Industry covering Control Board’s budget “bad idea” says one analyst

When Nevada lawmakers meet in special session this week, one idea being floated to fix an $887 million budget deficit is having the gaming industry cover the Gaming Control Board’s annual enforcement budget.

Union Gaming Group Principal Bill Lerner believes the concept is akin to rolling snake eyes.

The control board’s annual enforcement budget is about $32 million. Spread out over all the state’s gaming licensees, the cost wouldn’t have a meaningful impact on any one operator or property.

The concern, Lerner said, is that lawmakers might use the industry’s willingness to help as a move for additional tax revenues. The state’s largest casinos currently pay a 6.75 percent tax on gaming revenues.

“Given that Nevada has no personal or business income tax, and it is very difficult to pass a law or voter referendum to change that, the gaming industry tends to be the first target caught in the crosshairs,” Lerner told his firm’s clients last week.

In 2008, the state’s teachers union sought a voter referendum that would have increased gaming taxes by 44 percent. The issue had gained public support, but the union struck a deal with Harrah’s Entertainment, Wynn Resorts and Station Casinos to support an industry-wide increase in hotel room taxes.

Lerner said gaming industry cash flows, a measure of profitability, are down some 50 percent since 2007. The teachers union referendum could have sunk cash flows another 11 percent.

“Perhaps, cash flows would be down more than 60 percent from the peak, further exacerbating financial turmoil for the industry potentially resulting in additional bankruptcies and job loss,” Lerner said.