Loss Of 8 Games To Travel Will Not Hurt A's Las Vegas Ballpark Bond Revenue

Las Vegas (Special to ZennieReport.com) – This post is based on a letter to the Las Vegas Stadium Authority written by Sacramento Lawyer Jeremy Koo, which came up with the wild idea that a loss of 8 games played at home by the Oakland A’s in their Las Vegas Ballpark would negatively impact bond payment capacity. As you are about to learn in my presentation, Mr. Koo is way off base.

Zenophon A. Abraham

CEO

Zennie62Media, Inc.

Zennie62Media.com

ze****@ze***********.com

June 5^th, 2024

Las Vegas Stadium Authority Board

Attn: Alexis Fradella

3150 Paradise Road Las Vegas, Nevada 89109

af*******@lv****************.com

VIA EMAIL

Dear Members of the Stadium Authority Board,

I am writing this public statement to be presented in the documents set and read for the record for at the July 18^th Las Vegas Stadium Authority Board Meeting

It has come to my attention that you were presented with a letter by a Mr. Jeremy Koo. Mr, Koo is a Sacramento lawyer in opposition to the A’s move to Sacramento and not a trained urban economic planner. Yet Mr. Koo would tell you all that just because the Oakland A’s plan to play up to eight of their home games out of town as part of a marketing plan, it automatically translates to a direct per-game loss that is “$2.6 – 3.0 million of lost incremental tax revenue and $65 – 75 million of lost incremental economic activity annually, based on the analysis prepared by A’s consultant Applied Analysis that was presented to the Legislature in its consideration of SB1.10”, according to his letter to you all.

Jeremy Koo has no educational background that would begin to suggest any real knoweldge of how to mathmatically evaluate the economic performance of a planned ballpark. But that fact did not stop him from presenting a simplistic view that would make such an assertion regarding negative impact on the ability to pay down the bond issue.

Jeremy Koo’s presentation continues what has been a constant stream of misunderstandings (some deliberate) of how the financial, economic, development, and legal process works with respect to the planning and building of a professional sports stadium or ballpark. All because the opponents are upset that the Oakland A’s didn’t choose to stay and put up with The City of Oakland’s over-politicized approach to what it calls “the sports business” and see its target date for groundbreaking get constantly pushed back into oblivion.

The main problem with Jeremy Koo’s letter is that it violates two lessons I learned in building urban development economic models based on the system dynamics modeling paradigm as far back as 1987 and for the City of Oakland as an intern to the Oakland Redevelopment Agency, and for my first company, Sports Business Simulations, and my Oakland Baseball Simworld that was used in 40 colleges and high schools in the US and the UK:

First, make sure you understand the legislation governing any large scale development project, because it is the real guide to how money actually flows.

Second, make sure to calculate the actual relative values of revenues and costs. That includes annual bond debt service.

In the case of Jeremy Koo’s evaluation, he failed to mention that he did not read the SB 509 Bill text itself. Instead, Mr. Koo zeroed in on a calculation regarding economic output, misapplied it to his own assumptions regarding ballpark visits per game (when the calculations include non-baseball events like concerts), and assumed that every economic activity of the ballpark was directly tied to baseball game attendance, when there was no presented language or equation in the Applied Analysis document that justifies such an assertion.

But let’s read the SB 509 Bill itself (remember, read the legislation), and more specifically, that part which is the engine of my argument starting with Section 29 of the Bill. Section 29 outlines 14 different taxes and fees that are to be collected not from within the ballpark, but from the Sports and Entertainment District that surrounds and includes the baseball stadium.

So, the bill has this kind of lanaguage “(a) The taxes imposed pursuant to: 41 (1) NRS 372.105 and 372.185 with regard to tangible 42 personal property sold at retail, or stored, used or otherwise 43 consumed, in the sports and entertainment improvement district 44 during a fiscal year.”

And regarding the district’s coverage, SB 509 also says that it will “Include only the land on which the Major League Baseball stadium project is or will be located and any surrounding or adjacent properties necessary for the operation of the Major League Baseball stadium project.” Current ballpark development trends mean allowing other developers to build next to the facility, thus allowing such structures as a giant baseball-themed sports restaurant to be built right next to the ballpark.

An Oakland A’s Las Vegas Ballpark Sports Bar Could Produce The Tax Revenue To Pay The Annual Bond Debt Service

So, the sports and entertainment improvement district could include a sportsbar or giant baseball-themed sports restaurant and situated outside the ballpark, but within the district boundary. The key development trend in stadium development is external uses like the one outside Wrigley Field where the Chicago Cubs play, which features its own bars and restaurants. And then there’s Texas Live!, Texas Live! is a partnership between The Cordish Companies and the Texas Rangers, that costs $250 million and is a world-class dining, entertainment and hospitality district situated between the Texas Rangers’ Globe Life Park and the Dallas Cowboys AT&T Stadium in the heart of Arlington, TX. In the Las Vegas context, it’s logical to assume that an external sports-themed retail use would be part of such a land use.

