Editorial: The deal that never should have been

In all the second-guessing and navel gazing over the Faraday Future flop, no one is bringing up the real reason that the deal should never have been made in the first place.

Yes, it was an ill-conceived idea for gullible Nevada lawmakers in a special session in 2015 on blind faith alone to agree to dole out $215 million in tax abatements and credits to entice Faraday Future to build an electric car factory at the Apex industrial complex in North Las Vegas, though at the time it did not even have a prototype vehicle. The deal, struck by the Governor’s Office of Economic Development, also promised to spend $120 million on infrastructure improvements at the site — water, rail and widening of Interstate 15.

Faraday promised to build a $1 billion manufacturing facility, create 4,500 jobs and start producing cars as early as 2016.

After visiting China in 2016 state Treasurer Dan Schwartz, long a critic of the Faraday largesse by the state, told the press, “We’re increasingly more concerned than we were before that this is just a big Ponzi scheme.”

He and the handful of other naysayers have been proven right. Faraday has pulled the plug, tucked tail and run off.
But it wasn’t just naiveté or poor negotiating skills or poor judgment that made this a bad deal. It was blatant and arrogant flouting of the state Constitution. In fact, it was a double flout.

Nevada’s Constitution has a Gift Clause, which states, “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.”

Self-styled economic development advocates have tried three times to amend the Constitution and remove the Gift Clause. The voters rejected those attempts all three times — in 1992, 1996 and again in 2000 by wide majorities.
The state Supreme Court has said that when the state provides something to a private entity without getting adequate compensation for the value, that is a gift and thus a violation of the Constitution.

Nevada’s high court has cited an Arizona Supreme Court ruling on that state’s nearly identical Gift Clause. The Arizona court said its Gift Clause “represents the reaction of public opinion to the orgies of extravagant dissipation of public funds by counties, townships, cities, and towns in aid of the construction of railways, canals, and other like undertakings during the half century preceding 1880, and it was designed primarily to prevent the use of public funds raised by general taxation in aid of enterprises apparently devoted to quasi public purposes, but actually engaged in private business.”

Then there is the section of the Nevada Constitution that clearly states, “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …” It is not uniform or equal if a select few get breaks while others don’t.

Despite these clearly worded prohibitions the state doled out $1.3 billion in tax breaks to Tesla Motors to build a battery factory near Sparks. The projections on capital investment and number of jobs to be created have fallen far short. All it would take to make the whole deal go bust is a technological breakthrough that makes lithium ion batteries obsolete.

That $750 million to build a Las Vegas stadium for the Oakland Raiders football team on a site with woefully inadequate parking spaces still could come up a piker.

But none of them should ever have been allowed in the first place and none like them should ever be allowed again, if officials and lawmakers would abide by the Constitution.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

Site of failed Faraday Future electric car factory. (R-J pix)

Real reason the Faraday Future deal should never have been struck

For all the recriminations and navel gazing over the Faraday Future flop, no one is bringing up the real reason that the deal should never have been made in the first place.

Yes, it was an ill-conceived idea for gullible Nevada lawmakers in a special session in 2015 on blind faith alone to agree to dole out $215 million in tax abatements and credits to entice Faraday Future to build an electric car factory at the Apex industrial complex in North Las Vegas, though at the time it did not even have a prototype vehicle. The deal, struck by the Governor’s Office of Economic Development, also promised to spend $120 million on infrastructure improvements at the site — water, rail and widening of Interstate 15.

Faraday promised to build a $1 billion manufacturing facility, create 4,500 jobs and start producing cars as early as 2016.

After visiting China in 2016 state Treasurer Dan Schwartz, long a critic of the Faraday largesse by the state, told the press, “We’re increasingly more concerned than we were before that this is just a big Ponzi scheme.”

He and all the handful of other naysayers were right. Faraday has pulled the plug, tucked tail and run off.

But it wasn’t just naiveté or poor negotiating skills or poor judgment that made this a bad deal. It was blatant and arrogant flouting of the state Constitution. In fact, it was a double flout.

You see the Constitution has a Gift Clause, which states, “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.”

Self-styled economic development advocates have tried three times to amend the Constitution and remove the Gift Clause. The voters rejected those attempts all three times — in 1992, 1996 and again in 2000 by wide majorities.

The state Supreme Court has said that when the state provides something to a private entity without getting adequate compensation for the value, that is a gift and thus a violation of the Constitution.

