That recommendation will be passed along to the Las Vegas City Council, which will likely make it official on Wednesday, and lead to further negotiations on the project's details.

"This is a giant step in the right direction," Mayor Oscar Goodman said on Saturday.

He has called REI's chances of building its ambitious project, Project Pulse, "a long shot."

On Saturday, Goodman said: "I'm still saying, I'm hoping for this miracle in the desert."

He added, though, that he now believes they have the financial wherewithal to make it happen.

As planned, Project Pulse would eventually include thousands of hotel rooms, high-rise condos and three casinos as well as a 22,000-seat arena. But the initial phase -- and what the committee considered -- was the first phase, which will include the arena and some retail.

Jon Weaver, a president and a partner of REI, said in a statement: "We look forward to presenting our arena proposal to the City Council for their consideration on Wednesday."

REI Neon, out of Bloomfield Hills, Mich., has partnered with private equity firm Warburg Pincus. In the interview with the city committee on Friday was Jon Weaver and Greg Orley from REI; David Schwarz from Warburg Pincus; and George Postolos, former CEO and president of the NBA's Houston Rockets.

Over the past several months, the city has sought proposals for an arena to help replace the Thomas & Mack Center, and to possibly host an NHL or NBA franchise. They received six proposals. Staff narrowed it to four before the committee interviewed principals on Thursday and Friday.

City Manager Doug Selby said REI was the consensus pick of the committee.

"They offered the best benefit with the least risk to the taxpayer," Selby said.

REI says they have agreements with 120 property owners involving over 85 acres. It was the only group not asking for land that the city owns, Selby said.

REI is largely asking for a property tax rebate on their development. Over 20 years, that could be worth an estimated $650 million if the entire $9.5 billion project is built, according to an estimate prepared by the city.

But if the project fails and is never built, taxpayers wouldn't be out any money.

The property tax rebate, called tax increment financing, has been used by the city of Las Vegas as an incentive to projects like the World Market Center, Chelsea Factory Outlets and some downtown high- rise condominiums.

Still, a number of questions remain. There are potential legal issues surrounding the City Council's vote last month to expand a gaming district into the area. And some property owners in the area, including the powerful Culinary union, spoke against the project.

Goodman said the committee only considered the arena portion of the project when making its recommendation, and not the larger future phases like the casinos, hotels and condominiums.

The arena would be at Main Street and Charleston Boulevard. The city has cited state law and a desire not to be second-guessed in its decision not to disclose all the competing proposals.

Selby said on Saturday that a list of some of the project's aspects had been prepared, and would be released to the City Council and the public before Wednesday's council vote.

The committee was made up of Goodman, U.S. District Court Judge Lloyd George, Las Vegas Bowl Executive Director Tina Kunzer-Murphy, Las Vegas Convention and Visitors Authority President Rossi Rolenkotter, Nevada Power President Pat Shalmy and Clark County Commissioner Lawrence Weekly.