Craig A. Ruark LLC

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I usually do not weigh in on political issues but the subject of unemployment in Las Vegas and attracting a more diverse economy has been on my mind for quite some time.  When I started looking into this issue it became clear that this is about “sustainability” as a community.  And although my suggestions might go against the grain, especially those of us in the design, development and real estate industries, I decided throw this out as a thought generator.  A quick note of apology those of you who do not live inNevada, this posting may not hold much interest. However, I can assure you that future posts will be more applicable to readers wherever you reside on this big blue ball.

How do we attract more industries to Las Vegas, is the question that has been asked since the 1950’s.  And even though early Las Vegas pioneers realized that the economy needed to be more diverse, not much has changed in the past 55 or more years.

The real question is, at what point does Las Vegas become self sustaining?  There are two key issues involved in this issue…economic and environmental.

First let’s look at the environmental issue.

Southern Nevada has an annual allocation of 300,000 acre feet of water from the Colorado River that is stored in Lake Mead.  One acre-foot of water equals 326,000 Gallons; enough to supply one or two households with water for one year (based on the average home using 446.5 Gallons per day or 162,999 Gallons per year.)  That allocation is enough water for 600,000 households or a population of 1,632,000 based on the average of 2.72 persons per home according to the 2010 census.  So with a current Clark County population of just around 2 million, how is it that we are able to provide adequate water.

The answer is two fold.  First, under the leadership of the Southern Nevada Water Authority, Las Vegans have learned how to conserve water.  Since 2003, the community has added more than 150,000 people.  In 2005, the valley used 15 billion gallons of water less than it did in 2003, roughly 52,000 acre feet.  While such an accomplishment is always subject to backsliding, Las Vegas has saved 1/6 of its annual share of the Colorado River while adding a midsized city to its population.  In addition to conservation, Las Vegas returns about 70% of its water allocation (210,000 acre feet) back to Lake Mead in the form of highly treated effluent as “Return Flow Credits” against its annual allocation.  This means that with the return flow credits the water allocation can support an additional 420,000 households or an additional population of 1, 142,000 persons for a total population of 2,774,400.

At our current population level we are getting disturbingly close to over taxing our most valuable resource.  In my opinion, reaching a 2.5 million population level would be stretching water allocations to the very limits without much room for error.

Of course there are a couple of ways that we can increase the amount of water available to this valley.  One way, as we all have heard, is the plan to pipe water from the Northern Great Basin area down to Las Vegas to augment our water needs.  This plan has met with objections from land owners to the north and will cost a great deal of money to construct the pipeline.  Another plan is to build a desalinization plant on the California Coast, they use the water from that plant for their needs and in exchange we get a equal portion of the water allocated to California from the Colorado River.  That too is a very expensive proposition. Pat Mulroy, Director of the Southern Nevada Water Authority also has an idea to build diversion dams for flood control and move the water to aquifers beneath the farmlands of Iowa, Nebraska, Kansas and Colorado. If Colorado farmers don’t have to use Colorado River Basin water for their crops, it makes more water available to downstream users, like Southern Nevada.

Those plans, if developed, would obviously increase the amount of water available to Southern Nevada and become sustainable for a much larger population.

A second environmental issue is that of the air quality in the Las VegasValley.  As you are aware, we live in a basin that is surrounded by mountains.  These mountains act as a barrier that traps atmospheric pollutants.  It used to be (back in the 1970’s and 80’s), that during the winter months, when a high pressure system would settle over the valley, a “temperature inversion” would trap pollution creating very unhealthy breathing conditions.  However, as the valley’s population has increased from 250,000 in 1975 to one-million in 1990 and then two-million by 2005, the increase in automobiles and other polluting devices has seen a rise in the number of unhealthy air quality days. Now, it is not unusual to see the familiar ‘brown cloud over the Las Vegas Valley even during the summer when a high-pressure system settles in creating warm days without a breeze.  As population increases in the Valley so too will the pollutants in the air to the point that Las Vegas will begin to look like theLos Angeles Basin.

Next let us look at economic conditions.

When I arrived in Las Vegasin 1975, the population was 250,000 persons and there were 35,000 hotel rooms.  At that time there was an average of 3 people employed for each hotel room built and, another 2 persons were employed outside of the hotel industry in support type businesses (e.g. grocery, dry cleaning, hair cutting, auto service etc.) for a total of 5 persons employed per hotel room.  So that means in 1975, the hotel casino industry supported approximately 175,000 jobs or 75% of the population.  It is no wonder that unemployment in this town was below 4% at that time.