Nevada’s high court has cited an Arizona Supreme Court ruling on that state’s nearly identical Gift Clause. The Arizona court said its Gift Clause “represents the reaction of public opinion to the orgies of extravagant dissipation of public funds by counties, townships, cities, and towns in aid of the construction of railways, canals, and other like undertakings during the half century preceding 1880, and it was designed primarily to prevent the use of public funds raised by general taxation in aid of enterprises apparently devoted to quasi public purposes, but actually engaged in private business.”

Then there is the section of the Nevada Constitution that clearly states, “The Legislature shall provide by law for a uniform and equal rate of assessment and taxation …” It ain’t uniform or equal if a select few get breaks while others don’t.

Despite these clearly worded prohibitions the state doled out $1.3 billion in tax breaks to Tesla Motors to build a battery factory near Sparks. The projections on capital investment and number of jobs to be created have fallen far short. All it would take to make the whole deal go bust is a technological breakthrough that makes lithium ion batteries obsolete.

That $750 million to build a Las Vegas stadium for the Oakland Raiders football team on a site with woefully adequate parking spaces still could come up a piker.

But none of them should ever have been allowed in the first place.

The only car Faraday Future has made.

 

 

Raiders’ deal gives new meaning to the term Black Hole

They apparently call the section of the stadium taken over by the most ardent, raucous, symbol bedecked and loudest fans of the Oakland Raiders the Black Hole.

On Monday the NFL owners voted to allow the Raiders to move to Las Vegas, opening just a bit wider the chasm that will become a black hole into which Nevada taxpayers money will be endless, relentlessly sucked.

That $750 million in Clark County room tax money is just the first of the piles of tax money that will be swallowed by the supposedly $1.9 billion, 65,000-seat domed (doomed?) stadium that someday might house the Raiders and possibly UNLV football.

Artist depiction of a black hole (NASA)

Remember, the Nevada Department of Transportation estimates it will take $900 million to improve the roads to access the most likely stadium site. Don’t think for a minute that the billionaire Raiders owners are going to pay for that.

In any other development the developers pay for the roads. You see all those sawtooth roads around the valley — ones that switch back and forth from two lanes to four lanes? That is because first builders in the rural areas were only required to pay for two-lane roads, while later builders were asked to pay for wider roads. Who do you think paid for the parkway that provides access to Howard Hughes’ Summerlin development?

Then there will be demands for upgrades, just like at every other NFL stadium in the history of the world, fleecing the taxpayers for billions.

As for economic improvement, most workers will be minimum wage and part-time, adding more to the welfare rolls than lifting people off.

When billionaire hotel, casino and newspaper owner Sheldon Adelson floated the idea of building a $1 billion stadium for the Raiders, I thought it would be like any other hotel amenity — just something to attract a few more suckers to the gambling tables and into the beds. But somehow Adelson wriggled out of his supposed $650 million commitment, though the stadium project lives, meaning he gets the amenity without footing the bill.

And who is to say it will ever cost $1.9 billion to which the price tag is said to have grown? Perhaps it can be built for less and stick the taxpayer with the bulk of the cost.

A stadium is a liability, not an asset. It is an insatiable maw that swallows tax money in perpetuity.

Black hole indeed.

The Black Hole

Editorial: Lawmakers should repeal football stadium funding

Lawmakers were summoned this past fall to Carson City and asked to pitch in $750 million toward financing a $1.9 billion domed football stadium that would house the Oakland Raiders and the UNLV football program.

The Raiders and the NFL would add $500 million to the pot and Las Vegas casino and newspaper owner Sheldon Adelson’s family would tip in another $650 million.

Since then Adelson has walked away from the deal, taking his money. He was miffed at the fact the Raiders’ owner never told him before hand about a proposed lease agreement with the stadium authority that legislators created to handle the “publicly owned” stadium.

The lease proposal envisions the Raiders paying $1 a year in rent, and the team owners pocketing all revenue from tickets, events, naming rights, etc., as well as having total control over the use of the stadium by UNLV and the Las Vegas Bowl.

“In addition to being discouraged by the surprise submission, I was deeply disappointed for the disregard the Raiders showed our community partners, particularly UNLV, through the proposed agreement,” Adelson said in a statement given to his Las Vegas newspaper. “It was certainly shocking to the Adelson family,” the statement also said. “We were not only excluded from the proposed agreement; we weren’t even aware of its existence. … It’s clear the Raiders have decided their path for moving to Las Vegas does not include the Adelson family. So, regrettably, we will no longer be involved in any facet of the stadium discussion.”

It is high time lawmakers, now meeting in regular session, reconsider the state’s commitment of room tax money to this harebrained, half-baked scheme to enrich billionaires.

