FORECAST: SILVER STATE ’08

Tuesday, Jan. 1, 2008 | midnight

With O.J. Simpson's trial and the upcoming Democratic presidential caucus, Nevada will find itself in the national spotlight throughout 2008. But amid the media attention, 2008 is shaping up as a year of uncertainty, especially for the state's sputtering economy.

Slumping tax revenue last year created a massive budget shortfall, forcing Gov. Jim Gibbons to consider cutting government spending over the next two years. These cuts are expected to have a profound impact on K-12 education, the university system and social services for the poor, the elderly and the mentally ill.

The budget crunch is predicted to coincide with another year of decline in the housing market, with no letup in Nevada's nation-leading foreclosure rate.

“It's going to be a trying year,” said veteran economic analyst Jeremy Aguero. “We have a consumption-dependent economy and a consumption-dependent tax system, which means we're all going to feel it.”

If the economy worsens, more cuts could be ordered. Just how Gibbons handles it all will be closely watched. His push to trim the budget at the end of 2007 was thoroughly criticized by top state legislators and others for its lack of transparency.

But Gibbons also stood up to pressure to raise taxes -- most notably, from MGM Mirage CEO Terry Lanni, whose company is the state's largest taxpayer. While that seemingly caused a rift with a giant political force, it also shored up Gibbons' support among his conservative political base, which applauded him for holding the line on spending.

Clouding the budget outlook in 2008 will be two grass-roots ballot initiatives that seek to impose higher taxes on gaming, the state's cash cow.

The Nevada State Education Association wants to raise the gaming tax from the current 6.75 percent to 9.75 percent on the highest-grossing gambling halls. Attorney Kermitt Waters has proposed to raise the gaming tax significantly more, to about 20 percent. Both initiatives face fierce challenges from the gaming industry, which in 2007 earned record profits.

Beyond the economy, uncertainty abounds elsewhere in 2008.

Will the proposed merger between Sierra Health Services and UnitedHealth Group win Justice Department approval? And if that happens, will the megamarriage improve or harm health care in Nevada?

Will the state finally gain the upper hand in the battle to stop the Yucca Mountain nuclear waste project, as the U.S. Energy Department steps up the pressure and files its long-awaited permit application?

Will either of the two high-powered groups seeking to propel Las Vegas into the world of professional sports break ground on an arena?

And will Nevada emerge as a national player in presidential politics with its strategically timed Democratic caucus Jan. 19?

These are among the major questions looming in what could be a challenging year for the state.

Here is more of what Nevada faces in 2008:

POLITICS

Thanks in great part to the efforts of Nevada's Harry Reid, the U.S. Senate's majority leader, Nevada Democrats are primed to play a key role in determining the outcome of the crowded Democratic presidential race, which officially gets under way with Thursday's Iowa caucus.

“It's putting us on par with Iowa and New Hampshire,” Las Vegas Democratic strategist Dan Hart said.

Hart expects national reporters and camera crews to be camped out in the state in the 10 days between the Jan. 8 New Hampshire primary and Nevada's Democratic caucus.

“It will bring Nevada issues to the forefront on a national level,” Hart said. “It will make us far more real to the rest of the country than just our reputation as an adult play land.”

The caucus also could radically alter the future of Nevada politics.

Nevada Republicans tried to follow suit, but they were upended by South Carolina Republicans, who scheduled their primary for the same day. As a result, Republican presidential candidates mostly stayed away from Nevada. But the leading Democrats established big campaign organizations here.

The benefits for the Democrats already are becoming clear. Before the 2006 election, Republicans held a small registration advantage. Democrats now have a 10,000-plus voter edge, and that's without any focused effort, just spillover from all of the political organizing.

Partisanship also is alive and well in the nation's capital.

When Congress resumes in January, the fall election is likely to dominate every move. The presidential contest will capture headlines, but the congressional drama in Washington will be rich as Democrats gun for greater majorities and Republicans try to prevent that from happening.

The Reid-led Democrats in the Senate will be trying to show voters they are agents of change who could do more if only Reid had more than his current one-vote majority to work with after 2008.

Republicans will be happy to block as many legislative accomplishments as possible so the party in charge looks less so. Continuing to tag Congress with a do-nothing label gives Nevada Sen. John Ensign better odds at succeeding in his job as chairman of the committee responsible for getting Republican senators elected.

But perhaps the most intriguing drama on the Senate side for Nevada this year will be watching whether Reid and Ensign can stick to their nonaggression pact, the agreement to not publicly criticize one another even as each tries to prevent the other's party from having a successful election.