Moreover, the giant baseball-themed sports restaurant would show other sports events, and become a uniquely situated gathering point with its own constiuents that may not even be Oakland A’s Season Ticket Holders, but wind up helping to pay down the annual bond debt of $6,240,000 or $187.2 million divided by 30 years (or $120 million times 1.56, to get the estimated total bond cost assuming 6 percent interest rate, and then divided by 30 years).

The sports and entertainment district collects revenue from the following concerns to retire the A’s Bond Issue pursuant to SB 509:

NRS 372.105 and 372.185 with regard to tangible 42 personal property sold at retail, or stored, used or otherwise 43 consumed, in the sports and entertainment improvement district 44 during a fiscal year.
The Clark County Sales and Use Tax Act of 2005, with 1 regard to tangible personal property sold at retail, or stored, used or 2 otherwise consumed, in the sports and entertainment improvement 3 district during a fiscal year
The Clark County Crime Prevention Act of 2016, with 5 regard to tangible personal property sold at retail, or stored, used or 6 otherwise consumed, in the sports and entertainment improvement 7 district during a fiscal year.
Chapter 377D of NRS, with regard to tangible personal 9 property sold at retail, or stored, used or otherwise consumed, in the 10 sports and entertainment improvement district during a fiscal year.
(5) NRS 374.110 and 374.111 or 374.190 and 374.191 with 12 regard to tangible personal property sold at retail, or stored, used or 13 otherwise consumed, in the sports and entertainment improvement 14 district during a fiscal year.
Chapter 377 of NRS with regard to tangible personal 16 property sold at retail or stored, used or otherwise consumed, in the 17 sports and entertainment improvement district during a fiscal year.
NRS 363A.130 or 363B.110 with regard to wages earned 19 by employees located within the sports and entertainment 20 improvement district during a fiscal year.
NRS 680B.027 and 680B.030 with regard to insurance 22 premiums earned from policies on businesses or assets within the 23 sports and entertainment improvement district during a fiscal year.
NRS 694C.450 with regard to insurance premiums earned 25 from policies on businesses or assets within the sports and 26 entertainment improvement district during a fiscal year.
NRS 363C.200 with regard to gross revenues generated 28 within the sports and entertainment improvement district during a 29 fiscal year
NRS 368A.200 with regard to admission to any facility 31 where live entertainment is provided within the sports and 32 entertainment improvement district during a fiscal year.
NRS 369.330 with regard to any liquor purchased or 34 otherwise consumed within the sports and entertainment 35 improvement district during a fiscal year. 36
NRS 372B.140 with regard to fares charged for 37 transportation services for which the point of origin or the 38 destination is in the sports and entertainment improvement district. 39
Chapter 361 of NRS with regard to personal property, as 40 defined in NRS 361.030, located in the sports and entertainment 41 improvement district during a fiscal year. 42 (b) The fee provided for in NRS 360.787 with regard to the 43 operating of a facility at which exhibitions are held within the sports 44 and entertainment improvement district during a fiscal year.
(c) A franchise fee imposed pursuant to chapter 354, 709 or 711 of NRS for the provision of electricity, gas telecommunications or 2 video services in the sports and entertainment improvement district. 3
(d) A business license fee imposed pursuant to chapter 354 of 4 NRS for a business located in the sports and entertainment 5 improvement district. 6 (e) With the approval of the Stadium Authority and the County, 7 any other taxes, fees and charges imposed at the time the sports and 8 entertainment improvement district is created or which are later 9 imposed by the County during the term of the development 10 agreement, lease agreement or non-relocation agreement entered
11 into pursuant to section 22 of this act, not including:
12 (1) Any tax, fee or charge that, if transferred to the baseball
13 stadium tax account, would violate the United States Constitution or
14 the Nevada Constitution; 15
(2) Any tax, fee or charge that is irrevocably pledged to the
16 repayment of a bond issued before the effective date of this act and
17 is not otherwise available to satisfy obligations of the County
18 pursuant to this section following the release of such tax, fee or
19 charge from such prior pledge;
20 (3) Any tax, fee or charge for services provided by any
21 publicly owned and operated utility; and
22 (4) Any ad valorem tax on real property exempted pursuant 23
to paragraph (c) of subsection 1 of section 33 of this act.

All Of These Revenue Collection Activities Are Inside And Outside Of The Ballpark

As a detailed read of SB 509 shows, the revenue collection is not exclusive to games in the ballpark, but focused on the entire sports and entertainment district.

