the shelter-in-place response to The Pandemic has shut down Las Vegas, causing the normally strong flow of tourism to stop as the whole world tries to limit the rising death count. It’s a situation that Jeremy Aguero nor I or anyone saw coming. But rather than admit there’s a problem because of it, he goes on TV to say “nothing to see here.” Well, no.
The $750 million subsidy is based on a general obligation bond structure, which means it really gets its money from the Clark County General Fund. What happens is that, to protect the Clark County General Fund from loss, the stadium hotel tax was crafted – the money is drawn from it to pay down the bond debt. But what happens when people stop going to Las Vegas and staying at hotels? The money from the hotel tax drops to a trickle.
Based on the forecast by the Las Vegas Convention and Visitors Bureau, and issued last week, at the low end, the best the hotel revenue that the tax is based on can muster is $100 million for the fiscal year – that boils down to just $8.8 million for the Las Vegas Stadium Bond Issue for the whole year. That’s far less than the $50 million it took in during the previous fiscal year.
So, we are looking at a $41.2 million loss, if we use that estimate; the debt service reserve is $56.8 million, according to the latest report on the Las Vegas Stadium Authority website from the January 2020 meeting. That means the debt service reserve would be drawn down to $15.6 million.
And here’s the bad news: the money loss started a month ago. This is what I wrote in March:
According to this vlogger’s research, as of this writing, the known cancelled major convention events sets for Clark County and the Las Vegas Strip total 55,900 visitors, a loss of $22,721,500, and a loss in hotel stadium tax revenue of $199,949.20. The events cancelled or postponed are Channel Partners Conference & Expo, Security industry conference ISC West, NXT Global Summit, Atmosphere ’20, Adobe Summit, MISS Conference, and SAP Ariva Live.
Since the average hotel stadium tax revenue per month has been about $4,200,000, so right now, that’s just about 4.7 percent of the monthly average. The trouble is, the real problem is the cancellations of visits to Las Vegas for March and for April are not confined to the events named – the list keeps growing.
Moreover the decline in non-convention visitors, though not subject to an official count in real time, is constantly mentioned in social media. It’s either a tweet reporting that “people call to cancel rooms through July”, or “a certain hotel looks empty”. What ever the specific mention, the overall picture is one of a Las Vegas without its normal levels of visitors.
It’s not off-base to say that it would seem Las Vegas has suffered a 50 percent drop in visitor rates for March, thus far. If that does, indeed, turn out to be the case, then the hotel stadium tax revenue would fall to $2 million for March. That would be a record low for Las Vegas Stadium Hotel Tax Revenue. Even worse, it would be a tally less than the bond debt times the debt coverage ratio of 1.5, which would be $4,247,343.75 – that would produce a March shortfall of $2,247,343.75.
Las Vegas Stadium Debt Service Reserve Is Under-Funded According To Documents
Now, its worse than that. Let’s cut to the chase: what Jeremy did not tell FOX5 Las Vegas that the Debt Service Reserve Fund was under-funded. That’s right, according to the very Clark County Stadium Bond document that is the bible for the subsidy, a Debt Service Reserve Fund of double the average annual debt service for the 30-year-bond is to be maintained – that comes to $90.2 million, and is noted on the Las Vegas Stadium Authority website report from January.
On top of that, what Jeremy did not also say was that the Las Vegas Stadium Authority was to maintain a constant revenue flow of 1.5 times the bond debt per month, reflecting the too low debt coverage ratio. If you go back and look at the monthly comparison of bond debt times the debt coverage ratio, there are months where there were shortfalls, but that’s another story.
The bottom line is COVID-19 will deplete the Debt Service Reserve Fund to a point where, by the end of the fiscal year, it will not be able to sustain the 30-year-bond-issue against more than another five months of bad economic hits. So, the time to worry is now, because the whammy of low visitor rates will take years for Las Vegas to overcome, and absent a Federal Government Bailout, the taxpayers of Clark County will start to feel it in fiscal year 2023, and because of this COVID-19 problem.
Now, about that start-time.’
The original time for the stadium to be completed was May of 2020. That was expressed in the Mortenson-McCarthy video simulation from 2018, as presented by The Las Vegas Sun.
Then the date was moved back to June 2020, then by July 2020 and “substantial completion”, then August for opening, then September according to the schedule documents. But when this vlogger found that information and showed it, the stadium minders when ape and fixed the information to say that by July 31, 2020, the stadium would be finished. But, the bottom line is the stadium has been behind schedule for some time. That’s the truth.
If the people associated with the Las Vegas Stadium project would just admit truths, we could then collectively find solutions to get it, and Las Vegas, back on track.
Las Vegas, just ask for help. You don’t “got this”, but we got you.
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