By 1990 the population of Clark County had grown to 741,459 and the number of rooms’ sky rocketed to 106,000.  However, due to growth in competition and advances in technology the hotel casino industry supports between 2.5 to 3 persons per hotel room which equates to approximately 318,000 jobs or nearly 43% of the population.  But with a strong economy and a massive population growth, Las Vegas had the lowest unemployment rate in the nation.  Today, the population is 2,036,000 (according to the 2010 census) and we have approximately 148,900 rooms which would equate to approximately 446,700 jobs or nearly 22% of the population.

Of course this little exercise only substantiates the fact that the Resort Industry no longer supports our current population.

In the past two years, Las Vegas has dropped from being rated as one of the best places in the U. S. to live, to the bottom of the list because of our unemployment.  While there are a lot of white collar employees out of work (architects 60%, engineers 60%, real estate professionals, etc), the majority of the out of work people are laborers and most of those are from the construction industry.

In the past year, I have attended many presentations where economists and real estate professionals are predicting that we will not see the construction of new retail, office or industrial buildings in the near future.   This is mostly due to that amount of vacant square footage available throughout the Valley.  Therefore, I feel that many of the workers that moved to Las Vegas to take advantage of the construction boom will probably end up moving to other locations in search of work at their trade skill.  It is possible that Las Vegas could lose close to one-hundred-thousand persons from its population base over the next couple of years.  I myself do not consider that a bad thing.  Losing some population could give us some breathing room on the environmental side of the coin.  In fact if we dropped down to a population of 1.5 million Las Vegas would be less susceptible to economic swings such as the one we just experienced.  Given the number of hotel rooms that we currently have, employment support by the hotel casino industry for 1.5 million population, would bring us back to around 35% to 40% leaving other smaller industries to take up the slack.  This smaller population base would allow Southern Nevada to stabilize for the short term.  However, most Economists agree that a healthy/sustainable economic population growth rate would be between 1.5% to 2% per year.

So what is the next move?  Most are advocating that we bring in businesses to take up the slack that the Resort Industry cannot handle.  This sounds like good advice on the surface but the question is, what sort businesses.  And can those businesses absorb the type of professional workforce that we have available or would we need to attract more people to the valley.  As I stated before, attracting more people to the valley is not an ideal situation. It only exasperates the problem both environmentally and economically.  But of course there is the age old debate; Economic Development –vs- Economic Growth.

We really need to concentrate on employing the current workforce residing in Las Vegas and not importing more people.  This of course, will require a massive investment in workforce training and development.  Fortunately, there are lots of Federal dollars to do this.  However, we should not waste these dollars training dishwashers, housekeepers and construction workers; but instead concentrate on health care and technology

What makes Las Vegas the city that it is, is the fact no other city does what we do as well as we do.  We are the “Adult” Entertainment Capital of the World.  Although hotels are being built around the United States and the world, to compete with Las Vegas, no other city has the volume and diverse selection of hotel and entertainment options.  The resorts are constantly upgrading and remaking their image to offer new and exciting product to the tourists.  First and foremost, we as a city should continue to extend the entertainment, dining and other venues and expand upon what we do best.  That is where we will get the most bangs for our buck.  As my friend and economist John Restrepo once said; “The question is will Las Vegas remain the Gaming Mecca or will it become a Gaming Mecca along with Macau, Singapore and other Asian markets.  All leading industries go through a period of rapid growth, stability and decline.  The Las Vegas Resort industry is no different.  That doesn’t mean we turn into Detroit, but to think that we will stay on top into perpetuity is complete hubris.  We should continue to support the Resort “pillar” but don’t exclusively depend on it.  Other economic pillars need to be built.”

As far as new industries, it is my opinion that we should concentrate on attracting research and manufacturing for clean energy development.

Another key industry would be focused on Senior Citizens and the creation of Independent and Assisted Living Facility campuses with access to medical treatment specifically centered on geriatric medicine.

According to the U.S. Department of Health and Human Services, persons 65 years or older numbered 39.6 million in 2009 and represented 12.9% of the U.S. population, about one in every eight Americans. That percentage is up from the 12.4% of the population (34.9 million) in the year 2000, and is expected to grow to be 19.6% of the population (72.1 million) by 2030.

This health care industry would have to be supported by a technically proficient work force (math, science and engineering), as well as vocational training.  The retiree market will not come to Las Vegas for cheap buffets, low taxes and cheap housing.  They must be confident that they will receive expert healthcare first and foremost.

Whatever we do, we should work towards a sustainable community in terms of both environment and economy.  To me, that means not stretching our water and air quality resources and being smart about the type of industry’s we attract, which in both cases could restrict the amount of population growth yet increase our economic diversity.  We do not need to attract another half-a-million residents in order to increase the economy.  We need to attract businesses and industry that can absorb our unemployed.