Clark County and the Southern Nevada Tourism Infrastructure Committee once promised substantial economic benefits for the region by raising the hotel occupancy tax on casino resorts. This was done in order to help fund a $1.97 billion NFL stadium near the Strip.
But less than a year after the opening of Allegiant Stadium, the home of the NFL Las Vegas Raiders franchise, the county is accessing reserve funds to meet its mandatory bond payments.
Clark County lured in the Raiders by pledging a $750 million commitment to building them an NFL stadium just west of I-15 and Mandalay Bay. The county contributed the money in 2017, and raised the funds by issuing bonds on behalf of the Las Vegas Stadium Authority (LVSA).
To cover the $750 million, Clark County increased the nightly occupancy tax on hotel room stays on the Las Vegas Strip and surrounding areas by 0.88 percent. The hotel tax increased 0.5 percent on all other hotels within 25 miles of the Clark County Government Center.
The hotel tax increase was expected to cover the repayment of the bonds, but COVID-19 changed everything. As a result, this week Clark County confirmed that it withdrew $11.7 million from the LVSA’s debt reserve account to complete the $18.6 million bond payment due June 1.
COVID-19 was an unimaginable crisis that led to Las Vegas’ more than 150,000 hotel rooms being occupied just 42.3 percent of the time last year. The average nightly rate was just $120.36, meaning the stadium tax was about $1.05 per overnight stay.
The June 1 bond obligation marked the second time the LVSA has dipped its hand into its reserve fund. In December, the county took $11.55 million from the account to make good on its payment.
Despite the withdrawals, Clark County spokesperson Dan Kulin says all is well.
This action does not constitute a default and was expected in light of the decline in tourism to Las Vegas. Fortunately, the financing for the Stadium Authority bonds included the funding of a debt service reserve fund to weather economic declines like the one Las Vegas is currently experiencing due to the pandemic,” Kulin explained.
Jeremy Aguero, a principal at Applied Analysis who works with the LVSA, says the reserve fund remains robust. He says the account still has more than $54 million, a number that he does not anticipate future withdrawals will come “anywhere near that amount.”
When Nevada approved legislation to allow Clark County to help build an NFL stadium with tax money from hotel stays, the bill mandated that a reserve fund be initiated. Revenue collected via the room tax increase is used to pay down the bond debts, and also fund the reserve.
While the financing for the stadium remains sound, the headlines of Clark County using a reserve fund to pay the bond obligations could generate more critics. The MLB Oakland A’s are considering following their former Oakland counterpart to Southern Nevada, and said this week a new ballpark would cost in the neighborhood of $1 billion.
“No more sports teams. Put that money into education,” a Casino.org reader recently commented on the A’s relocation rumors.
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