Current Economic Discussion/Issues
The Southern Nevada Index of Leading Economic Indicators, a signal of expected economic expansion over the period four to six months in the future, continues to be flat in calendar year 2010. This follows deep and prolonged declines from late 2008 throughout 2009. During the last quarter, visitor volume, convention attendance, and gasoline consumption showed modest improvements. However, taxable sales, airline passenger counts and gaming revenue showed larger declines, resulting in a 0.57% decrease in the overall index. The economic index is compiled by the UNLV Research Center and can be accessed at UNLV SNINDEX.
In contrast, the Conference Board’s U.S. leading economic index (LEI) has been rising steadily over the last year, although two of the most recent three months have experienced decreases. The recent results led Conference Board economists to project continued, but slow national economic expansion. Growth is expected to continue at a slower pace in the second half of the calendar year. The disparity between the LEI and the Southern Nevada indexes reflects an expectation that Southern Nevada will experience a much slower recovery than some other areas of the nation.
The LVCVA has taken a proactive approach to dealing with the economic downturn since late 2008. Conservative fiscal policy in prior years provided for the accumulation of sufficient reserves to react to the current economic crisis without severely impacting operations. During fiscal years 2009 and 2010, utilizing reserves, suspension of the Master Plan Enhancement Program (MPEP), and multiple operating cost containment measures were used to offset the continuing declines in room tax revenues. Cost containment measures include salary freezes for executive and management employees, an organization wide hiring freeze, and mandatory furloughs.
FY2010 ended on June 30th and the Comprehensive Annual Financial Report (CAFR) is being prepared at this time. Preliminary results for room tax and gaming fee revenues are $156 million, slightly above the revised budget, but 13% less than FY2009 and 29.9% less than FY2008. The most recent six months of revenue results have shown signs of stabilization and the deepness of the shortfalls experienced over the prior eighteen months has contracted. Revenue shortfalls compared to peak years is primarily driven by sustained reductions in the Average Daily Rate, which was down 12.3% from FY 2009. Despite the decreases in daily rates, occupancy rates in Las Vegas continue to outpace the national average and reflect the strength and appeal of the destination.
Management continues to monitor our financial position daily and is prepared to implement additional cost containment measures as necessary to maintain the Authority’s financial integrity.
The FY2011 budget was adopted on May 20, 2010 and reflects the continuation of all existing cost containment measures. These measures are critical, as the overall expectation is to expect continued weakness in Las Vegas and Southern Nevada through the 2011 fiscal year. As the global and national economies improve, we believe that the local economy will eventually follow. Consumers will be more willing to spend on both leisure and business travel when there is confidence in the job market, housing market and financial institutions.
