Current Economic Discussion/Issues
The Southern Nevada Index of Leading Economic Indicators, a signal of job growth four to six months in the future, declined in December by 0.61 percent. Eight of the ten indicators show declines from the same month a year ago. The economic index is compiled by the UNLV research center and can be accessed at UNLV SNINDEX. In contrast, the U.S. leading economic index increased 1.1 percent in December, extending the rising streak to nine months, leaving many cautiously optimistic of a pending recovery. Conference Board, a New York-based private research group, said the index has risen 5.2 percent in the six months through December, substantially higher than earlier in the year. The disparity between the two indexes reflects an expectation that Southern Nevada will experience a later recovery than some other areas of the country.
The LVCVA has taken a proactive approach to dealing with the economic downturn. 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 year 2009, reserves and the suspension of the Master Plan Enhancement Program (MPEP) were used to offset the continuing declines in room tax revenues. The LVCVA’s new fiscal year began July 1, 2009 and room tax revenues remain below expectations. However, the deepness of the shortfalls has contracted during the last few months and show potential signs of stabilization. Room tax revenues for the first six months of fiscal year 2010 (July through December) have averaged 24% below prior year results and 14.8% below the adopted budget. The shortfall is primarily driven by sustained decreases in the Average Daily Rate (down 23%) as the occupancy rates in Las Vegas continue to outpace the national average. As a result, the LVCVA recently reduced the room tax revenue forecast for FY 2010 and implemented additional expenditure cuts to offset the shortfall.
LVCVA management continues to monitor our financial position daily and is prepared to implement additional cost containment if necessary to maintain adequate fund balance reserves. The overall expectation is to expect continued weakness in Las Vegas and Southern Nevada through the coming months. As the global and national economies improve, we believe that the local economy will realize the benefits. People are more willing to travel when there is confidence in the job market, housing market and financial institutions.