GAMING

After a year when private equity companies stampeded into Las Vegas with billions of dollars to invest in the casino business, 2008 will open with the biggest chapter yet: the consummation of Harrah's Entertainment's buyout by Apollo Management and Texas Pacific Group.

Other privately financed deals are expected to close in 2008, including the sale of the Stratosphere and the two Arizona Charlie's casinos.

Though private equity firms are scaling back on big deals because of the credit crunch, the allure of gaming riches in Las Vegas will likely bring a steady stream of new investors this year, especially foreigners benefiting from an exceptionally cheap dollar.

The latest example: Australian casino company Crown Limited's deal to buy Cannery Casino Resorts, including its off-Strip casinos and a racetrack casino in Pennsylvania -- a deal expected to take at least a year to close.

The Strip, meanwhile, will continue its transformation in 2008 into a wealthy resort destination with the January grand opening of the 7,000-room Palazzo, which will be connected to the Venetian.

Upcoming Strip resorts, ultramodern visions in steel and glass that little resemble the themed resorts of years past, are soaring over Las Vegas Boulevard or just starting their ascent. MGM Mirage's CityCenter, Wynn Resorts' Encore and the Cosmopolitan and Fontainebleau, riding a construction boom that will top the previous major development wave in the 1990s, all are expected to open in 2009.

REAL ESTATE

The jobs the new megaresorts will bring to the Strip can't come soon enough for those working in the housing market.

New jobs mean new home buyers.

But the demand for homes isn't likely to pick up until all of the resorts open their doors in 2009.

“I think it is going to be some tough going,” said Ken Perlman, a housing analyst with Sullivan Real Estate Advisors of San Diego. “It is going to be another year of recovery. The housing industry has some work to get back on track.”

Buyers enjoyed some of the best bargains in years as 2007 drew to a close.

The median price of new homes fell from a high of $355,435 in April 2006 to less than $300,000 by the end of 2007. The median price of existing homes reached $290,000 in 2006, but fell below $260,000 by the end of 2007 -- the lowest prices have been since January 2005.

Many analysts expect home prices to continue to fall this year.

The record number of homes on the market could grow in 2008 because many loans are scheduled to reset during the first half of the year. That will cause payments to rise and could force more homeowners into foreclosure despite a plan by President Bush to freeze some adjustable-rate mortgages.

TRANSPORTATION

Southern Nevada residents can probably expect two things from the valley's crowded roadways in 2008 -- more gridlock and a fight over who should pay to relieve it.

Gibbons and state lawmakers cobbled together about $1 billion for highway construction during the 2007 legislative session, but that left $3.7 billion to $5 billion of needed work unfunded. As a result, the November 2008 ballot is likely to feature proposals to fund road construction.

Clark County Commissioner Bruce Woodbury has been discussing a funding measure similar to those voters approved in 1990 and 2002. It would likely tap several sources to spread the burden among gamers, truckers and others. The initiative sought by attorney Waters would finance new roads on the back of the gaming industry.

Some roadway relief, however, is on the horizon.

Ground will be broken early this year for the $240 million widening of Interstate 15 in Clark County from the Spaghetti Bowl to Craig Road. One of the largest projects undertaken by the state Transportation Department in 2008, it will expand the highway from six to 10 lanes from the Spaghetti Bowl to Lake Mead Boulevard and from six to eight lanes from Lake Mead Boulevard to Craig Road.

At the usually crowded McCarran International Airport, the lifeblood of the tourism industry, officials expect to accept bids in 2008 for the $1.8 billion third terminal project.

A new link between McCarran and the Strip corridor also might move forward in 2008. Operators of the Las Vegas Monorail say they are completing financing for a proposed expansion from the airport to the Strip and are on track to break ground this year.

HEALTH

The proposed merger between Sierra Health Services, Nevada's largest health insurance provider, and national giant UnitedHealth Group has tremendous potential to change health care in Southern Nevada in 2008.

The question is whether the takeover of Sierra will make things better or worse.

Sierra insures about 630,000 Nevadans, most of them in Clark County. Officials of the two companies insist things will only get better after the $2.6 billion takeover, with United's national network of providers and advanced technology making health care more efficient.

But the acquisition has raised the ire of doctors, nurses, hospital officials, insurance brokers, Medicare patients and Clark County officials, who say the merger would give United a near-monopoly on health insurance in Las Vegas.

