Tax bill was top local business story in ‘03

Friday, Jan. 2, 2004 | 11:26 a.m.

A funny thing happened in 2003 when it became clear that the Nevada Legislature would raise the state gaming tax and hit all businesses in the state with a broadbased business tax.

Gaming and nongaming businesses alike plowed ahead with a flurry of construction projects and expansions and went on hiring sprees, pushing the Southern Nevada economy back into a booming state as local unemployment dipped to a 34-month low of 4.5 percent in November.

No one is suggesting that businesses like to pay taxes, but it was obvious in 2003 that the tremendous opportunities for growth and profit-making here outweighed concerns about the new government levies. And many business leaders said the higher taxes would improve the Nevada economy in the long run by financing better schools and quality of life initiatives.

The new and higher taxes and the sizzling local economy were among the top business stories in Southern Nevada in 2003 as selected by Las Vegas Sun business editors and reporters. Here is a summary of the top 10 stories:

1. Taxes: After a heated Legislative session and two contentious special sessions, lawmakers passed a tax package designed to raise $836 million over the next two fiscal years. The key component is a 0.7 percent tax on business payrolls.

Lawmakers also levied a 2 percent payroll tax on banks and a $7,000-a-year per-branch excise tax. Casinos also saw their gross gaming win tax increase from 6.25 to 6.75 percent. Additional increases included higher business license and secretary of state fees, higher slot machine fees for establishments such as bars and grocery stores and higher taxes on the sale of real estate. The package also means new taxes on live entertainment, cigarettes and liquor.

2. Casino rebound: The year for Las Vegas hotel-casinos got off to a sluggish start as the SARS virus in Asia caused a downturn in tourism that spread to the United States. The Iraq war in March also dealt a blow to the Strip as many people stayed glued to television coverage of the conflict. After eight straight months of increases, gaming revenue on the Strip in April declined 5.3 percent to $361.2 million.

But gaming revenue rebounded in June and July, setting the stage for higher casino and hotel results near the end of the year. Citing healthier consumer spending trends, some Strip operators reported record hotel prices and occupancy rates.

Park Place Entertainment Corp. resurrected plans to build a hotel tower by 2005 at Caesars Palace after putting it off after the Sept. 11 terrorist attacks, while Bellagio broke ground on a second tower to open by the end of 2004. Others will soon begin hotel and casino expansion projects, including the Orleans, Santa Fe Station, Fiesta Rancho, Green Valley Ranch, the Rio and Southcoast.

3: Housing boom: Home prices soared in 2003 amid high demand for new homes that can't be built fast enough, a shortage of land for home builders and the Las Vegas Valley's booming job growth.

In 2003, the average cost of a new home broke the $200,000 mark and continues to climb.

The cost of resale homes continued to increase with many homes selling the day they were placed on the market. The valley's growing population and long wait for new homes fueled resale prices and demand.

The median price of a resale home in November was $178,000, a year-to-year increase of $22,750, or 14.7 percent.

4. Nevada Power: Struggling with shaky finances, Nevada Power Co. appeared to be on the road to recovery when the state Public Utilities Commission in May allowed the utility to recover the lion's share of a $195 million rate-hike request.

That security was lost when a U.S. Bankruptcy Court judge ruled that the utility owed Enron Corp. more than $300 million. The utility is now seeking regulatory permission to recover that $300 million from ratepayers should it fail in its appeal of the Enron case.

Nevada Power also has filed two new rate cases that would raise rates by $752 million over the next three years.

5. Malpractice: Nevada physicians in 2003 said the Legislature hadn't done enough to correct the medical malpractice crisis. But, they're hoping that will change after a public vote in November.

Physicians are pushing for a voter initiative called Keep Our Doctors in Nevada (KODIN), which would reform the malpractice laws passed in a special legislative session in 2002.

Dr. Rudy Manthei, an ophthalmologist who heads the group backing the initiative, said the changes are necessary to keep physicians in Nevada, aid malpractice victims and to keep quality health care affordable and accessible.

Some physicians have left Nevada, scaled back their services or closed their practices since the malpractice crisis peaked in 2001.

Manthei said some physicians have moved to Nevada, but there has not been enough of an increase to accommodate the growing population.

