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Howard Stutz

Room tax debate: Groups contest ballot initiatives

25 March 2008

LAS VEGAS, Nevada -- The Las Vegas Convention and Visitors Authority and every municipality in Clark County filed a lawsuit late Thursday to disqualify two potential November ballot initiatives that would divert room tax dollars away from tourism support and into either public education or public safety improvements.

The initiatives, currently in the form of two petitions on file with the secretary of state's office, are being circulated by former state Treasurer Bob Seale.

In the lawsuits, filed in District Court in Carson City, the convention authority said reallocating how room taxes are divvied up would not only damage its mission to support Southern Nevada tourism, but also hurt its standing with bond holders who have funded the previous and current expansions of the Las Vegas Convention Center.

"The (convention authority) board has a fiduciary responsibility to our bond holders, but these initiatives would reduce our overall ability to market the destination," said Boyd Gaming Corp. CEO Keith Smith, who is vice chairman of the convention authority's 14-person board of directors.

Representatives from the cities of Las Vegas, North Las Vegas, Henderson, Boulder City and Mesquite and Clark County, are all members of the board. All the municipalities are parties in the lawsuit.

Las Vegas Mayor Oscar Goodman, who is also chairman of the convention authority board, said the initiatives would also divert hotel room tax dollars away from local governments.

"We, as cities, would get less money and we would provide less in the way of public safety, roads, parks, etc.," Goodman said.

"I had conversations with the (other) mayors and this would have a debilitating effect on local governments. The money generated in the south would just go up to the state, and we all know the state budget is a giant black hole at this time," Goodman added.

Seale filed the petitions on Feb. 29, saying the money would pay for needed improvements without raising taxes.

The lawsuits claim the two initiatives would violate a 2005 state law that requires petitions to deal with a single subject. That argument was used recently by the Nevada Resort Association to prevent the circulation of petitions calling for an increase in the state gaming tax.

"Although hidden from the initiatives' face, their true objective is to reduce the revenues that currently fund the ... convention authority," the lawsuit stated. "To do that, they try to wrestle control over the subject matters of county room taxes, county gaming fees, as well as the room taxes and gaming fees of every municipality in Clark County. These are separate subjects. Compounding matters, Seale tries to attract supporters by spreading the money around to politically popular topics of education, transportation and/or public safety. Plainly, these publicly appealing subjects have nothing to do with each other, let alone whether voters want to reduce the (convention authority's) operating funds. This is old-fashioned log rolling, which the law forbids."

The lawsuit also claims Seale is acting on behalf of the Las Vegas Sands Corp., whose executives have had a long-running dispute with the convention authority and its operation of the Las Vegas Convention Center.

Seale has said the petitions were his idea and Las Vegas Sands is not involved.

The total room tax now averages 9 percent in Clark County. According to the convention authority, room taxes collected in fiscal year 2007 were more than $397.7 million. Of that total, the convention authority used $191.9 million while $205.8 million went into total community support, including $72.6 million that was distributed to the Southern Nevada municipalities.

The convention authority has projected room taxes will reach $456.3 million in fiscal 2009 and $571.8 million by 2012.

The convention authority now pays debt service of $36 million annually on total debt of $317 million, which is reflective of previous renovations to the Las Vegas Convention Center and land acquisitions for future expansion. The annual debt service is expected to increase to $98 million based on the convention authority's $890 million expansion plan for the convention center.

"These initiatives completely impact our ability to honor our commitment to our bond holders, and that was based on advice of our legal team and outside bond counsel," said convention authority spokesman Vince Alberta.

Goodman said the initiatives would unnecessarily disrupt a business model that is working.

"We have a pretty good thing going in Southern Nevada," Goodman said. "Southern Nevada drives the rest of the state. Why tamper with something that seems to be working?"