By Deena Beasley
LOS ANGELES (Reuters) - Plans to ask Nevada voters to raise taxes on casinos have alarmed the Las Vegas gambling industry, which is scrambling to block initiatives and come up with other ways to fund projects from education to new roads in the tax-averse, fast-growing state.
The specter of a tax hike is particularly unsettling given the industry's recent doubling-down on luxury casino resorts. Analysts say about $30 billion in new development is currently under construction on the Las Vegas Strip.
Polls have found that a majority of Nevadans would support petitions like one from the Nevada State Education Association to raise the state's gambling tax by 3 percentage points to 9.75 percent.
"If it gets on the ballot, voters will pass it," said Bill Lerner, an analyst at Wall Street firm Deutsche Bank.
To head off that possibility, casino operators are angling to have the initiatives scrapped on legal grounds.
In addition, the Nevada Resort Association, which represents the state's casinos, has been involved in a number of discussions, including talks with other industries, over the need to raise tax revenue; but there have been no concrete proposals, said association president Bill Bible.
Last week, a state judge threw out as untenable two petitions, backed by Las Vegas lawyer Kermitt Waters, which sought to nearly triple Nevada's 6.75 percent casino tax.
Waters is expected to appeal the decision.
Meanwhile, the petition to raise taxes on casinos from the teachers' union was resubmitted earlier this month after a judge said it needed to be reworded.
Lynn Warne, president of the NSEA, said the union chose to pursue a ballot initiative after trying, but failing, to get the state legislature to impose a general business tax.
Nevada does not tax corporate or personal income and Republican Governor Jim Gibbons was elected on a campaign promise of no new taxes.
Warne said the higher casino levy would raise $250 million a year for teacher salaries and "student achievement" needs.
NATION'S LOWEST GAMBLING TAX
She said the union plans to start collecting the 58,000 signatures needed to get the gambling tax initiative on the November ballot but is holding off until next week's deadline for opponents to respond to the reworded petition.
"We have the lowest gaming tax in the country. Going to 9.75 percent is not even the average," Warne said.
Nevada's 6.75 percent levy on large casinos is indeed the nation's lowest. Casinos in Atlantic City, New Jersey, the No. 2 U.S. gambling market, pay 9.25 percent. Mississippi gambling resorts pay a rate of 24 percent and Pennsylvania's new casinos pay more than half of their gambling revenue to the state.
Nevada's rate is comparatively low because competition is unlimited, said Deutsche Bank's Lerner.
He estimates that the union's proposal would shave about 6 percent from Nevada casinos' cash flow and clip their return on capital investment by 100 basis points.
"There should be a broad-based tax ... The last time I looked, bankers, auto dealers and everyone else have children who go to school," said Terry Lanni, chief executive of casino operator MGM Mirage
"The industry has indicated that they feel that if there is a need for education funding it should be broad-based ... All who benefit should share responsibility," said the resort association's Bible.
Others say Las Vegas is likely to throw off more than enough money in the form of room taxes generated as new resorts open their doors.
"By 2013, there will be excess room tax of $400 million to $500 million a year. There is plenty of room to get $250 million from $500 million," said Sheldon Adelson, chief executive at Las Vegas Sands Corp
But much of the room tax proceeds, which totaled around $398 million last year, are flagged for the Las Vegas Convention and Visitors Authority, which is responsible for attracting tourists, conventions and meetings to the gambling mecca. In that role, the convention bureau competes with the Sands.
"It makes no sense to raise taxes on the primary revenue generator for this city. It could put some companies out of business," Adelson said.
(Reporting by Deena Beasley, editing by Gerald E. McCormick)
