NFL Raiders Muni-Financed Stadium Debt Shows Sign of Strain
(Bloomberg) -- Clark County, Nevada, drew on a reserve account to make an upcoming debt payment due for bonds sold to finance a stadium for the Las Vegas Raiders football team.
The county, home to Las Vegas, withdrew $11.6 million from a reserve fund to make a nearly $16 million debt payment due Dec. 1, according to a regulatory filing dated Nov. 25. It affected a reserve fund sub-account, which will be left with a balance of about $47.9 million, while another sub-account with a $9.4 million balance wasn’t drawn upon.
Clark County sold $645.1 million in investment-grade bonds in 2018 to help finance the cost of the National Football League stadium where the Raiders play. Drawing on reserves for debt payments is typically a sign that borrowers are struggling to pay their debt, and multiple issuers have done so during the pandemic-induced recession.
The filing was made by a representative at Zions Bank Public Finance, which handles disclosure services for the county.
Erik Pappa, a spokesperson for the county, said in an emailed statement that the draw came amid a drop in room tax collections due to the pandemic. “Today’s action was expected in light of the decline in tourism to Las Vegas,” he said. “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.”
The football stadium is estimated to cost nearly $2 billion, but public investment in the project is capped at $750 million, according to the Las Vegas Stadium Authority. Clark County uses a hotel room tax to help pay the bonds, which is a revenue source that’s been particularly hurt by the pandemic as people cut down on travel for business and vacations.
Failure to replenish the reserve withdrawal is not considered a default, which can give investors certain legal rights, according to the disclosure notice.
©2020 Bloomberg L.P.