LOS ANGELES May 20 Nevada teachers have agreed to drop a ballot initiative aimed at raising taxes on casino winnings in return for the backing by three major gambling operators of a bid to raise hotel room taxes.
"This has the potential to grow and raise a great amount of money for schools," Lynn Warne, president of the Nevada State Education Association, said on Tuesday.
The teachers association said late Monday that it had reached an agreement with Harrah's Entertainment, Station Casinos, and Wynn Resorts Ltd (WYNN.O) under which it would drop plans for a referendum to raise the state's tax on large casinos to 9.75 percent from 6.75 percent.
"We view this development as a positive for gaming operators ... However, we think some gaming companies could be opposed to this solution given their relative exposure to the tax if they have disproportionately more rooms than other operators," Deutsche Bank analyst Bill Lerner said in a research note.
The three casino operators agreed to back an advisory question on this year's ballot in addition to pushing the Nevada legislature in 2009 to raise the room tax as high as 13 percent from its current 9 percent.
The funds would go to the state's general fund to offset budget shortfalls and to back education initiatives, including supplementing teacher salaries.
Warne said the higher room tax would generate an additional $180 million in its first year, with the amount rising further as new casino resorts come on line.
Wall Street analysts say about $30 billion in new development is currently under construction on the Las Vegas Strip, including Wynn's 2,000-room Encore and MGM Mirage's (MGM.N) massive mixed-use CityCenter project. (Reporting by Deena Beasley; Editing by Tim Dobbyn)