Report suggests Nevada casino slump - but only on paper

Brendan Riley

Wednesday, May 24, 2000 | 10:27 a.m.

CARSON CITY, Nev. - A long-delayed state report on net profits of major Nevada casinos will show a big drop in their fiscal 1999 bottom line compared with 1998 - but it's only on paper. The casinos actually are taking in record sums.

The state Gaming Control Board's annual Gaming Abstract, normally out in late January, was delayed this year to gather more accurate data from casinos on their corporate-level interest, legal expenses and other costs.

The result is expected to be a drop in the casinos' combined net profits, from $1.13 billion in fiscal 1998 to about $800 million in fiscal 1999. That suggests a nearly 30 percent slump - if you try to make an apples-to-oranges comparison between last year's report and this year's.

The latest abstract, which should be distributed by Friday, actually would show a slight year-to-year increase in net profits if the same accounting methods from past years had been used.

But the Nevada Gaming Control Board decided on a change in the report's format, calling for an end to the old practice of listing major expenses such as interest and lawyers' fees on some clubs' corporate ledgers. From now on, the expenses will be on the balance sheet of specific casinos within a corporation.

Under the old method, interest paid on new financing for a specific casino, for example, hadn't been listed as an expense of that casino even though it would be more accurate to account for it in that way.

Regulators have been aware of the less-than-exact accounting method for years, but it hadn't been a big issue.

Now, however, borrowing money at the corporate level for specific casino has increased greatly. Legal fees for individual resorts that are carried on corporate books also are up. The Gaming Control Board says that warranted a change in the Gaming Abstract.

While the change should mean a more accurate report, it also has political overtones this year because there's an effort under way by state Sen. Joe Neal, D-North Las Vegas, to raise taxes of Nevada's biggest casinos.

Neal is collecting signatures to force the 2001 Legislature to consider raising the tax rate on those clubs from 6.25 percent to 11.25 percent.

He says Nevada's casino taxes are among the lowest in the nation and big resorts can afford the increase.

The accounting change in the Gaming Abstract would not change the total casinos pay because taxes are figured on gross revenue. But with the change, Neal's campaign won't be able to point to the report to show the casinos' combined net profits top the $1 billion mark.

Bill Bible, head of the Nevada Resort Association, says Neal shouldn't cry foul because the discussion on changing the report's format began a year ago, before Neal started his petition.

"This change shouldn't be a surprise to him," Bible said, adding that the senator sat in on the discussion during legislative hearings.

"Now you have a report that fairly reflects the economic position of the industry," Bible said. "What you're getting is a lot better information."

The Nevada Resort Association, representing the big casinos, claims Neal's plan would boost total state taxes on casinos to nearly 60 percent of their profits.

The resorts have been backed by Gov. Kenny Guinn, whose 1998 candidacy was heavily backed by the clubs. Guinn has urged Neal to abandon the effort, calling it as divisive and destructive.

The Gaming Abstract is the only public document that's available from the state to show the combined net profits of more than 230 casinos that each grossed more than $1 million during the fiscal year that ended last June 30. The resorts account for almost all of Nevada's casino revenues.

The net profit is the money left over after various expenses and state taxes are deducted from gross revenues. Depending on individual casinos, federal taxes can take as much as half of the net revenues.