That would give United, which is well-known for its high profit margins and has a record marred by regulatory violations, the clout to raise rates on consumers and lower reimbursement rates to hospitals and health care providers. It's possible that doctors and hospitals who refuse to accept rates offered by United could be cut off from their patients.

Approval by the U.S. Justice Department would not mean the fight is over, because any group with the means to wage a legal battle could file a lawsuit to try to block the merger. Clark County commissioners, in fact, are expected to decide today whether to authorize litigation if they determine it's necessary. Several weeks ago, Clark County expressed an interest in joining the opposition because the merger could increase costs at University Medical Center, the county's only public hospital.

This year should bring better news to UMC, which reported record losses in 2007 and became embroiled in scandal after Metro Police launched a criminal investigation into the conduct of former CEO Lacy Thomas.

Thomas was ousted for mismanagement in early 2007, and the Clark County district attorney's office is still deciding whether to file criminal charges against him. Thomas is accused of awarding millions of dollars in no-work contracts to his friends from Chicago, deals for which his wife allegedly was given money in return.

ENVIRONMENT

The new year will mean resolutions -- whether good or bad -- for environmentalists.

Battles over plans for coal-fired power plants, the nuclear waste repository at Yucca Mountain and a water pipeline from northeast Nevada to Las Vegas raged last year. And questions hung in the air over the role of renewable energy in the state and whether Congress would enact climate change legislation.

Most, if not all, of these issues are expected to be decided in 2008.

If Congress enacts limits on greenhouse gas emissions it could be the death knell for three coal-fired power plant proposals in Nevada.

And if Congress, in addition to establishing carbon dioxide limits, passes legislation extending investment tax credits for solar and other renewable energy developers, it could make those technologies cheaper than coal.

Insiders predict the renewable energy industry could boom in Nevada, supplying not only the state's own population but also meeting California's clean energy demands.

Next summer the Energy Department hopes to move a step closer to building the high-level nuclear waste dump at Yucca Mountain, 90 miles northwest of Las Vegas. The department plans to file its long-awaited permit application before the Nuclear Regulatory Commission, an action that will bring a stiff challenge from Nevada officials and intensify the state's long-standing opposition.

HIGHER EDUCATION

Services will likely go down. Student fees will go up.

In the new year, the Board of Regents, which governs the university system, will have some unsavory decisions to make -- namely, how much of the governor's budget cuts each higher education institution must absorb.

As regents Chairman Michael Wixom puts it, 2008 “will be a time of transition.”

Wixom said the regents will call a special meeting in January to discuss budget reductions.

The College of Southern Nevada and UNLV could leave faculty positions vacant, resulting in fewer classes or services for students. UNLV officials expect the school's financial situation to worsen as declining enrollment further dents revenue.

Five-year-old Nevada State College could put off searches for staff including a dean of students, and postpone plans for a School of Fine Arts.

And if officials' fears materialize, faculty and staff members will begin leaving Nevada in the new year, pursuing opportunities in other states. Diminished resources also could scare away potential job candidates.

For students, the coming months also look gloomy. In essence, they could find themselves paying more for less, because even as colleges prepare for cuts, student fees are set to rise next fall. At a meeting in February, regents will hear proposals for more hikes over the next two years.

Despite money problems, college officials hope 2008 will include opportunities for growth. UNLV is scheduled to open two new buildings by summer to house departments in the sciences and in urban affairs.

EDUCATION

Clark County Schools Superintendent Walt Rulffes didn't expect to have to deal with any of the governor's budget cuts.

But Gibbons changed the plan late in the game, and now the school district will have to trim as much as $70 million to meet the governor's demands.

The district wanted to add more full-day kindergarten classes for at-risk students in 2008, but those plans, along with expansion of the empowerment schools pilot program, have been put on hold.

Keith Rheault, Nevada's superintendent of public instruction, wants 2008 to be the year the Silver State's schools make significant inroads in reducing the statewide dropout rate. He's also eager to build on 2007's gains by students on standardized tests.

A new law setting limits on which retired public employees are eligible for subsidized state health insurance benefits will continue to cause headaches for educators in the new year.

The Clark County School District and the teachers union this month are expected to announce a new retiree health plan, a move they hope will stem an exodus of educators who might quit early before the new state law's loophole closes next fall.

Student enrollment growth may have slowed slightly in 2007, but the school district still is running short on classroom seats.

In November, voters will be asked to support a $9.5 billion capital improvement plan that would extend the district's share of tax revenue for another 10 years. The money would build an estimated 73 new schools and renovate dozens more.

