Nevada Stands to Lose Big by Subsidizing the Silver and Black
April 7, 2017
When dealing with players enamored by short-cuts to success, former Raiders head coach John Madden famously quipped, “the road to Easy Street goes through the sewer.” His team would be wise to keep this quote in mind as they finance their much-discussed move to Las Vegas on the backs of taxpayers. While the public may assume that tax revenue goes to priorities such as education, health care, and aid to the indigent, governments frequently add billionaire sports executives to the trough.
In this case, Nevada agreed to shell out $750 million in tax-exempt municipal bonds for the construction of a new stadium in Las Vegas to lure the Oakland Raiders away from their hometown. While Oakland fans may be bitter about losing the team they’ve cheered (unsuccessfully) for, Alameda County taxpayers should be thrilled that a terrible deal is finally over. Residents, after all, are still $83 million short on a $350 million bond subsidy awarded to the team in 1995. County taxpayers have had to foot a $13 million tab each year since 1995, and will continue to do so through 2025, long after the Raiders are gone. These arrangements completely skew governmental priorities by forcing tax-burdened residents to subsidizing well-heeled executives instead of the very neediest.
But how can Nevadan lawmakers justify repeating Alameda County’s mistakes? Elected officials and their hired consultants craft goldilocks economic projections to demonstrate that an NFL presence “pays for itself.” To these starry-eyed policy-makers, Nevadans will be long-run winners, despite education and infrastructure funds being diverted toward stadium building over the next few years. Except, it almost never works this way. As National Review columnist Jonathan Tobin points out in his takedown of the deal, think tankers from across the ideological spectrum have found fault with these state economic projections. In particular, economic impact analyses often add up total projected spending to take place in-and-around the stadium on game day. If just a few Raiders fans buy beer to diminish the pain of yet another defeat to the Broncos, the stated economic benefit of the relocation will be large.
But these exercises ignore opportunity costs that come with fans ditching alternative forms of entertainment to cheer on their new team. Movie theaters, for example, garner a substantial portion of revenue from Sunday showings, putting them in direct competition with the NFL. Ditching the silver screen for the Silver and Black just shifts income from lowly-paid movie theater employees to hypothetical (also low-paid) stadium employees. And due to the low number of NFL games per season, stadium employment isn’t nearly as dependable as movie theater opportunities.
Any serious economic analysis of an NFL relocation ought to take this into account, and estimate how many jobs will be hemorrhaged in Las Vegan theaters, casinos, and live show businesses. Nevada legislators also ought to consider the indirect costs of yanking the Raiders to the Silver State. David Kalist and Daniel Lee of Shippensburg University in Pennsylvania have found that NFL home games are associated with a 2.6% increase in crime in the host city, costing the city around $86,000 in extra funds. The jail inside of the Lincoln Financial Field in Philadelphia, Pennsyvania shows just how unruly fans can get.
States and municipalities have repeatedly wooed sports franchises over the past few decades, with abysmal results for taxpayers and un-subsidized competitor industries. While it may be too late for Nevada to avoid footing $750 million for a $1.9 billion stadium, other lawmakers in states around the country should avoid future boondoggles. Franchises should be able to lure customers in through providing an exciting experience, instead of creeping through the sewer of handouts and giveaways.