SEARCH NEWS:

 

Year In Review: On The Rebound

The business climate in Southern Nevada steadily improved over the past 12 months and, while no major megaresorts are scheduled to open in 2004, continued growth is projected for the coming year.

Las Vegas' economy has surged during waves of new building on the Strip, but it's now being supported by service-based businesses capitalizing on a booming population and a construction industry that employs twice the national average.

Economic development experts cite the state's favorable tax structure and low cost of living as primary reasons Southern Nevada has grown at rates envied by most of the nation.

Some say those benefits are eroding. Median prices of new homes have escalated to more than $200,000, land has become more expensive than just about every neighboring state except California and the Legislature passed an $836 million tax increase.

Here are the Top 10 local business stories for 2003:

. 1. Tourism rebounds

Las Vegas' tourism-based economy faced multiple challenges in 2003, but millions of visitors once again made their way to Southern Nevada's hotels, casinos, restaurants and other attractions.

The war in Iraq, terrorism concerns, a lackluster U.S. economy and the outbreak of the deadly severe acute respiratory syndrome eroded many people's willingness to travel worldwide.

But thanks to an attention-grabbing advertising campaign, new attractions and an improved focus on conventions and trade shows, Las Vegas still reported a 1 percent increase in visitor volume through October.

During the first 10 months of 2003, the city welcomed 29.9 million visitors. That was only about 296,000 fewer visitors than were reported in the first 10 months of 2000, when Las Vegas was on its way to a record 12-month visitor total of 35.8 million.

Traffic this year at McCarran International Airport was also ahead of last year's pace, the Clark County Department of Aviation reports.

Despite the recent losses of carriers such as National and Singapore airlines, the airport through November had handled 33.3 million arriving and departing passengers, up 3.2 percent from a year ago.

Airlines that ranged from Southwest and America West to JetBlue Airways and Virgin Atlantic each increased their local service this year to meet growing passenger demand for Las Vegas, with more service additions scheduled to begin early next year.

. 2. Taxes

Facing a budget shortfall of about $400 million a year, Gov. Kenny Guinn appointed a committee to devise a tax plan that could generate more revenue to fund the growing need for public services such as education, health care and transportation.

The Governor's Task Force on Tax Policy came up with several proposals, the most controversial being a gross receipts tax that would take 0.25 percent of a company's revenue over $350,000 a year.

The gaming industry felt it was paying more than its fair share of taxes, and that the gross receipts tax was a more equitable, broad-based tax.

Several business organizations, including the Las Vegas Chamber of Commerce and the Southern Nevada chapter of the National Association of Industrial and Office Properties, opposed the tax, saying it would cripple small business and scare off companies looking to move to Southern Nevada.

"Basically, the GRT (gross receipts tax) is nothing more than a complex sales tax that is administered in a different form," NAIOP said in a March report that presented an alternative tax plan.

The Legislature, in special session, reached a compromise, replacing the gross receipts tax with the modified payroll tax. It imposed a 0.7 percent tax on gross wages paid by employers during a calendar quarter, minus employee health care costs. Banks and certain other financial institutions pay a 2 percent tax.

Taxes were increased on liquor, cigarettes and live entertainment. Real property transfer taxes were essentially doubled with the state collecting $1.30 on each $500 of value.

The tax package also increased the monthly gaming license fee in gross gaming win to 3.5 percent for the first $50,000, 4.5 percent for revenues between $50,000 and $134,000 and 6.75 percent for all revenues over $134,000. All tiers were raised by 0.5 percentage points.

. 3. Casino cash

Violations of Nevada's Regulation 6A, the state's anti-money laundering reporting law, took center stage with regulators early in the year and kept the spotlight through December.

The Nevada Gaming Control Board in February opened an investigation into the failure of The Mirage to file almost 15,000 anti-money laundering reports with state or federal regulators.

State investigators found at least nine executives of The Mirage were aware of but did nothing to correct the failure to file the required anti-money laundering forms with the IRS from 2001 to 2003.

The report also found there was a breakdown in company and government auditing procedures used to catch deficiencies in the filings, which are used to track large cash transactions by individuals in casinos.

The investigation resulted in the largest fine ever imposed for a violation of Regulation 6A and the first criminal prosecution under the law.

The control board launched an investigation Feb. 10 into The Mirage's failure to file the currency transaction reports over an 84-week period, resulting in a $5 million civil fine against the company in June and the criminal prosecution of compliance manager Christopher Morishita, who was handed a three-year probationary sentence earlier this month.