In fact, SB509, which is also called Senate Bill 1 (but not used here because the Raiders Las Vegas Legislation goes by the same name), has this language:

Under section 28, the sports and entertainment improvement district is required to: (1) be located entirely within Clark County and outside the boundaries of any incorporated city; (2) include only parcels of land, or portions thereof, on which the Major League Baseball stadium project is located or will be located and any surrounding or adjacent properties necessary for the operation of that project;
and (3) not include any operating hotel or other public accommodation facility or any operating licensed gaming establishment. Section 28 authorizes the Board of County Commissioners to amend or modify the boundaries of the sports and entertainment improvement district but prohibits such an amendment or modification from: (1) impairing any bonds issued to finance the construction of the Major League Baseball stadium project; (2) excluding from the sports and entertainment improvement district any parcel of land, or portion thereof, on which the Major League Baseball stadium project is or will be located or any surrounding or adjacent property necessary for the operation of that project; or (3) including within the district any operating hotel or other public accommodation facility or any operating licensed gaming establishment.
https://www.lvstadiumauthority.com/docs/mlb/SB1_MLB%20(As%20Enrolled).pdf

So, there’s a clear and possible scenario where the eight games overseas present an opportunity where the overall money made that goes to pay these taxes is greater than any one game. And then there’s the size of the revenue stream versus the annual debt service.

The giant baseball-themed sports restaurant could bring in annual tax revenue $2,598,550 to the Clark County coffers. That, alone, would be just 3,801,450 below the $6.4 million annual debt bond service. As far as gross revenue, Top of the World at The Strat earned $25.2 million in sales with 246,054 meals served in 2019, making it the 7th most successful restaurant in the United States. Texas Live! pulled in just over $30 million in gross revenue in 2023. And 11 of the highest grossing restaurants in America were in Las Vegas in 2019/2020, and that is still true today.

And that doesn’t even start to consider the ballpark games, concerts, and other events and attractions the ballpark will host. If the giant baseball-themed sports restaurant at the A’s Las Vegas Ballpark were joined by a companion development for, say, concerts, that could bring in double that $2,598,550 to Clark County, or $5,197,100. That’s just $1,202,900 less than the $6.4 million annual debt bond service – and from just one or two sources external to the ballpark.

And let’s not forget that the days where the A’s aren’t playing came include other forms of entertainment. Let’s say Kanye West and Taylor Swift team up for a three-day-concert event in the A’s ballpark. Then add the giant baseball-themed sports restaurant and external concert stage for “warm-up” acts, and you’ve got a massive money-maker.

So What’s The True Breakeven Level Of Attendance For The Bond Issue?

Mr. Koo did not pay one iota of attention to how the bill is written. Like it or not, it allows for development to occur outside the ballpark, and that revenue would be part of the tax collection from the sports and entertainment district.

That means the opportunity to create a year-round-venue that has its own constituency. Something like the Battery Development in Atlanta. So, the “loss of eight games or up to that number” is best thought of as providing the same space rental opportunity as for a shopping center: fill the space with some kind of happening. Bowing to Mr. Koo’s writing is like saying there’s no intention of doing that. Think about where that leads. Carefully.

That means the whole Raiders Las Vegas Stadium argument that it would draw 49 large scale events (Remember that?), which would then bring more hotel room stays, thus helping to gain hotel stadium tax revenue – is meaningless. As if it was not true.

You the reader and I both know otherwise.

What we do know is simple: more events in the A’s Ballpark context, leads to more visitors to the sports and entertainment district, thus more money to the total revenue collected by the tax structure for the district. The A’s leaving for eight games just provides a chance to fill in that space. Plus, you have the external development that will occur – and has to. That leads to a question no document has addressed in the Athletics’ case.

The question is how many total events, be they games or large scale events, does it take for the break-even for the bond issue to be reached, then surpassed? Well, if the bond debt is $6.24 million per year, and let’s say the tax collected per person, per game, adds up to $12 – that leads to 6,419.75 average attendance per game need to breakeven. There’s your inside ballpark breakeven attendance. That leaves a lot of room for extra money. Why? Because the bond issue itself is relatively small, that’s why.

So, let’s lop off eight games representing the time the A’s need to play overseas: that means we need an average attendance of 7,123 or 704 more people above the breakeven at $12. That’s it.

Now that’s way below what I originally considered the breakeven attendance for the project to be: 13,000 or about just over 1/3rd the ballpark’s total attendance of 33,000. So, if the A’s had said they wanted 20 days, that comes to 8,524 people. In other words, the A’s would have to want to eliminate half of the home games to threaten the bond issue.

See?

In addition, the breakeven attendance needed to pay the annual bond debt goes down as the average tax payment per attendee goes up. So, the more money made outside the ballpark, the less needed from inside the ballpark.

Calculations first. Always. Forever.

The Ballpark Can Produce Enough Tax Revenue To Retire Bond Debt With Eight Away Games Overseas

So, the conclusion is that the Oakland A’s Las Vegas Ballpark can produce enough tax revenue to retire bond debt even if the A’s travel abroad eight times during the MLB season. The simple reason is that the sports and entertainment district allows for the collection of tax revenues from sources outside the ballpark. It is not within the boudaries of the Ballpark, but surrounds it and can include other properties external to the stadium. That means year-round revenue-producing activties even when the A’s are out-of-town, regardless of where they go.

That proves Jeremy Koo’s 1-to-1 game-ticket-holder-to-economic-output assertion is not the right way to look at the Sports and Entertainment District money flows. The lesson here must be repeated: in any large scale development project, always carefully read legislation tied to it before doing any economic analysis.