Sin City? How Raiders players and coaches would become richer in Las Vegas

Down
enlarge
Randall Cunningham: Why Las Vegas would work as an NFL city
0:32 | NFL
Randall Cunningham: Why Las Vegas would work as an NFL city
Michael McCann and Robert Raiola
Tuesday January 17th, 2017

The potential relocation of the Raiders from Oakland to Las Vegas is controversial for many reasons, but not in one respect: Raiders players, coaches and other relocating employees would take home a lot more in “net pay.” Although their salaries would remain the same in Nevada, Raiders employees would be relocating from the highest state personal income taxes in the country to the lowest, and they would enjoy a much more affordable cost of living, too.

To be sure, relocation to Las Vegas would come with disadvantages for some Raiders players and coaches, particularly those who enjoy living in Oakland and whose families are settled there. The Raiders also have a legendarily passionate and loyal fan base in Oakland that in no way deserves to be abandoned. But when it comes to finances, relocation to Vegas would mean more dollars in players and coaches’ bank accounts.

Extra Mustard
Q&A: John Madden discusses the Raiders move to Vegas, Tom Brady v. Peyton Manning and his classic Miller Lite ads

A brief history of the Raiders: a franchise often on the move and never afraid to sue

The Raiders are perhaps the most nomadic franchise in NFL history. The team began play in 1960, holding its home games in San Francisco’s Kezar Stadium. A year later they relocated to San Francisco’s Candlestick Park. In ’62 the team moved again, making their new home Frank Youell Field in Oakland. Only a few years later, the restless Raiders would again pack their bags, but for a comparatively lasting move: The team headed over to Oakland-Alameda County Stadium and would remain there for the rest of the ’60s and ’70s.

In 1980, then owner Al Davis sought to relocate the Raiders to Los Angeles, a substantially larger media and TV market. The Raiders’ lease with the Oakland-Alameda County Stadium had expired and the Los Angeles Memorial Coliseum, which had just seen its NFL tenant, the Rams, leave for nearby Anaheim Stadium, wanted another NFL team. On the surface, it seemed like a good match.

The NFL, mindful of the regional interests of the Rams, said not so fast. Even though Davis was the “owner” of the underlying asset—the Raiders franchise—Davis’s equity was restricted in numerous ways as a condition of his franchise’s membership in a league of similar franchises. One such restriction was found in Article 4.2 of the NFL’s constitution and bylaws. Article 4.2 stipulates that at least three-fourths of other teams’ principal owners must approve relocation of a franchise to a different city. The logic behind such a provision is that the NFL, like other pro leagues, does not want franchises relocating frequently. Relocation can be disruptive to the league, as well as to fans, players, coaches and broadcast partners. There were 28 NFL teams at the time. Not one of the other 27 teams voted in favor of Davis’s desired relocation.

Davis moved his team anyway, sparking a multi-party, multi-year antitrust litigation that pitted Davis against the NFL and the Rams. Davis, along with the Los Angeles Memorial Coliseum, would ultimately prevail. Courts reasoned that the NFL using Article 4.2 to block the Raiders’ move to Los Angeles constituted anticompetitive conduct.

The Raiders would play in the Coliseum from 1982 to ’94. In ’95 they would relocate back to Oakland-Alameda County Stadium—a move that triggered more litigation, with Davis unsuccessfully suing the NFL for allegedly interfering with his efforts to secure a new stadium in Los Angeles.

The Raiders have been in Oakland ever since, but perhaps not for much longer.

Extra Mustard
Your ultimate guide to Houston's best Super Bowl LI parties, events

Uncertainty of whether—and when—the Raiders would relocate to Las Vegas

The potential move to Las Vegas stems from managing general partner Mark Davis, son of the late Al Davis, eyeing Las Vegas as his team’s new home. There are many attractions to Vegas, including the prospect of a new, state-of-the art NFL stadium. The stadium, which is expected to cost at least $1.9 billion, would be a domed facility that seats about 65,000 people.

Financing of the Las Vegas stadium project is not entirely clear at this point, but it would comprise both private and public resources. For his part, Davis has committed to spending $500 million of his family’s money. Sheldon Adelson, the CEO of Las Vegas Sands, has reportedly offered to pledge $650 million, though the firmness and specifics of such a pledge—including what Anderson wants in return—remain uncertain. The Raiders have also expressed that Goldman Sachs would to some degree finance the stadium. The government would raise the most significant contribution: $750 million from a newly approved increase in the local hotel tax.

NFL
Lane Johnson's bold move to sue his own union is rare, but not unprecedented

Making relocation more accessible is the Raiders’ lease agreement with the publicly owned Oakland-Alameda County Stadium. The lease agreement enables Davis to exit the lease after the completion of the 2016, 2017 or 2018 seasons. These terms make it unlikely that relocation would spark a successful legal effort to keep the Raiders in Oakland.

With a stadium plan mostly in place, Davis is expected to formally petition the NFL to approve the team’s relocation to Las Vegas. The formal petition could happen this week and would likely go to a vote by owners at their annual meeting in late March. Article 2.4, which Davis’s father defeated in court as it related to the Raiders’ move to Los Angeles, remains in place and requires support of three-fourths of NFL teams’ principal owners. This means at least 24 of the 32 NFL teams must support the relocation. If owners rejected the move, Davis, like his father nearly four decades earlier, could sue the NFL in an antitrust case. For obvious reasons, Davis and the NFL would like to avoid such an outcome.

