In the face of an unpredictable outlook for the tourism industry, the Las Vegas Convention and Visitors Authority’s predictions will count for more than at any time in recent memory.
The budget for the authority’s coming fiscal year calls for finishing with a reserve, called a fund balance, of $7.8 million on June 30, 2012. This represents a drop of nearly half from the current spending plan and just 4.3 percent of total operational spending, the low end of the range the authority tries to maintain.
At the same time, the authority has built in a $7 million increase next year in room tax revenue, the source of three-fourths of its funding. A hiccup in visitor traffic could quickly eat away at the reserve, although better-than-expected room taxes this year allowed the authority to come in with a reserve $5.3 million higher than originally expected.
The budget calls for a 1 percent decline from this year to $230 million. Due to rising debt service, spending on operations, including running the Las Vegas Convention Center and selling the city to the world, will drop 4.5 percent to $180.4 million.
In putting together the 2012 estimates, authority Vice President of Finance Brenda Siddall said she canvassed member hotels about their outlooks. "To a person, they talked about the inconsistency of what they were seeing," she said. "Roller coaster was the operative term."
Sharply climbing oil prices have emerged as a potential brake on the economy, hitting Las Vegas in the form of rising airfares and gasoline prices that now average about $4.17 a gallon in Southern California, the largest source of visitors. Siddall noted that the Conference Board’s Consumer Confidence Index dropped sharply in March after several months of gains.
Boulder City Councilman Cam Walker, an authority board member, raised a caution flag about the shrinking reserve. If the revenue projections turn out to be high, it could lead to another round of budget cuts like those that followed the onset of recession three years ago.
"I am concerned about the people that would be affected," he said.
The state calls for authorities to keep reserves of 4 percent to 8.3 percent of an operating budget, but the authority has adopted a target of 4 percent to 12 percent.
The reserve hit $45.7 million three years ago, 16.4 percent of operating spending, as the authority built up funds to carry out a capital improvement program. But when room tax collections took a sharp dive, the more ambitious projects were shelved and some of the funds went to maintain the authority’s basic functions.
Out of 572 positions shown on the books, 101 sit vacant. As part of the new budget, the authority will eliminate 67 permanently.
The allocations for 2012 were trimmed 1 percent for marketing and 7 percent for advertising, two categories that comprise just over half of the operating budget. The dollar amounts for both categories are still lower than they were in 2005.
Still, said Siddall, the gradual economic improvement over the past year is projected to continue, with low single-digit percentage gains in hotel room occupancy and average daily rates. This will let the authority make some headway in its two top funding priorities of boosting the advertising budget and spending on employees through such measures as eliminating mandatory furloughs.
Contact reporter Tim O’Reiley at email@example.com or 702-387-5290.