If passed, the KODIN initiative would require a $350,000 cap per case on pain and suffering damages without exceptions for gross malpractice and exceptional circumstances. Also, physicians and other defendants would be able to pay judgments over several years and would only be held accountable for their portion of the plaintiff's injury.

The initiative would limit lawyers' contingency fees by implementing a sliding scale that would decrease as the size of the awards increased.

Manthei said the initiative would help to stabilize the cost of health care by reducing the amount of defensive medicine and medical errors occurring in the industry.

Look for plaintiffs' attorneys to vigorously oppose the measure.

6. Downtown: Things finally started to look positive for downtown redevelopment in 2003, with the opening of the Las Vegas Premium Outlets, jointly owned by the Chelsea and Simon property groups, at Grand Central Boulevard across from the Clark County government center.

Other developers committed to downtown, with Mark L. Fine & Associates announcing plans to build a 100,000-square-foot building offering retail, restaurant and office space on 4.5 acres at the southwest corner of Bonneville Avenue and Grand Central Parkway near the Las Vegas Premium Outlets mall.

Construction also began in October on the World Market Center furniture market on a 57-acre parcel at Grand Central and Bonneville Avenue. Scheduled to open in 2005, phase one of the World Market Center will include 1.3 million square feet. Upon completion, the project is envisioned to cost $1 billion and will encompass 7.5 million square feet.

All three projects are near the city of Las Vegas' now vacant "61 acres," which city planners unveiled a site design for in 2003. The plans include a high density neighborhood include office, retail and residential.

7. Construction defect bill: A bill allowing builders the right to repair construction defects on homes and to avoid being drawn into lawsuits passed the Legislature last year, heading off what many said was a looming crisis in the building industry.

Senate Bill 241, which was a compromise between contractors and attorneys who represent homeowners in lawsuits over alleged shoddy construction, changed the previous law that permitted homeowners to immediately file suit without giving contractors a chance to repair the workmanship. SB241 says a homeowner who has a complaint must notify the contractor, who in turn can bring a subcontractor in to address the question of whether there is a defect.

8. Aladdin: The year saw a turn of events for the $1.2 billion Aladdin hotel-casino, the 2,587-room Strip hotel that opened in August 2000, but plunged into bankruptcy 13 months later. After months of legal wrangling, U.S. Bankruptcy Judge Robert C. Jones in June ruled the best bidder for the property to be a group headed by Planet Hollywood International Inc. Chairman Robert Earl.

Partnering with financier Bay Harbour Management LC, New York, and hotel operator Starwood Hotels and Resorts Worldwide Inc., Earl agreed to pay $635 million for the property and plans to convert it into the Planet Hollywood hotel-casino next year. Mike Mecca, formerly general manager of Green Valley Ranch Station Casino, was named president and chief executive of the property.

9. Gaming expansion: With the threat of higher taxes and opportunities to legalize gambling stalled in several U.S. states, major casino companies rushed to Britain to corral partners for potential future casinos while Steve Wynn and Sheldon Adelson proceeded with development of resorts in Macau. The British government is expected to liberalize the country's gambling laws in the coming years and allow more casinos with Las Vegas-style features, though details of those rules have yet to be hashed out.

In the United States, casino interests led by Station Casinos Inc. focused on expansion opportunities outside Las Vegas to manage casinos for Indian tribes.

Station Casinos signed its second tribal contract with a San Francisco Bay Area tribe and opened its first tribal casino near Sacramento. The Thunder Valley Casino has been blamed for more dramatic declines in Reno's gambling revenue. Station has since purchased a stake in a company with a contract to develop a resort for a Michigan tribe. Also, Park Place Entertainment struck a deal with a Southern California tribe to build a resort in place of its small gambling hall.

10. Water shortage: Some businesses responded to the drought by ripping up lawns and replacing them with desert landscaping. At the same time, other businesses fought new drought restrictions -- and successfully won variances to keep fountains flowing if they remove turf or other landscaping for a 50 to 1 savings in water conservation.

Some community groups have called for limiting the growth of the valley -- and the construction of homes -- as a way to ease the demand on the area's water supplies. The Bureau of Land Management, which releases land for development through auctions, is studying whether there is enough water for future land releases and development.

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