One complication to a Las Vegas move is that the new stadium would take years to build. Reports suggest the stadium would not be ready until the 2020 season. It is thus possible that the Raiders’ relocation could be approved this March but the team stays in Oakland for several more seasons. That is only one of several possibilities. Another: The Raiders could play in Sam Boyd Stadium, a facility in Vegas that seats only about 35,000 people (by contrast, Oakland-Alameda County Stadium can seat up to 63,000 for a football game), while it awaits construction of a new stadium. Alternatively, although the current odds seem stacked against this possibility, Raiders executives and Oakland political leaders could agree on a new stadium project. Such a deal would keep the Raiders in Oakland for years to come. The larger point is that neither relocation nor its timing is definitive at this time.

 

If and when the Raiders move, players and coaches stand to benefit financially

Raiders players, coaches and some of the team’s employees are currently subject to the highest state income tax in the land. California imposes a 13.3% income tax rate on those who earn in excess of $1 million. This rate won’t change anytime soon, either. California voters recently approved Proposition 55, which ensures the 13.3% rate will continue until at least 2030. California residents who are single taxpayers and who earn between $268,750 and $1 million annually fare only slightly better with taxes, with rates ranging from 10.3% to 12.3%. No other state comes close to such a taxing regime, with Oregon in second place at 9.9%. Keep in mind, state income taxes are separate from federal income taxes, which currently impose a rate of 39.6% on single taxpayers who have taxable income in excess of $413,650. (As we discussed in an another article, President-elect Donald Trump seeks to lower federal income tax rates to 33%; also, while state and federal income taxes are separate, they interact when taxpayers are able to take an itemized deduction on their federal income tax return for state and local taxes paid.)

What kind of state income tax can Raiders players and coaches expect in Las Vegas? None. Nevada has no state income tax, which is tantamount to a pay raise for Raiders employees: a noticeable portion of their pay that currently goes to the government will go instead to their bank accounts.

The absence of a state income tax is not the only financial benefit to Raiders employees. According to CNN’s Cost of Living Calculator, life in Vegas would be a lot cheaper, too. Housing is about 53% less expensive in Vegas than in Oakland, and utilities and groceries are just under 10% cheaper. Bankrate.com estimates that a Raider could take a 26% pay cut and maintain the same standard of living in Vegas. Sure, new and perhaps unwise temptations to gamble in Vegas may, for some Raiders employees, prove to be more “costly” than the tax and cost of living savings accompanied by the move. But assuming Raiders employees don’t squander their earnings at the blackjack table or slot machines, they’ll feel a lot richer in Vegas than in Oakland.

BRANDT: The five myths of franchise relocation

How a move to Vegas would impact players’ pay

As noted above, even if the Raiders’ relocation to Las Vegas is approved, the Raiders could remain in Oakland for several years. Any such delayed move wouldn’t impact many, if not most, of the team’s current players. After all, every NFL team has roster turnover from season to season—often in the 10% to 25% range. This means a not insignificant percentage of players currently on the Raiders’ roster won’t be on that roster to start the 2017 season. There are also tax issues that are subject to modification whether the Raiders play in Oakland, Las Vegas or elsewhere. For example, while we anticipate there will be significant changes in federal income tax laws over the next year or two, it’s uncertain what those changes will be or when they would occur. Also, players and coaches who travel with the team will pay “jock taxes” on some of the road games that the Raiders play. There are thus many variables, some of which are impossible to predict with certainty, in assessing Raiders players’ take home of net pay based on the team’s location.

Still, just for illustration, consider how relocation would significantly impact the take-home pay of Derek Carr and Khalil Mack, arguably the Raiders’ two best players, who are both in line for massive extensions at some point in the next two years. Their future take-home pay would clearly differ based on whether their team played in Oakland or Las Vegas.

NFL
The Raiders' rabid fans finally have a team to get behind ... but for how long?

According to Joel Corry, a former sports agent and an NFL contract and salary cap expert, the Raiders will likely agree to pay Derek Carr more than the Colts have agreed to pay Andrew Luck. Last year, the Colts signed Luck to a five-year, $123 million deal, with $87 million guaranteed. Corry also believes the Raiders are poised to make Mack the first non-quarterback to earn $20 million per year and perhaps will guarantee him as much as $75 million.

It is true that Carr and Mack would earn tens of millions of dollars playing for either the Oakland Raiders or the Las Vegas Raiders. But the absence of a state income tax in Nevada means they would take home millions more of their salary if they played in Las Vegas than in Oakland.

While it’s unclear how Carr and Mack feel about a potential relocation to Las Vegas, if they place a premium on take-home pay, the Raiders would be better positioned to keep them in the fold for years to come. This is important given that Carr’s current contract is up after the 2017 season, while the Raiders have a team option on Mack for 2018.

The need for the NFL and NFLPA to explore equivalency provisions

As we argued in regards to the Rams’ move from St. Louis to Los Angeles, the significant role played by state income tax variations and cost of living differences in how much NFL players actually take home in pay warrants study by both the league and the NFLPA. It is understandable when players are paid differently based on their productivity, talents, skills, age, position and other market-based qualities. It is altogether different when they are financially rewarded or punished based merely on where their team plays. For a league that expresses an unbending desire for fair competition and employs a rigid salary cap, the NFL noticeably permits stark variances in pay based on geography that substantially benefit some teams and hurt others.

Any use of equivalency provisions would require corresponding adjustments to the salary cap. It might get complicated, to be sure. But fear of complexity shouldn’t discourage taking the most sensible path going forward.

Michael McCann is SI's legal analyst. He is also an attorney and a tenured law professor at the University of New Hampshire School of Law.

Robert Raiola is the Director of the Sports & Entertainment Group of the CPA and Advisory Firm PKF O’Connor Davies.

SI Apps
We've Got Apps Too
Get expert analysis, unrivaled access, and the award-winning storytelling only SI can provide - from Peter King, Tom Verducci, Lee Jenkins, Seth Davis, and more - delivered straight to you, along with up-to-the-minute news and live scores.