Instead of sticking tourists with a 0.88 percent hike in the room tax, lawmakers should let them keep that money to spend on food, drink and gambling, which net nearly 10 times as much in tax revenue.

Sam Boyd, where there are more people on the field than in the stands.

Sam Boyd, where there are more people on the field than in the stands.

Now, we are reticent to suggest that the proponents of this stadium deal are so Machiavellian as to have plotted this from the start, but …

Lawmakers should note that there is no stadium price tag in the bill they passed, and the stadium backers flatly refused to consider capping public funding at 39 percent of the cost of construction. It was $750 million or no deal. The cost of the stadium when first proposed was a mere $1 billion. It ratcheted up from there. What is to stop the Raiders from building a $1 billion stadium, tapping the taxpayers for three-quarters of the tab and getting the state to make the estimated $900 million in road improvements needed to access the stadium?

Besides, does UNLV really need a new football stadium, when it can’t fill the one it has? One that has adequate traffic access off a major freeway and abundant parking. Why is there a need for a stadium on or near the campus, when 93 percent of students live off campus? And never mind the problems it might create for air traffic into McCarran International Airport.

A stadium is a liability, not an asset. It is an insatiable maw that swallows tax money in perpetuity.

The Kingdome in Seattle was repaired in 1994, costing more than $50 million in 20-year bonds, which were paid off in 2015. The stadium was imploded in 2000.

Renovate Sam Boyd Stadium if that is needed and forget this domed stadium boondoggle. If Adelson can take a hike, so can the state.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

Did someone ratchet up the stadium price tag to hoodwink lawmakers? Nah …

So, according to the Sheldon Adelson Review-Journal (SAR-J, pronounced sarge), NFL executives in Houston for the “Big Game,” as all the ads say because they can’t say Super Bowl, say that $1.9 billion price tag for a 65,000-seat domed stadium in Las Vegas to house the Oakland Raiders might be “exorbitant.”

Now, who’d’ve thought that?

No other stadium has cost that much so far, the paper says, though one being built is estimate to top $2 billion.

Back in October when lawmakers were contemplating Senate Bill 1, which proposed to raise room taxes to help pay for such a stadium — the special session vote was 16-5 in the Senate and 28-13 in the Assembly, satisfying the two-thirds requirement — someone wrote:

The stadium is being pushed by billionaire casino and newspaper owner Sheldon Adelson who promises to shell out $650 million from his rather deep pockets to pay for construction. The National Football League and the Oakland Raiders are supposed to contribute $500 million toward construction. The $750 million public sop is the largest ever by any public entity for a sports facility in this country.

All profits from stadium operations accrue strictly to the private investors.

At one point during the Assembly hearings, Assemblyman Ira Hansen of Sparks asked what happens if the stadium comes in under the $1.9 billion estimate. Would the taxpayers still be on the hook for the full $750 million?

Steve Hill of the Governor’s Office of Economic Development, which had touted the project, replied: “Technically that’s correct.”

Before Hill could elaborate, Hansen cut him off with a terse: “Thank you.”

So, if the project comes in closer to the original estimate of $1 billion, the taxpayers will pick up 75 percent of the cost and the billionaires keep their money.

Now that Adelson has walked away from the deal, might taxpayers be facing just such an outcome? The stadium proponents rejected a proposal to cap taxpayer funding at 39 percent of the actual cost. It was $750 million or no deal. Don’t forget the $900 million in tax dollars it will take to improve roadways to access the stadium.

The article in the paper asks the billion-dollar question: “Does (Oakland Raiders owner Mark) Davis really need the $650 million that was coming from the Adelsons, or does he need far less to build the Las Vegas stadium?”`

Oakland Raiders owner Mark Davis. (AP pix via SAR-J)

Oakland Raiders owner Mark Davis. (AP pix via SAR-J)

State should pull the plug on funding football stadium

Casino and newspaper owner Sheldon Adelson walked away from the proposed $1.9 billion domed stadium and took his $650 million with him. The state of Nevada should renege on its $750 million commitment.

Sheldon Adelson

If Adelson can’t make a suitable deal with Oakland Raiders owner Mark Davis to move the team to Las Vegas, what makes anyone think UNLV will be able to deal with him and get a fair share of playing time and money from the stadium, should it ever really get built?

Adelson apparently was miffed that the Raiders handed the new stadium authority a lease deal without consulting him. “In addition to being discouraged by the surprise submission, I was deeply disappointed for the disregard the Raiders showed our community partners, particularly UNLV, through the proposed agreement,” Adelson’s said in a statement given to his Las Vegas newspaper.

