Sheldon Adelson, the billionaire founder and CEO of Las Vegas Sands (NYSE: LVS), convinced the desert gambling mecca to agree to finance a football stadium for him, ostensibly so he could bring the Oakland Raiders NFL franchise to town. Where the casino operator will be kicking in $650 million and the relocating football team another $500 million, local taxpayers and tourists will be paying for the balance through $750 million that will be raised via higher hotel taxes. Some of those levies will also go toward financing an expansion and upgrade of the Las Vegas Convention Center. But all those plans may come to naught, and the proposed stadium could end up being a huge white elephant for Las Vegas.
While Las Vegas was hiking hotel taxes to build Adelson a stadium for a football team it doesn’t have yet, San Diego voters were rejecting a 6% increase in hotel taxes to build a new $1.8 billion venue for the Chargers. The Chargers now must decide whether or not to stay in their current home, or request a move to Los Angeles, where the Rams are looking for a stadium roommate to share costs.
Here’s the problem for Adelson and Las Vegas. If the Chargers decide to stay in their current digs, that means the Raiders would be able to choose between moving to Vegas or going to Los Angeles. With 3.8 million people, L.A. is second in population only to New York in the U.S., meaning it has a huge built-in fan base. Las Vegas has never had a pro sports team and there’s no guarantee a franchise will thrive there.
Moreover, NFL Commissioner Roger Goodell does not favor a move to Las Vegas for the Raiders, though it’s up to the team owners to decide. While several high-profile owners like the Dallas Cowboys’ Jerry Jones back a move, it’s rumored that there may not be enough support among the rest. Two-thirds of the league’s owners have to approve it before a move can be made.
Publicly financed stadiums rarely if ever live up to the hype, routinely failing to create the number of jobs or level of economic activity their promoters promise they will. San Diego likely dodged a bullet by rejecting the new stadium, but Las Vegas could be saddled with one that may never be as utilized as its backers intend it to be.
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Rich Duprey has no position in any stocks mentioned.
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