Las Vegas and the lessons of growth
George Caloyannidis | Feb 28, 2017
During the Napa Vision 2050-sponsored forum on the "Tourism Economy" in April 2016, one of the panelists, Mr. Eben Fodor of the planning firm Fodor & Associates who conducted studies on the long-term fiscal impacts of urban growth, cited his 1998 findings on the Thornburgh mega destination resort in Oregon.
He calculated that after all fees and public improvement costs were paid, the net uncollected cost of incremental service capacity for a single residential unit was $33,408 for a total unaccounted public cost of $46 million.
As we have come to believe that growth and a balanced budget are the barometers of a healthy economy, the Thornburgh development in spite of its enormous size of 1,375 homes, hotels and golf courses did not garner the proper attention, considered specific to that development.
But, during a recent visit to informed friends in Las Vegas and based on a Feb. 6 article in the Las Vegas Review-Journal, there is evidence that that metropolitan area -- one of the fastest growing in the nation -- which hosts 75 percent of the state's population is experiencing similar negative development-induced effects. Both Las Vegas and the Napa Valley are tourist-based economies, and as they both found out in 2008, they are singularly vulnerable when the economy contracts.
But, according to Jim Murren, CEO of MGM Resorts International, the Las Vegas economy is poised for a "giant leap" with 170,000 new visitors, especially from China. The projected $200 million in economic growth will fuel additional casinos, hotels and a variety of new entertainment venues and homes.
In addition, when one considers the beginnings of some economic diversification attracting company headquarters and some 42,000 manufacturing jobs, the massive housing developments that keep prices and rents affordable ($875 for a 1-bedroom) in the ever-expanding outskirts, one would think that the Las Vegas fiscal future based on such growth couldn't be brighter.
However, there are signs that the growth model is not working out as planned for existing residents. For the past 12 years, Nevada has had and made do with a 3 percent cap on the annual property tax increase on owner-occupied residential units and an 8 percent tax on other residential and commercial properties. But instead of the cap being lowered by the revenue of the tens of thousands of new residential and commercial units as would be expected, there is a push to increase it. If development growth is a metric of economic success, shouldn't services improve and their costs go down rather than up?
According to the Journal, local officials rationalize that, "population continues to rise, oftentimes growing the demand for government services, but property taxes haven't grown at the same rate." This just proves Mr. Fodor's point. Here now, we have a major city asking its residents to finance its growth. Who benefits?
One must also consider that Las Vegas -- the only major U.S. city established in the 20th century -- has not yet faced the huge bill for the maintenance of the massive expansion and increased tourist use of the infrastructure due in the next several decades. But in the Napa Valley, that future arrived a long time ago.
The reality, as Mr. Fodor explained, is that once the economy enters the vortex of development growth, government becomes increasingly beholden to the immediate revenue of developer fees and other taxes just to keep up with the increased demands growth itself generates. "We do not charge developers enough," he said. The evidence is in the unending general revenue bonds, measures, fees, assessments and taxes to finance the repair and expansion of roads, schools, water districts, sewer plants and more growth-serving public employees and their pensions.
The big growth winners of the model are the handful of developers. The enablers are the growth-dependent governments playing catch-up to balance their ever- increasing budgets one year at a time. The loser is the working middle class that is footing the bill of this ingenious arrangement. And so the income gap widens.
Of course, there is good and bad growth. There was a time when the development growth model was in a contributing mode, the one that builds our bridges and roads. But when it crossed the line from contribution to exploitation on so many levels as it has, it left potholes in its wake for the common man to fix, a sign that the model has run its course.
It is high time for our small valley to explore new paradigms if it is to survive the induced-growth model pursued by its governments. The decades-old words of Robert Parker calling it, "the most beautiful wine country in the world" are hanging by a thread.
NVR version 2/28/17: Las Vegas and the lessons of growth
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