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Best of Howard Stutz

Gaming Guru

Howard Stutz

Analyst worried Nevada budget fixes will hurt casinos

25 February 2010

LAS VEGAS, Nevada -- Wall Street is watching how the events unfold during this week's special session of the Nevada Legislature.

Mainly, analysts are concerned how the gaming industry will be impacted as lawmakers work to fix a nearly $900 million state budget deficit.

Deutsche Bank gaming analyst Andrew Zarnett told investors a proposal where the state's gaming industry would fund the operating budget of the Gaming Control Board — about $32 million annually — wouldn't have a large financial impact on major casino operators.

Zarnett is concerned the proposal could lead to gaming tax increase. Nevada's largest casinos pay a 6.75 percent tax on gross gaming revenues.

However, Zarnett's biggest fear is the statewide salary reductions that may be imposed on state workers and teachers. That move could have a negative incremental impact on the locals market casino operators, such as Boyd Gaming Corp. and Station Casinos.

"The Las Vegas locals economy has been plagued by rising unemployment, lesser wages, increased personal debt and higher foreclosures, which has led to a steep decline in gaming revenues in fiscal 2009," Zarnett told investors. "We believe that this trend is likely to continue in fiscal 2010 and be impacted to the downside as some of the proposed cuts are realized."