The Control Board also started an investigation of Station Casinos in April for its failure to file regulation 6A reports. That investigation is alleged to involve hundreds of reports and is still under way.

Park Place Entertainment agreed to a $75,000 settlement on Feb. 28 after finding it failed to file two transaction reports in December 2000 and December 2001.

Gaming Control Board Chairman Dennis Neilander said in December that his agency will make changes in Regulation 6A procedures as early as January to make sure similar failures are caught by regulators in the future.

The three cases also raised speculation that the federal government may cancel Nevada's exemption from federal currency transaction reporting requirements, and Neilander said conversations are ongoing with the U.S. Treasury Department's Financial Crime Network about handling the reports in the future.

. 4. Power play

The Western power crisis ended two years ago, but Nevada Power Co. of Las Vegas continued to feel the aftershocks.

Enron Corp., the bad boy of energy companies, won a $336 million final judgment in September against Nevada Power and affiliated utility Sierra Pacific Power Co. The lawsuit stemmed from a bond rating downgrade that came after state regulators threw out almost half of a $922 million energy rate increase for Nevada Power. Enron stopped deliveries but argued that the utilities owed it for lost revenues.

The two subsidiaries of Sierra Pacific Resources appealed the judgment for Enron.

Meanwhile, the New York bankruptcy judge who ruled in favor of bankrupt Enron directed the Nevada companies to ask state regulators for a declaratory ruling on whether they could recover the judgment from ratepayers if the appeal fails. The Nevada utilities also challenged the judgment in a complaint filed with federal regulators.

In late December, the staff of the Public Utilities Commission, which is independent of the three-member commission, filed a document urging the PUC to refuse the utilities' request for a declaratory order.

That would leave undecided the question of whether shareholders, customers or both should bear the burden of the judgment.

In May, the PUC voted 2-1 to disallow $47 million of $195 million in past power and fuel expenses for Nevada Power, rather than disallowing $175 million, as Commissioner Adriana Escobar Chanos suggested.

. 5. Aladdin sale

Planet Hollywood Chairman Robert Earl and a couple of other investors hope being the second owners of the bankrupt property will prove luckier than being the first, who turned the $1 billion project into the Strip's biggest flop.

Earl's group and its $635 million offer was named the winning bidder by the U.S. Bankruptcy Court in June. The prospective owners must receive gaming licenses; if they do, the sale is expected to take place in mid-2004.

The property would be renamed Planet Hollywood, and the new owners would invest at least $90 million to renovate the hotel-casino.

The megaresort's separately owned shopping mall, Desert Passage, was sold earlier this month to a group of East Coast investors for $240.5 million; the new owners are expected to work with Earl's group to harmonize the mall with the hotel.

. 6. Strip projects

Casino companies show continued optimism about Las Vegas growth by proceeding with several major construction projects in 2003.

The $236 million Mandalay Bay Convention Center opened at the company's signature resort opened in January. The 1.5 million-square-foot project became the nation's fifth-largest convention center, trailing only Chicago's McCormick Place, the Las Vegas Convention Center, Atlanta's Georgia World Congress Center and the Orange County Convention Center in Orlando, Fla.

Mandalay Resort Group in December also opened The Hotel, its new $230 million, 43-story tower next to Mandalay Bay.

The Venetian opened its new $275 million Venezia tower and a $45 million expansion of New Congress Center, both in June, increasing the megaresort's meeting room area to 1.9 million square feet.

The shell for another 385,000 square feet, with an additional 20 percent increase in meeting space, also has been completed on top of the expanded center at The Venetian.

The Venetian is expected to announce the development of a new destination resort-casino at the corner of Twain Avenue and the Strip early next year.

Developer Steve Wynn, continuing with construction of his $2 billion Strip resort across from The Venetian, renamed his property Wynn Las Vegas.

And MGM Mirage and Park Place Entertainment Corp. each proceeded with construction of new hotel towers.

The Bellagio, owned by MGM Mirage, is building a $375 million, 928-room tower that is scheduled to open in December 2004, just in time for a revitalized Bellagio to face the expected challenge for Strip supremacy from Wynn Las Vegas, set to open in April 2005.

Caesars Palace, owned by Park Place, started building its 26-story, 949-room tower at Flamingo and the Strip. The $375 million tower is expected to open in 2005.

