Tourism and Gaming

Gibbons' plan: Penny wise, pavement foolish

By Richard Velotta / Staff Writer

Gov. Jim Gibbons is declaring victory in his bid to secure transportation funding after the end-of-session flurry of activity that typifies the final hours of most legislative terms.

The bottom-line figures that ultimately were approved: The state transportation fund will receive enough money by diverting existing taxes on hotel rooms, car rentals and county property to bond for $1 billion in highway improvements over the next two years.

While the governor is happy with that - particularly because he argues that it didn't raise taxes to do it - others are dismayed that actions taken barely scratch the surface of the state's highway woes, unfairly diverted funds from significantly worthwhile programs and didn't include other groups that use the highways just as much or more.

Everybody has concurred that we haven't seen the last of the debate over funding transportation and the governor's shortcut could ultimately cost taxpayers even more than experts initially told us.

Among the unanswered questions from the end of the session: How much more will highway construction cost us since lawmakers took a Band-Aid approach to fixing the problems? Should tourists (and tourism-related enterprises) be gouged for the costs? Will other transportation system shareholders who were alleged to have walked away from the negotiations on paying for highways be held accountable with a greater share of the cost in the future?

And, finally, what big pot o' money has yet to be tapped to pay for highways?

In the closing days of testimony in committee hearings, Nevada Department of Transportation Director Susan Martinovich said materials costs alone are climbing at a clip of about 31 percent. Estimates of the cost to build 10 critical highway projects was pegged at $3.8 billion. By the time Gibbons got around to proposing his transportation plan, Martinovich said the cost had risen to $5 billion.

In a Senate hearing, she said the 31 percent inflation rate would push the cost up by $100 million in two years and by $1 billion in four. Clearly, the state didn't do itself any favors by piece-mealing the plan.

Who should pay for highway improvements is another issue.

The Review-Journal's poll that found that 72 percent of people surveyed believe that room-tax revenue be used to pay for roads was hardly a shock. It's always easier to let the other guy pay for something.

While it's true that the successful marketing programs of the Las Vegas Convention and Visitors Authority and hotel properties across our landscape have increased the number of visitors who come to Southern Nevada, the reality is that most of our congested highways are filled with local residents.

Does it make sense for tourists to foot most of the bill by raiding the room-tax fund to the tune of $2.2 billion by 2015, as the governor initially proposed? And, should the funds that help generate the additional visitation to the city - the marketing dollars used by the LVCVA - be diverted to pay for roads?

Fortunately for tourists from everywhere and for the LVCVA, a compromise measure was reached and the room tax will only contribute $20 million to the pot next year instead of the almost $9 million Gibbons was hoping for initially with the amount going up by an even larger amount every two years.

But LVCVA leaders have to know that a governor who measures success by his ability to prevent new taxes will be back in 2009 to take another stab at raiding the room-tax coffers.

Frankly, I was stunned that it took so long for Gibbons to get to that. I had been asking tourism leaders since the day the legislative session started when we were likely to see the governor's proposal to divert money from room taxes. LVCVA officials said they would participate in a healthy philosophical debate about the topic, but even they weren't prepared for the magnitude of what the governor was seeking.

That's what irritated the elected officials on the LVCVA board of directors the most. They wanted to participate in the debate but weren't contacted ahead of time by the governor until he made his proposal. The governor's office maintains that they were in contact with the LVCVA early on, but there's nothing like getting a call directly from the man himself when the time comes. That's what Las Vegas Mayor Oscar Goodman, chairman of the LVCVA board, was expecting and never got.

The LVCVA will put off a few projects after finding that it would be short $20 million in revenue in the next fiscal year, but it won't have to cancel the $890 million convention center refurbishing plan the board had approved, something that was listed as a possibility if the governor's plan went through.

On the rental-car tax front, local companies took an even bigger hit. Bernie Kaufman of the Nevada Car Rental Association said that a 4 percent recovery surcharge tax that had been going to the rental companies to pay car registration fees will now be split with half going to the transportation fund.

