On March 27th, 2017, the National Football League’s thirty-two owners voted on whether or not the Oakland Raiders franchise would be allowed to relocate to Las Vegas for the beginning of the 2019 football season. The vote, which passed with an overwhelming thirty-one to one vote, has been met with mixed reactions from football fans across the country. Specifically, Oakland Raiders fans have been furious with the decision, as their team has been trending in the right direction on the field in recent years, and it must seem to them a curious time for a relocation. The question I want to address, however, is whether this move, and the stadium that must be built in Las Vegas to accommodate it, will prove to be a prudent decision from an economic standpoint.
First, I want to consider the cost of building the extravagant, $1.9 billion stadium just off the famous Strip in Las Vegas. The state of Nevada has already pledged $750 million to the project, and Raiders owner Mark Davis, son of Raiders legendary owner Al Davis, has pledged another $500 million. This means that roughly $650 million needs to be raised somehow for this stadium to be built, which investor Sheldon Adelson previously had pledged to the project, but Adelson withdrew his pledge early in March, leaving a lot of uncertainty around how this stadium is going to be built, especially in only a two year window before the Raiders franchise is slated to move to Las Vegas. One issue that the NFL must address is that there is now opportunity for casinos to invest heavily in the stadium, picking up the slack that Adelson has left behind, but Roger Goodell and the NFL have maintained a profoundly anti-gambling position, with Goodell saying recently “I don’t see an ownership position in a team from a casino, that is not something that is consistent with our policies … not likely a stadium, either.”
Probably more important than where the funding for the stadium will ultimately come from, however, is the question of whether the stadium will generate enough revenue to be worth the money, or how long it will take for this to happen. Supporters of the stadium and the move to Las Vegas claim that the stadium will pay for itself very quickly, and support this claim with the idea that the stadium will bring in many tourists to Las Vegas who would otherwise not have made the trip, otherwise known as incremental visitors. One estimate made by Jeremy Aguero, an analyst with Applied Analysis, a Las Vegas-based data analysis firm, has estimated that the stadium would host a total of 46 events each year, bringing a total of 451,417 incremental visitors each year. On top of this, he estimates that the stadiums’ wide variety of events would generate $35 million in tax revenue each year, an estimated $22.5 million of which would go toward local government revenue. These numbers, which have been criticized by many, including College of the Holy Cross economist Victor Matheson, are completely unrealistic in any market other than Las Vegas, and many speculate that they may not be realistic for the Las Vegas market anyway. The question is, does Las Vegas actually have a completely unique situation which allows them to gain more in tax revenue from events held at the stadium than any other market does. And the answer, of course, is not obvious. Las Vegas most certainly used to be uniquely positioned to gain revenue from a sports stadium, but the fact is that they are no longer the only market where gambling is legal, something that many including Aguero have cited as a major reason why the stadium is economically feasible at all.
New Jersey has now legalized gambling activity, and with Atlantic City being so close to Philadelphia, I would estimate that a good way to gauge the economic performance of the new Las Vegas stadium is to take a look at how the Eagles’ stadium, Lincoln Financial Field, has done. The results do not inspire much confidence, as the Eagles were criticized last year for proposing that Temple University, who rents out the field for their home football games, pay $12 million toward renovations as well as trying to increase Temple’s rent from $1.8 million per season to a gaudy $3 million going forward. This clearly does not inspire confidence in the ability of the proposed stadium in Las Vegas to generate enough revenue to make up for the huge investment that the state of Nevada is making in the stadium, especially because the city of Philadelphia only had to invest $188 million in the original stadium, and Lincoln Financial only cost $512 million to build, paltry numbers compared to the stadium in Las Vegas.
In conclusion, it does not appear to me that the proposed stadium in Las Vegas will end up being economically beneficial for the city of Las Vegas. I was unable to find any more realistic estimates of revenues generated than those made by Aguero, but general consensus is that his numbers are significantly too high. Additionally, Vegas is most certainly not an area where players would want to live full-time, and as a result the city stands to gain less in tax revenue from players purchases and living expenses year-round. Finally, I do not believe that Las Vegas is truly a unique market for sports stadiums, and I reject the idea that their sports multiplier is higher than in other markets where gambling is not legal, because of recent developments in online gambling such as the popular site DraftKings.com which allow other states to gain tax revenue from gambling activity which has at least not been deemed illegal yet. The stadium will certainly attract a lot of tourists who want to catch a game, boxing match or one of a multitude of other proposed events at the stadium, but the fact remains that Aguero’s projections on how much new business this will generate for the city of Las Vegas are generous to say the least. This, coupled with what will likely be an angry Raiders fan base who overwhelmingly disapprove of the move, means that the stadium will not likely bring in nearly enough revenue for Las Vegas to make their $750 million investment a wise one.