Now there’s a “novel” concept: a private developer proposing to build a stadium – in hopes of turning a profit – and suggesting the developer might pay for it without tax dollars.
Shocking, I know. A private company using private capital to try to turn a profit. When has that ever worked before?
Since the Legislature this year rejected a special tax district to fund the $2 billion stadium/dormitory/retail project, university administrators and Majestic Realty Co. have been working on a financial formula and other changes to allow the project to move forward.
Craig Cavileer, president of Silverton resort and Majestic’s representative on the project, said one idea is for UNLV to issue but not underwrite bonds to pay for construction, allowing the university to avoid liability should the project fail and investors sue. Another idea is for Majestic to fund the project.
Regardless of the source of financing, the stadium would be built on public land – west of the Thomas & Mack Center on space now used for parking – eliminating the need to pay hefty property taxes and seek a special state exemption from the tax. [Emphasis added]
There are literally dozens and dozens of studies on how government-funded stadiums are an economic loser, but if a private company wants to pay for a stadium, that’s great. On a personal level, I’d be very excited for a major-league sports team to come to Las Vegas.
Mine or anyone else’s excitement about a sports stadium, though, isn’t a valid reason to subsidize a private company. As I wrote during the legislative session, when three stadium developers came hat-in-hand asking for taxpayer dollars:
Leaving aside the inherent problem of government giving your money to a private business, this is a perfect example of why government shouldn’t pick the winners and losers in the economy.
Instead of pitching the merits of their plans to investors, these developers are going to politicians.
Let’s compare how the two processes work. Investors, because they are spending their own money, have a strong incentive to examine whether a project makes financial sense and would bring the best return on their dollars. This process unfolds millions of times every year and is one of the most important – and powerful – features of the free market. Occurring spontaneously among individuals, this process usually prevents poor uses of scarce resources and directs those same resources into the areas individual consumers want the most. Now, this process will produce some failures, but the financial impact of those failures is limited to those who chose to spend their money on it.
Politicians, on the other hand, are spending other people’s money – yours and mine. This makes it more likely that a shoddy project will get pushed forward, because, instead of examining whether a project makes financial sense, many politicians (excluding those committed to free-market principles or who have a working knowledge of Nevada’s constitution) examine whether a project makes political sense. Those factors include good short-term PR, campaign contributions, quid pro quos with lobbyists or other lawmakers, and getting re-elected.
If a project goes bad, there are very few consequences for individual politicians – they aren’t held financially liable and they are regularly able to move on to higher office. And often times they are no longer even in politics when the destruction their decision caused becomes apparent several years down the road. As a result of all of these factors, the politicians make “investments” that private investors would reject as a financial loser. Even if some consider a particular project a “success,” you still have the constitutional, economic and philosophical problems of forcing taxpayers to subsidize someone else’s business.
Instead of turning to the Legislature and demanding taxpayer dollars to subsidize their businesses, developers interested in building a stadium or arena in Las Vegas should put their (own) money where their mouths are.