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Benjamin Spillman

Authority foresees drop in hotel room-tax revenue

16 May 2008

LAS VEGAS, Nevada -- Even Las Vegas optimists led by "America's happiest mayor" have lowered their revenue expectations for Southern Nevada resorts, predicting room taxes for the year will be $8 million less than forecast.

A budget forecast by Las Vegas Convention and Visitors Authority officials means the organization, fronted by Las Vegas' eternally optimistic Mayor Oscar Goodman, projects the agency will collect $219 million in room taxes this fiscal year, a 3.5 percent decrease from an earlier estimate of $227 million.

The authority, which operates the Las Vegas Convention Center and funds marketing efforts such as the "what happens here, stays here" campaign, has already frozen hiring and curtailed travel not related to sales in response to the revised budget numbers.

The impact of lower-than-anticipated room tax revenue was a subject of discussion Thursday during the authority's public hearing on its fiscal year 2009 budget.

"To offset that we obviously have to reduce expenses," Brenda Siddall, the authority's vice president of finance, said in an interview before the hearing. "We thought that to be conservative, fiscally conservative and prudent, that we would revise our estimates."

The authority gets 80 percent of its funding from room taxes; 16 percent comes from the Las Vegas Convention Center, the rest from other sources.

The hearing on Thursday preceded a vote by the authority's board of directors to approve a 2009 budget that projects $280 million in revenue and $218 million in operating expenditures.

Siddall recently revised the 2009 budget to lower the projected average daily room rate in Clark County 1.2 percent to $92. Despite the lower rate, she still predicted the authority's share of room tax proceeds would increase 2.5 percent to $224 million.

The authority made its original projections before March gambling and visitation figures were published.

But March results showed a 1 percent decline in visitation and a 2 percent decline in gambling win by Clark County casinos.

Meanwhile, convention attendance was down nearly 7 percent or the month, following double-digit declines in January and February in the convention segment.

Convention visitors are important because they spend, on average, about twice as much as a typical tourist.

The revised projections are the result of declining room tax collections in recent months and reports from resort executives who expect the tourism slump to continue.

Overall, room taxes are expected to generate about $420 million in revenue with $194 million, about 46 percent, staying with the authority. The rest goes to state and local community services such as schools, roads and local government services.

In addition to the travel restrictions and hiring freeze, which authority President and Chief Executive Officer Rossi Ralenkotter says affects 28 open positions, the authority is making other cuts.

The revised budget reduces spending on capital improvements $7.6 million to $14.6 million. It reduces payments to a debt sinking fund by $7 million to $58 million for the upcoming fiscal year.

What this means is that, for now, the authority isn't setting aside as much money as it would like for projects such as a proposed pedestrian bridge over Convention Center Drive.

Authority spokesman Vince Alberta said the agency will wait for better times to boost contributions toward a 10-year capital improvement budget that identified $78 million in needs.

"We have to make up that money at some point," he said. "Otherwise we can't do those projects."

The cutbacks won't disrupt the schedule of a proposed $890 million renovation of the Las Vegas Convention Center. The upgrades are scheduled to be complete in 2011 and include renovations to the facade, parking areas and the addition of escalators, restaurant space, taxi space and technology infrastructure.

Gov. Jim Gibbons and leaders from Las Vegas Sands Corp., who support Gibbons and also operate a competing convention center, say diverting more room tax from the authority could help bail the state out of its current financial troubles.

More recently, the Nevada State Education Association and major resort owners have discussed raising room taxes as much as 2 percentage points as well as shifting where the money goes.

The authority had planned to discuss the issue Thursday but didn't because the agency is involved in lawsuits challenging ballot initiatives to redirect room tax revenue.

Authority leaders say they have a proven business model that attracts tourists and conventions to Las Vegas which, in turn, greases the entire economy of the state.

As evidence, they cite the status of Las Vegas as the No. 1 trade show destination in the country. Las Vegas hosts 44 of the top 200 trade shows, followed by Orlando, Fla., at 24.

More importantly, according to the authority, Las Vegas has steadily increased its share of big shows from 25 in 1994 to the current figure of 44. Other top trade show destinations, such as No. 3 Chicago and No. 4 New York, haven't increased their market share.

Authority foresees drop in hotel room-tax revenue is republished from