Legislation signed by the governor doesn't replace any of that lost revenue and most rental companies are just eating it as an expense, not wanting to raise rates in a competitive environment.

Nobody has fully explained how that doesn't constitute a tax increase and why it was OK with the governor. The Legislative Counsel Bureau and the attorney general's office clearly thought it was: It required the two-thirds majority for passage reserved for new taxes.

While the LVCVA, the car-rental industry and county property owners ended up contributing to the highway fund in the end, others seemed to have dodged a bullet. But if Sen. Bob Coffin, D-Las Vegas, has his way, some of the dodgers will be contributing when highway funding comes up in the next session.

Coffin was the most vocal critic of the trucking industry when it walked away from the table because, presumably, its leaders knew that Gibbons wouldn't increase the amount of tax they pay for every gallon of fuel purchased. Coffin said he only wanted truckers to pay the same tax as citizens who fill the tanks of their cars. The tax on diesel fuel is 6 cents less a gallon. Coffin's motion to raise the tax 3 cents this year and 3 cents more next year died in a Senate Taxation Committee hearing.

But you can take it to the bank that the proposal will be back. Another industry that dodged higher taxes and fees that could have gone to transportation was the taxi industry. A proposal in a bill to increase the initial cost taxi drivers charge their customers died before ever reaching either house floor, as did proposals to index driver's license fees differently so that motorists paid more to license their cars and changing the licensing fee on vehicles hauling more than 55,000 pounds.

Are there any other pots of money that can be raided to pay for transportation? I've thought of three, two of which could someday see the light of day. But both of them would require a lot of legislative work and a green light from the gaming industry.

One potential pot of money that has no chance of developing is the federal investment in infrastructure that would occur if Yucca Mountain ever became a reality. The opposition appears to be too strong and united to allow a nuclear waste repository to be developed in Nevada. The tourism industry is a part of that coalition, not wanting to mortgage the state's future as a destination should a waste transportation accident occur.

Two funding sources that could have merit would require some strong backing from the gaming industry. One would be the development of a state lottery. While frequently discussed as an avenue to generate education funding, it's possible that transportation could become a critical need worthy of support from lottery proceeds.

Another proposal is even more complex, but it certainly could produce dividends for Nevada if our state took the initiative. I'm talking about regulating and taxing online gambling.

Members of the National Council of Legislators from Gaming States, which met in Las Vegas last week, talked about the prospective tax windfall that would occur if Web gambling were legalized in the United States. There are four bills that address some aspect of Internet gambling pending before federal lawmakers.

If online gaming were legalized, state lawmakers would have to buy into regulating and taxing it in Nevada. Most industry experts concur that Nevada could be the best place in the country to take that step because of the state's track record for understanding the nuances of the business.

Taxing online casinos would require an affirmative nod from our no-new-taxes governor. Would the prospect of such a revenue source convince him to go for it? Or would the gaming industry shout it down, fearful of online casinos hurting their own brick-and-mortar properties?

Whatever direction Nevada goes, it's a long haul. Many things could change by 2009. But something has to happen to fix the state's highway problems.

Passport panic: The Travel Industry Association believes common sense has prevailed with the announcement last week that people no longer have to have a passport for their air travel to Canada, Mexico and the Caribbean.

When the State Department and the Department of Homeland Security announced the requirement, applications for passports soared and passport processing centers nationwide were overwhelmed with requests.

Now, through Sept. 30, the passport requirement has been rescinded. But travelers aren't completely home free. Instead of showing a passport, people entering those countries now have to show proof that they have applied for a passport in addition to a government-issued photo identification.

Richard N. Velotta covers tourism for In Business Las Vegas and its sister publication, the Las Vegas Sun. He can be reached at (702) 259-4061 or by e-mail at velotta@lasvegassun.com.

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