George E. Harris: NFL stadium plan is bad for Las Vegas
September 15, 2016
Every few years Las Vegas movers and shakers fantasize about attracting major league sports to the city and want taxpayers to pay for a new stadium.
This year it's Las Vegas Sands Chairman and Las Vegas Review Journal owner Sheldon Adelson who wants to contribute $650 million of his family's money if, and only if, $750 million in room tax receipts go towards paying for a state of the art stadium seating 65,000 and costing $1.9 billion.
The world's 22nd richest man according to Forbes, with a net worth of $25.2 billion, admits he's no football fan, but told Yahoo! Finance, "We can fill our rooms during the slowest time of the year. Mid-November to December is the slowest part of the year … So I'm doing it as a community effort. I don't need it. I could live without it."
Adelson is under the impression that tourists will pay the increased room tax and therefore Las Vegas residents should think they will get a stadium for free. When pressed by Yahoo as to who would absorb the tax, Adelson said, "But all of our hotels, for the most part, are occupied by tourists, who pay a room tax. So the local residents here won't feel any imposition of taxes. Let's say the room tax is 12 percent, maybe the tax goes up to 12.75 percent. But I know that it will be less than a 1 percent increase in room tax."
What the Sands head man assumes is that the tax can be shifted forward, with hotels raising their prices to have tourists pay the tax increase. However, tourists decide what they will pay for room nights. Room rates would only rise to compensate for the tax if the supply of rooms were to fall.
As former UNLV economics professor, the late Murray Rothbard, wrote in his book Power & Market, "It should be quite evident that if businesses were able to pass on tax increases along to the consumer in the form of higher prices, they would have raised these prices already without waiting for the spur of a tax increase."
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Contrary to Adelson's claim, the tax increase will lower revenue, and thus, what hotel properties will do is shift the tax backward to be absorbed by their employees and suppliers. Instead of hotel employees and local businesses, which supply the hotel industry, having the $750 million to spend, that amount will be transferred to a stadium authority to spend on its favored contractors and a rich NFL team owner.
"Specific factors in industries that have lost business as a result of the shift from private to governmental demand will lose proportionally more in income," Rothbard explained. "Specific factors in industries gaining in demand will lose proportionally less, and some may gain so much as to gain absolutely as a result of the change."
Asked if he'd still put his family's $650 million toward the project if the Raiders don't come, Adelson told Yahoo!, "If I don't get a professional football team I'm not going to do it. It's going to lose money otherwise. That's why municipalities and government have to put up the money. If you want that kind of economic development for your city, the city government has to help to finance it."
But taxpayer-funded stadiums don't increase economic development.
In Cato Paper No. 339 "Sports Pork: The Costly Relationship Between Major League Sports and Government," Raymond Keating, chief economist for the Washington-based Small Business Survival Committee, wrote, "The economic facts, however, do not support the position that professional sports teams should receive taxpayer subsidies. The lone beneficiaries of sports subsidies are team owners and players."
Economist Keating concluded, "Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect."
Economists Robert Baade of Lake Forest College and Allen Sanderson of the University of Chicago studied 10 metropolitan areas that brought in sports teams, and found no net employment increase. Spending was simply realigned.
The University of Akron's John Zipp, who examined local economies, found there was no evident difference in economic performance between cities with or without teams during the 1994 baseball strike.
After analyizing data from 1969 to 2011 of professional sports franchises and their local economies, Dennis Coates, writing for the Mercatus Center at George Mason University, concluded, "sports-led development is unlikely to succeed in making a community richer. If the local government is looking for a policy to foster economic growth, far better candidate policies exist than those subsidizing a professional sports franchise."
Yahoo! asked Adelson how he would feel if the stadium doesn't happen. He replied, "Do you think guys like Buffett or Gates are passionate about something like this? They can buy a football team or basketball team with the stroke of a pen, and so can I. So there's no reason to be passionate about this."
The Legislature has convened in special sessions the last two years to provide taxpayer giveaways to billionaires. In 2014, Elon Musk's ($10.7 billion net worth) Tesla made out. Last year, it was Jia Yueting's ($4.6 billion net worth) Faraday.
Lawmakers will likely be given a third try to do the right thing for their constituents. Let's hope this time they have the guts to say no. After all, Mr. Adelson can live without it, and so can the rest of us.
George E. Harris is Chairman of Nevadans for Sound Government.