“It was certainly shocking to the Adelson family,” the statement also said. “We were not only excluded from the proposed agreement; we weren’t even aware of its existence. … It’s clear the Raiders have decided their path for moving to Las Vegas does not include the Adelson family. So, regrettably, we will no longer be involved in any facet of the stadium discussion.”

Under the proposed lease the NFL team would pay$1 a year for the stadium and would keep all the revenue from concessions, events, naming, etc. Uses by UNLV and the annual Las Vegas Bowl would be subject to the whims of the Raiders.

Reportedly Goldman Sachs stands ready to step into the fray and pick up the funding gap left by Adelson’s departure. Reportedly. ESPN is reporting the Goldman Sachs is re-evaluating its role in the deal.

That $750 million in room tax money could be spent on more worthwhile endeavors, including a less ostentatious football stadium for UNLV. It would also mean the state would not have to spend $900 million in road improvements for the stadium. Lawmakers meet in Carson City in a week or so and bill draft could ready for them when they arrive.

Adelson’s sports columnist speculated that other NFL team owners did not want an unsavory casino owner dabbling in their pristine pastime, or, just perhaps, they did not want to associate with someone whose company has paid $16 million in fines to the feds in the past year over allegations of bribery involving overseas operations.

How long will it take for that little italicized disclaimer at the bottom of stories about the stadium to disappear, just as Adelson has? And what will be the paper’s editorial stance on the stadium proposal?

 

Editorial: Billions for billionaires, pittance for parents

We now know the pecking order in Nevada.

In his State of the State speech this past week Gov. Brian Sandoval boasted that the Tesla gigafactory near Sparks, in addition to making batteries for electric cars, would also be making electric motors and gearboxes, adding 550 workers.

Left unsaid was who would pay for the police and fire, schools and other government services those workers would need, since Tesla was given $1.3 billion in tax breaks and credits, as well as promises of millions more to improve roads, by lawmakers in a special session in 2014.

Tesla is owned by billionaire Elon Musk.

Nevada takes care of billionaires.

Nevada lawmakers in a special session in 2015 agreed to dole out $215 million in tax abatements and credits plus millions in road improvements to entice Faraday Future to build an electric car factory at Apex in North Las Vegas. The company is owned by a Chinese billionaire.

As if on schedule, legislators in 2016 agreed to pony up $750 million in tax money to help build a domed football stadium for the billionaire owner of the Oakland Raiders, Mark Davis, and Sheldon Adelson, billionaire owner of the Sands casino corporation and the Las Vegas daily newspaper. The stadium would also require the state to spend $900 million for road improvements.

Mark Davis and Sheldon Adelson.

Mark Davis and Sheldon Adelson.

Almost as an afterthought, Sandoval tossed out a $60 million sop to the parents who have applied for education savings accounts (ESAs) approved in 2015 by lawmakers. The ESAs were blocked when the state Supreme Court said ESAs are constitutional but the funding mechanism devised by the lawmakers was not.

Under the law, parents who opt out of sending their children to public schools would be given an education savings account that would equal a portion of the statewide average the state spends per public school pupil, currently that is about $5,700. Low-income parents and parents with special needs children would get 100 percent of that amount, while all others would get 90 percent, or about $5,100 currently.

That money could be spent on private schooling, tutoring, transportation, distance education and/or homeschooling.

“We’ve heard from the thousands of Nevada families about how crucial it is that we give them freedom of choice in the education of their children,” Sandoval said in his speech. “I look forward to building a bi-partisan solution to get this done. It is time to give Nevada families more choice.”

Well, a few Nevada families perhaps.

It turns out the $60 million — $25 million in the first fiscal year and $35 million in the second — would fund about half the 8,000 to 9,000 ESAs already applied for so far in the first year and about two-thirds of them in the second year.

To add insult to injury, a spokesman for the governor said Sandoval is open to limiting who is eligible for ESAs by imposing means testing — the more a family earns, the less the family could get back from its own taxes.

When Sandoval announced his funding proposal for ESAs, Republicans applauded and Democrats sat on their hands, prompting the governor to quip with a chuckle, “I knew it would be a split house on that one.”

In 2015 not a single Democrat voted in favor of authorizing ESAs. Now the Democrats have majorities in both chambers of the Legislature, making that bi-partisan solution look like a pipe dream.

The governor had his chance to fund ESAs in that special session, while Republicans still held majorities in both chambers, in which lawmakers approved $750 million for that football stadium in Las Vegas, but he failed to put that on the agenda. Just not as important as the billionaires.

Nevada doles out billions for billionaires, but pittance for parents.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.