This also is a pivotal year for the district's public image. Like Rheault, local officials hope to prove that the recent gains on standardized test scores were the start of an upward swing, not a fluke.

SPORTS

This is one fight that has yet to live up to its hype.

Two high-powered groups, one in the city and one in the county, will be competing again this year to build separate major league sports arenas.

Here's the tale of the tape.

REI Neon/Warburg Pincus, downtown arena: Seats: 22,000. Cost: $500 million. Total project cost: $10.5 billion. Hotel rooms: 6,000. Condominium units: 1,500. Time share units: 1,600. Retail space: 785,000 square feet. Convention space: 4 million square feet. Office space: 500,000 square feet.

Shovels in the ground: 0.

Harrah's Entertainment Inc./Anschutz Entertainment Group, Las Vegas Strip arena: Seats: 22,000. Cost: $500 million. Shovels in the ground: 0.

Mayor Oscar Goodman predicts the first developer to get a shovel in the ground this year will be the most likely to succeed.

So far, it's a tie.

Breaking ground on new projects has never been a problem at Las Vegas Motor Speedway, which probably means we are a lot closer to getting a second NASCAR race than we are to our first major league sports franchise.

Speedway owner Bruton Smith recently purchased the speedway in Loudon, N.H., but says he has no plans to move one of its two coveted NASCAR races to Las Vegas.

Guys with lots of money, however, have been known to change their minds -- especially if it means making more money.

ARTS

Las Vegas culture is finally taking itself seriously.

This year brings the groundbreaking of the Smith Center for the Performing Arts, the remodeling of a more centrally located space for the Las Vegas Art Museum and reconstruction of the old La Concha motel lobby, which will serve as the main entrance and gift shop for the Neon Boneyard on North Las Vegas Boulevard.

Each project is expected to generate local and international interest in Las Vegas culture, which traditionally has taken a back seat to slick Strip life.

The Smith Center for the Performing Arts will offer a 2,050-seat theater and two smaller performance venues and will house the Las Vegas Philharmonic and the Nevada Ballet Theatre.

The Las Vegas Art Museum's move to the former All American Sports Park will give the museum four times the space it has at the Sahara West Library. Its more centralized location also will be more accessible to valley residents and close enough to the Strip so it can market to tourists. Remodeling will begin this summer, but the museum isn't expected to open at the new location until 2009.

After much hubbub, international artist Dennis Oppenheim's Gateway to the Arts District project has been approved. The project will bring two sculptural paint brushes -- each roughly 50 feet high -- to mark the Arts District, with each sculpture sending choreographed light shows into the sky. One paint brush will rise from the intersection of Charleston and Las Vegas boulevards; the other will be at Charleston Boulevard and Main Street.

ENTERTAINMENT

Big changes are in store for Las Vegas entertainment in 2008.

Netherlands magician Hans Klok couldn't work his magic on the home turf of Siegfried & Roy and David Copperfield. His production at Planet Hollywood closed Dec. 8.

“The Producers” will exit Paris Las Vegas Feb. 9, and “Mamma Mia!” will close next summer after five years at Mandalay Bay.

Visitors also won't have Celine Dion to look forward to anymore -- she left Dec. 15.

But in her place will be Bette Midler and her production “The Showgirl Must Go On,” which premieres Feb. 20.

Six weeks after Midler's debut, “Jersey Boys” arrives at the new Palazzo. The Tony-winning musical about the Four Seasons is a smash on Broadway and may be able to break the curse that seems to afflict shows that come to Las Vegas from The Great White Way. “Jersey Boys” opens April 4.

And then there's the rock star-like magician Criss Angel, who appeals to a younger demographic. Angel and Cirque du Soleil are working on a show to debut at the Luxor next summer.

THE CITY

A test of how Las Vegas has matured will take place in April, when the Bureau of Land Management makes a preliminary decision on where to set the boundaries of a prehistoric preservation area in the far northern outreaches of Las Vegas.

The Upper Las Vegas Wash, which straddles a line created by Moccasin Road, contains one of the greatest collections of Ice Age fossils in North America. They are so plentiful that some of them, including a mammoth fossil, literally stick out of the ground.

But there are different views on how to preserve this historic treasure trove.

There's the city's view, which seeks to minimize the protected area so that growth won't be interrupted. And there's the view of a group of residents, mostly well-heeled retirees who moved here to live the quiet desert life -- then were stunned by not only the natural beauty of the desert but the invaluable historic wealth beneath their feet. That group wants a larger area protected.

The two sides will square off after the BLM's preliminary decision on the size of the preservation area is made in April. The battle will continue through the summer before the BLM's final decision in the fall.

