Brooks, baccarat are sure bet but other sectors may remain down

Thank you, Garth Brooks. And baccarat.

When it comes to predicting Nevada's economic future, prognosticators search for any sign -- big or small -- of shifting spending habits to forecast how much money the state will collect in taxes and fees.

So, when ticket prices jumped by $110 to $253 for the country star's rare Las Vegas concerts, forecasters took note. And when high-rollers suddenly started playing up to an astonishing $60 million a day at Nevada baccarat tables, the bean counters began to recalculate their figures.

"It is an art as well as a science," said Nevada Budget Office economist Janet Rogers, a forecaster who helps formulate state budget projections that determine future spending.

"You are trying to forecast the future. If it were purely scientific, it would be easier to do."

To remind her of the crystal ball nature of her job, Rogers keeps on her Carson City desk a few gag tools of the trade: tarot cards, spell-casting chicken bones and a Magic 8 Ball with its famous all-purpose answers that include "yes," "no" and "good luck."

For the first time in several years, Nevada's luck may be changing after a recession that raised to record highs the rates of unemployment, home fore­closure and bankruptcy.

Forecasters are warily predicting slow but steady growth in sales and gaming revenue, although other sectors of the economy are expected to show little or no progress, including home sales and overall employment.

As a result, this past week a panel known as the Economic Forum predicted state tax revenues and fees will generate $5.33 billion in the two-year budget cycle that begins July 1.

That's still less than the current $6.4 billion level of biennial spending, meaning Gov.-elect Brian Sandoval and the Nevada Legislature will need to fill the budget gap.

Sandoval vows no new taxes, so proposed cuts are on the way.

By law, the governor and lawmakers must use the five-member Economic Forum's projections to build a budget covering everything from teachers' salaries to mental health counseling. That's why forecasts are so important, and why those compiling the figures put so much effort into measuring every economic indicator.

During the panel's six-hour meeting last week, forecasters from the state budget office, the Legislative Counsel Bureau and various agencies made it clear they were often using their best guesses.

"This is a tough world for a fore­caster," said Russell Guindon, deputy fiscal analyst at the Legislative Counsel Bureau, adding he's "trying to read signals versus noise."

John Restrepo, chairman of the Economic Forum and an expert in real estate development, said the uncertainty of recent times has made it all the more difficult to determine when Las Vegas and the rest of the state will turn around, although things appear to have hit bottom.

"This is our Great Depression in many ways," Restrepo said. "This is going to be a game changer for a while. There's a level of uncertainty we've never had to deal with before."

What will happen in gaming, Nevada's legal cash cow since 1931, remains one of the biggest questions, especially from leading revenue generators such as baccarat.

The winner is the player whose two- or three-card hand is closest to nine with the "10" and face cards worth zero. Bets can hit six-figures per hand in a hurry, and add up to multimillion-dollar wins or losses for the players or the house.

"It's next to impossible to forecast" baccarat revenues, said Matthew Maddox, a forum member and chief financial officer of Wynn Resorts who also has worked in Macau for Wynn.

In a good sign for the Strip half a world away, Macau's baccarat revenue grew 42 percent during November with the Asian region's casinos collecting $2.13 billion in gaming revenue.

"As Macau spikes in baccarat so does Las Vegas," said Mike Lawton, a fiscal analyst for the Nevada Gaming Control Board. "There is a correlation there. Macau is starting to develop a relationship with those customers. Then they come to Las Vegas seeking a different experience."

Lawton said the total expected baccarat "win" by Nevada casinos will be about $1.25 billion in the budget year ending June 30, or a 13 percent increase over last year.

In one amazing spike in August, baccarat players were betting an average of $60 million a day. Usually, such heavy betting happens in January and February, around the Western and Chinese new years.

Still, the Nevada Gaming Control Board is taking a conservative view, predicting only slight growth in baccarat play over the next two years: $1.26 billion in 2012 and $1.3 billion in 2013, Lawton said.

"I could be wrong. I just didn't think it wise for us to say, 'Let's do double-digit growth again with baccarat.' "

Baccarat revenue accounts for more than one of every $10 in wins by Nevada casinos. The Gaming Control Board projects $10.5 billion in overall gaming revenues in fiscal year 2011 ending June 30, $10.7 billion in 2012 and $11.2 billion in 2013.

That is a modest upswing that's still several billion dollars less than the peak gaming year of 2007, before the recession kicked in.

In the end, the Economic Forum adopted a slightly more conservative model, predicting gaming revenues would increase by at least 6 percent over the next two-year budget cycle.

"I would call that realistic," said Maddox, reflecting reluctance to raise recovery hopes too far.

The most interesting forecast-modeling decision that upped revenue projections centered on news in early November that Wynn Las Vegas would raise ticket prices for Brooks' next 16 performances.

The concerts are part of a five-year deal with Brooks, who came out of retirement to perform.

"My decision to raise the ticket price was a simple one. The demand for Garth was so overwhelming that it caught us by surprise," Wynn Resorts Chairman and Chief Executive Steve Wynn said at the time. "We could fill a theater many times the size of this, twice a night."

The 1,500-seat Encore Theater quickly began selling out for Brooks' dates, including this weekend, as well as for Jan. 21-23, Feb. 11-13 and Feb. 25-27.

When Lawton heard the news he quickly checked if other casino properties were also raising ticket prices. They weren't, but he learned that the gaming industry expects more visitors, who would likely want to see more Vegas shows.

As a result, Lawton changed his forecast of how much money he thought Nevada casinos would earn from live entertainment, including Brooks' shows, resulting in an added $8.5 million in expected revenue this year and through the end of fiscal 2013.

In total, Lawton raised expected revenue over three years from $333.3 million to $341.8 million, annual growth of more than 2 to 3 percent.

"We thought that if visitation goes up, maybe the (attendance at) large shows will go up," Lawton said. "This is the only forecast that really changed for us because of the ticket prices."

Las Vegas expects more than 37 million visitors this calendar year, with 1.2 percent more in 2011.

Asked if he had ever seen Brooks in concert, Lawton laughed and said, "No comment," although he added, "I like Garth Brooks and he is a country star coming out of retirement."

Maddox, who works for Wynn, said not to expect more ticket sticker shock beyond Brooks, who initially balked at raising the cost for his fans to hear him sing.

"That one was unique," Maddox said.

Contact Laura Myers at lmyers@reviewjournal.com or 702-387-2919.