Uncategorized Venues

Oakland and the Raiders need to figure out the magic number

Quick business scenario: One city will give your company $350 million in benefits to keep the company’s headquarter in their city. It has a pretty onerous tax rate — compared to other cities and states — but a much larger revenue base. Basically your company can sell moreproduct if you stay. The problem is a lot of your revenue is set. It doesn’t matter the city you’re currently located in because of parent-company wide revenue sharing. The other city is willing to kick in $750 million of free funding. Its tax rate is much lower compared to your current home. Honestly the politics of business may be easier there as well. Which do you choose?

The obvious answer is the one that gives you more money. Since your largest revenue driver isn’t set on where the business is located, the free money makes a difference. That’s the current situation the Raiders are in. It’s nice that Oakland has come off their zero dollar stance, but $350 million doesn’t make up the difference.

Sure the NFL can give the Raiders access to $500 million in funding, but they don’t need that much in the Las Vegas deal. If the deal is contingent on the NFL lending more money, there’s no reason the team or league would want to do that. Free money is free money and that is exactly what Las Vegas is essentially offering.

All things being equal Oakland is a better market and it isn’t really that close. Oakland has more Fortune 500 companies closer to the city — or new Stadium. Oakland has a larger media market. Oakland has a built in fan base and won’t rely on tourism traffic to drive ticket sales and PSLs. But, that is with all things being equal. You’ll notice $350 million does not equal $750 million.

There’s an answer somewhere. The city of Oakland the Raiders need to decide what that answer is. If the answer isn’t $350 million — which from multiple reports it is not — then the exact number may be closer to $500 million. The magic number isn’t $750 million with the added benefits of staying in Oakland.

A new stadium isn’t going to come in at a price tag at less than $1.3 billion. That’s the number the city, county and Ronnie Lott and the Fortress Investment Group pegged in the current deal. In all reality it will probably be more than that. The Raiders don’t have the ability to fund a $1 billion dollar project, and Marc Davis doesn’t want to sell his ownership stake so that is out the window for investors.

All the current plan does is give Davis and the Raiders some negotiating leverage with his counterparts in Las Vegas. They need it — Sheldon Adelson doesn’t lose in many negotiations. For now the $350 million number is off. It’s not where it needs to be to keep the Raiders from bolting northern California. It doesn’t mean the Raiders are leaving. They just need to find the right amount it would take them to stay. It doesn’t sound like the current number is going to do it.

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