SUBURBS

The new year will see the torrid pace of growth in Clark County's suburban cities continue, fueled by new master-planned communities.

North Las Vegas will retain its title as one of the country's fastest-growing cities. In 2008 the first residents are expected to move into Park Highlands, which eventually will have nearly 16,000 homes and 50,000 people.

Henderson will experience similar growth as Inspirada, along St. Rose Parkway, begins to take shape. It will add 13,500 homes to the city when completed. Just a mile down the road, work along Las Vegas Boulevard South will be seen as M Resort pushes to become the first hotel to open in an area some are dubbing the Second Strip.

Elsewhere in Henderson and North Las Vegas, downtown redevelopment efforts will continue as each city attempts to spruce up its oldest neighborhoods. And ground will likely be broken on a new North Las Vegas City Hall on Las Vegas Boulevard North.

Boulder City officials, meanwhile, hope to come up with a plan to alleviate traffic concerns when the Hoover Dam Bypass opens in 2011, sending thousands of trucks onto U.S. 93.

COMPASSION

It's easy to understand that people such as Linda Lera-Randle El feel at times as if they're doing a dance that goes one step forward, one step back.

The activist for the homeless has seen the past three years bring first-time millions in state and county dollars for a handful of agencies doing the kind of in-the-trenches work she pioneered with the Las Vegas Valley's homeless decades ago.

But 2008 may bring statewide budget cuts in a range of social services that outreach workers in those agencies rely on to get people off the streets.

“This is sort of how we do things in Las Vegas,” said Lera-Randle El, founder of the nonprofit organization Straight from the Streets. “We cut off the nose to spite the face.”

If the coming year appears tenuous for the region's roughly 11,000 homeless, people who are a step or two up the economic ladder may be looking for help from an organization in its sophomore year.

The Urban League is positioned to take over many of the cradle-to-grave services that the Economic Opportunity Board provided for four decades. Programs that give milk to poor mothers and train the unemployed for jobs will be under the Urban League's direction -- and under scrutiny, as observers watch to see whether the organization avoids the mismanagement that closed the EOB.

PUBLIC SAFETY

Police don't like to play Nostradamus, though they are willing to predict relative certainties in 2008.

Clark County's law enforcement officers agree there will be traffic problems in 2008, and with these problems, accidents. They're also willing to bet on continued drug use and sales, stolen cars, drunken driving, gang violence and homicides -- if the pattern holds, one murder every few days.

Metro sources say the department will put particular focus on curbing robberies, which were up in 2007. There also are plans to increase the attention paid to computer crimes involving child pornographers and white-collar offenders.

Other officers, meanwhile, will continue efforts to make Las Vegas a homeland security hub, zero in on men who pick up prostitutes and work to continue a downward trend in gang violence.

The Nevada Highway Patrol promises to focus on three things: “Belts, booze and speed.” There was a reduction in crashes and fatal accidents from 2006 to 2007, so the highway patrol will continue to aggressively target certain moving violations and seat-belt violations. This means more speed trap-style stakeouts, probably in partnership with other police agencies.

And North Las Vegas police plan to partner with area agencies to reduce the number of stolen cars by using decoy vehicles and homing in on auto theft rings.

WHAT HAPPENS HERE ...

The public's continuing fascination/revulsion with O.J. Simpson will rivet attention on Las Vegas in April when the former football star is to be tried on charges of kidnapping and armed robbery of two sports memorabilia dealers in September in a Palace Station hotel room.

A kidnapping conviction could result in a life sentence for Simpson.

Another spring trial could add a new chapter to the region's image as an incubator of political corruption.

Former Clark County Commissioner Lynette Boggs faces four counts stemming from accusations she falsely claimed to be living in her district when she filed for reelection in 2006 -- a race she ultimately lost -- and that she lied about campaign funds that she used to pay her children's nanny.

Boggs' legal woes come at a time when observers say there is much less tolerance of questionable political activity following the fallout from a federal corruption probe that sent four former county commissioners to prison.

Sun reporters Marshall Allen, Liz Benston, Tony Cook, J. Patrick Coolican, Brian Eckhouse, Jerry Fink, Abigail Goldman, Charlotte Hsu, Ron Kantowski, Lisa Mascaro, Michael J. Mishak, Kristen Peterson, Timothy Pratt, Emily Richmond, David McGrath Schwartz, Joe Schoenmann, Phoebe Sweet, Mike Trask and Brian Wargo contributed to this story.