. 7. Housing boom

Las Vegas remained one of the nation's hottest housing markets, fueled by low mortgage rates and an estimated 8,000 new residents moving here each month.

New home sales through November totaled 22,245 and were expected to reach 24,500 by the end of the year, said Dennis Smith, president of Home Builders Research, a company tracking local housing.

That would break the record set in 2001 by almost 1,600 sales, a 6.8 percent increase.

Sales of existing homes rose by a 27.5 percent through November to nearly 45,000.

The median price of a new home in Las Vegas is $207,931, an increase of $19,034, or 10.1 percent, from a year ago. Since 1995, median prices have risen $82,831, or 66.2 percent.

"There aren't many, if any, large metropolitan areas in the United states that can show that kind of price appreciation," Smith said.

What's clouding the housing picture in Las Vegas is soaring land prices.

The Bureau of Land Management held a public auction in June that fetched an average of about $230,000 an acre, a jaw-dropping number for a city that appears to have plenty of available desert land. Most of it is federally owned.

Home builders are paying in excess of $300,000 an acre for prime parcels.

But they backed off in the most recent BLM auction in November, refusing to bid the minimum $250 million for nearly 2,000 acres in Henderson. Developers said they couldn't make the numbers work, especially with the $225 million they'd need to spend on infrastructure and some zoning mandates by the city.

Still, demand for new homes has outstripped supply, and some consumers resorted to camping out in their cars to be first in line for new phase releases in some new subdivisions.

. 8. Downtown

Among a host of 2003 downtown changes, the biggest was MGM Mirage's $215 million deal to sell downtown's top resort, the Golden Nugget, to an ownership group that includes a couple of dot-com millionaires, former International Game Technology Chairman Chuck Matthewson and tennis champ Andre Agassi.

The sale to Travelscape.com sellers Tim Poster and Tom Breitling, announced in June, includes the Nugget's sister property in Laughlin. It is subject to Nevada regulatory approval and is expected to be completed by February.

In other deals, slot-bar king Terry Caudill's $20.5 million purchase of downtown's Four Queens was completed in July and Chelsea Property Group and Simon Property Group opened the $95 million Las Vegas Premium Outlets mall.

Across the street from the mall, a Los Angeles company broke ground on what is expected to be a $1 billion World Market Center furniture expo.

. 9. `Vegas Stories' ads

The Las Vegas Convention and Visitors Authority launched its $58 million "Vegas Stories" advertising campaign in mid-January and quickly capitalized on a swirl of publicity surrounding the National Football League's refusal to allow the commercials to run during the Super Bowl.

Las Vegas Mayor Oscar Goodman championed the city's anti-NFL charge by ripping the league for its "deviant" athletes and unsavory image. Goodman later campaigned to sue the popular sports league over its refusal to run the ads, though the longtime attorney eventually backed away from the idea.

Such hype and hullabaloo were only the beginning for the ads, whose "What happens here, stays here" tag line made inroads into pop culture while irritating critics who claimed the spots presented an unsavory view of the city and its residents. Among other topics, one 30-second commercial depicts a group of conventioneers who appear to misplace a friend while partying. Another shows a woman who gets aroused while riding in a limousine.

Regardless of the controversy, convention authority officials and the representatives of the ads' creator, Las Vegas-based R&R Partners, contend the campaign has been a resounding success. And like 'em or not, the first of six new "Vegas Stories" television ads is scheduled to debut in February.

. 10. Gaming growth

Out-of-market developments provided a lot of the news for major Las Vegas casino operators in 2003.

Station Casinos opened its first California tribal casino in June and hopes to make as much as $75 million from the first year of operation of the Thunder Valley casino it manages for the United Auburn Indians in suburban Sacramento. The locals giant hopes to develop additional tribal casinos in Sonoma County and in Michigan.

A host of other companies, including Park Place Entertainment Corp., Hard Rock Hotel and Harrah's Entertainment, went after new deals or stepped up their already existing roles with Indian tribes.

Harrah's announced the third-largest merger in gaming history with its $1.45 million deal to buy Horseshoe Gaming Holdings' three central U.S. riverboat casinos, an agreement that must past federal antitrust muster as well as regulatory OKs in all three states.

Prospective relaxation of United Kingdom gaming laws led MGM Mirage, Harrah's and others to begin lining up British casino development deals, and Sheldon Adelson's Las Vegas Sands casino in Macau is under construction and expected to open next year.

Copyright GamingWire. All rights reserved.

< Gaming News