Stadium Bonds for NFL Raiders Struggle Even as Vegas Reopens

A bond-financed stadium for the Las Vegas Raiders continues to show signs of struggling, even with a bounce-back in tourism to support the debt.

Clark County, Nevada, which is home to the gambling hub city of Las Vegas, is expected to draw on its debt service reserve fund Tuesday to make a payment associated with the $645 million of municipal bonds sold in 2018 for the stadium, according to S&P Global Ratings and a regulatory filing.

This is the county’s second such withdrawal in six months, typically one of the early signs of a project facing financial trouble. It comes even as cities like Las Vegas reopen their economies as more Americans are vaccinated. The drop in tourism has rippled through the $3.9 trillion municipal-bond market given that taxes on hotel stays often help repay bonds sold for convention centers and sports facilities like the Raiders stadium.

Clark County had enjoyed the benefits of a strong tourism industry before the pandemic, with hotel occupancy rates that were higher than the national average, according to bond documents from 2018. When the debt was initially sold, S&P said that county officials anticipated hotel room taxes would cover stadium bond debt service payments through maturity in 2048.

The county also made a reserve withdrawal in November to make a December 2020 debt payment, citing the decline in tourism to Las Vegas. The bonds are repaid through hotel room taxes, and the county also backs the debt.

The Las Vegas Convention and Visitors Authority reported that tourism in March 2021 was the highest since February of last year, with more than 2.2 visitors, a 45% jump month over month. While hotel occupancy rose to 55.5%, that’s still 36 percentage points below pre-pandemic 2019 levels, the data show. Weekend occupancy rates were stronger, a sign of strong demand for leisure travel.

Las Vegas is being affected by a slow comeback in conference and convention activity, said Eric Kazatsky, municipal strategist for Bloomberg Intelligence. He said the recovery may take time as people and companies get comfortable with business travel again.

“I don’t think that business is going away,” he said.

The county is planning to use an estimated $11.7 million from a reserve fund sub-account to help make an $18.6 million principal and interest payment due June 1, the filing said.

Room tax collections were insufficient to make the debt payment, according to Erik Pappa, a spokesperson for Clark County. An estimated $54.4 million is expected to remain in the reserve fund after the withdrawal, 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,” according to the statement.

If the county does end up needing to back the bonds, any financial blow to Clark County will be eased by an infusion of federal aid for municipalities from the Biden administration’s American Rescue Plan. Clark County is allocated $440 million of aid, according to the Treasury Department.

S&P noted in a May 24 report that the withdrawal isn’t an event of default. It doesn’t affect S&P’s investment-grade credit rating on the bonds.

Li Yang, an analyst for S&P, said that municipalities are starting to see a recovery in tourism that’s still a “work in progress” as more people are vaccinated. The revenues associated with that often come in on a lag, so it may take months for cities to reap the financial benefits of that, he said.

“A lot of the recovery has yet to be seen,” he said.

©2021 Bloomberg L.P.

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