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The Republican tax overhaul introduced in Congress could affect funding for the proposed $1.9 billion stadium that will house the Las Vegas Raiders.
A provision of the 429-page bill ends tax-exempt status on bonds used to pay for stadiums used by professional sports teams, The Las Vegas Review-Journal reported Saturday.
The Oakland Raiders’ bid to build a 65,000-seat domed football stadium clearly falls within circumstances that would be banned in legislation President Donald Trump has vowed to approve by Thanksgiving. The stadium’s financing plan includes $750 million in publicly issued tax-exempt bonds.
A staff adviser to the Las Vegas Stadium Authority and the Southern Nevada Tourism Infrastructure Committee, Jeremy Aguero of Applied Analysis, told the newspaper he has been inundated with calls about the change.
“The stadium, as designed, appears to meet the definition of a project that could not use tax-exempt bonds,” Aguero said Friday. “That could potentially affect the financial models we have been using in estimating the potential cost of the project.”
The proposal would likely increase the bond interest rate and either make the project more expensive or decrease the yield, Aguero said.
A legal expert in tax-exempt projects and real estate-based financing said many people were caught by surprise by the content of the legislation.
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Richard Jost, an attorney with the Fennemore Craig law firm who also teaches classes at the University of Nevada Las Vegas, called it “somewhat of a shock to everybody” that the proposal was not only in the bill but that it would be effective immediately.
Jost predicted that supporters of the stadium would be burning up the phone lines between Nevada and the state’s congressional delegation to amend legislation to exempt the Las Vegas stadium project from the plan. A simple fix would be to exempt projects that are already underway, he said.
The authority next meets Thursday. It’s unclear whether the legislation would be a topic of discussion at that meeting, Aguero said.
A new $1.9 billion NFL stadium being planned for Las Vegas could get even more expensive if Republicans in Congress succeed in pushing through a ban on tax-exempt bonds for stadiums in professional sports.
The ban would apply to bonds issued after Nov. 2, according to the Republican tax reform plan unveiled Thursday in the House of Representatives. If it passes, that would affect the financing of the Las Vegas stadium, though it’s not clear how much.
“I am not sure,” said Jeremy Aguero, an analyst who works for the Las Vegas Stadium Authority, which will own and oversee the stadium. “We are evaluating the potential impact if the bonds were converted from tax-exempt municipal bonds to taxable municipal bonds.”
Aguero told USA TODAY Sports on Friday that none of the tax-exempt bonds planned for the stadium have been issued yet.
The Oakland Raiders have been approved to relocate to Las Vegas when the stadium is scheduled to open in 2020.
The project calls for a record $750 million in public funding from an increase in local hotel taxes. Aguero said he couldn’t quantify how much of the stadium cost would be reliant on tax-exempt bonds.
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“That will be a function of the amount of pay-go funds generated in advance of the bond issuance and whether there is a single or multiple issuances,” he said.
Under no circumstances will the public contribution exceed $750 million, according to the Las Vegas Stadium Authority. If the stadium cost goes up, another funding source may need to be to be found.
It could be a big problem. Hypothetically, if the room tax secured $750 million in tax-exempt bonds, sports consultant Marc Ganis estimated the legislation could increase the stadium cost by roughly $100 million. That’s because he said the interest rates would increase if the bonds were taxable instead of tax-exempt.
“If they haven’t gotten it done yet, they’ve now told their bond lawyers and Wall Street, `Get it done right now and beat the new tax code,’” Ganis said.
The current proposal says it’s too late for that. The bill would ban tax-exempt bonds after Nov. 2, 2017. But much could change, and the bill might not pass.
“Room tax collections will either be used to pay project costs directly or Clark County will issue stadium bonds on behalf of the (stadium authority) that will be secured by the hotel room tax,” the stadium authority’s website said.
Ganis said this proposal by Congress is designed to “stop and punish” tax-exempt financing for pro sports stadiums. An official estimate for Congress said that eliminating this tax break only would raise tax revenues by $200 million over 2018-2027.
“This is because some people think it is simply wrong for millionaire athletes and billionaire owners to benefit from tax-exempt financing,” Ganis said. “That’s why this is happening. It has nothing to do with raising revenue. The amount they have identified is so small that it is almost invisible.”