Southern Nevada's building sector has gone from boom to bust.
But a construction drought in Las Vegas doesn't mean the rest of Nevada has stopped building. Utility companies and transportation departments are working on billions of dollars in infrastructure projects across the Silver State.
The Ruby natural-gas pipeline runs 680 miles from Opal, Wyo., to Malin, Ore., crossing straight through Northern Nevada on its way. About 360 miles of the pipeline, as well as two of its four compressor stations, lie in Nevada; executives of El Paso Corp., one of the pipeline's partners, estimate that Nevada's share of the pipeline's $3.65 billion budget will be about $1.7 billion by the time construction wraps up later this month.
And then there's the $510 million One Nevada transmission line (ON Line), a 235-mile electric grid NV Energy is building from Ely to Apex to connect its northern and southern operations.
Some smaller road projects also add up to significant dollars: The Nevada Department of Transportation is spending nearly $100 million to improve Interstate 80 in Reno and a carpool flyover bridge at Summerlin Parkway and U.S. Highway 95.
In all, more than $2.3 billion in infrastructure construction is ongoing or nearing completion statewide.
The projects have provided a stop against further economic decline in a state that's leading the nation in joblessness and suffering a decimated construction sector. But once they're complete -- some due in a matter of weeks -- the state will have few projects to take their place. Construction trade groups advocate major efforts to keep infrastructure dollars flowing, though other observers say the long-term economic impact of more infrastructure spending would be minimal.
PIPELINE A 'JOB-CREATING MACHINE'
It's tough to pin down the economic effects of infrastructure projects because the state Department of Taxation doesn't disclose the names of companies behind taxable-sales purchases.
But Richard Wheatley, media relations manager for El Paso Corp., said the company's Ruby pipeline generated $45.5 million in sales and use tax revenue through the purchase of construction supplies and materials in 2010 and 2011 in Elko, Humboldt and Washoe counties. The three counties combined will get $15.6 million a year in continuing property-tax revenue from the pipeline, Wheatley said.
Plus, the pipeline's employees generated big gains in taxable sales through spending on consumer goods.
The Ruby pipeline employed nearly 2,500 Nevadans during December's construction peak, Wheatley said. Projectwide, El Paso spent $4 million a day on payroll during peak building. A typical welder pulled in about $75,000 over the course of the job.
"Ruby is and essentially has been a job-creating machine," Wheatley said. "It came when the state was in a really hard place in terms of revenue, so we were very pleased that all of the work going on at that time did help Nevada. There is a multiplier effect for counties and towns across the route, and we do feel that's been substantial."
To see how substantial, consider Elko County. The county is at the heart of the pipeline's operation: It's home to the line's big Wieland Flat gas-compressor station, and it's where the pipeline's manager will live full time. It's also where seven of the pipeline's 16 full-time employees will work once the line is in service.
Numbers from the Department of Taxation show that sales of tangible goods surged in Elko County by 15 percent to 30 percent year over year in almost every month from start of construction in July 2010 through March. In December, during peak construction, year-over-year sales in the county spiked 119.7 percent. Sales of goods in the utilities, heavy construction and specialty-trade contracting segments rose dramatically, but so did furniture sales, car sales, gasoline sales and restaurant sales (though some gains may have come from Elko County's mining industry).
In White Pine and Nye counties, construction of ON Line has started. It's too early for the project to have a big economic impact, but NV Energy officials say the transmission line will employ 400 workers at peak construction in 2012. Company representatives noted that workers building the line, which NV Energy is developing with LS Power of New York, will spend locally on housing, food and other services, while the line's contractors will boost demand for fuel and building materials such as concrete.
Work on the projects can't last forever, though.
construction sheds jobs
The Ruby pipeline is scheduled to go live by the end of July, and its full-time operations work force will equal 0.3 percent of its peak building employment. ON Line is scheduled to be done by late 2012.
Nor could either project reverse losses in Nevada's overall construction industry. The Silver State's construction jobs base plummeted from 148,800 in June 2006 to 54,700 in May. Jeremy Aguero, a principal in local research and consulting firm Applied Analysis, told the Legislature in February that the construction sector made up less than 5 percent of Nevada's labor force, but was behind 21.6 percent of its continued unemployment insurance claims.
Steve Holloway, executive vice president of the Las Vegas chapter of Associated General Contractors, testified to the Legislature that more than 90,000 of the 193,500 Nevadans receiving unemployment benefits in the winter were jobless due to construction layoffs.
John Madole, executive director of the Nevada chapter of Associated General Contractors, said the state's construction slump needs another shot in the arm, preferably through more spending on infrastructure.
"We need to get these people back to work," Madole said. "When we put construction people back to work, they start buying pizza for their kids on Friday nights, and we get things going again."
Additional infrastructure development alone won't deliver those new construction jobs.
Developers have few projects on the drawing boards. NV Energy is mulling a renewable-energy transmission line in northeast Nevada, but the company can't determine the line's construction costs -- or whether it will even be built -- until the utility gauges interest from clean-energy developers.
Several big road projects are on the horizon, but years away. Construction on a $140 million improvement of Interstate 15 between Craig Road and Speedway Boulevard won't begin before 2013. It'll be at least 2015 before $101 million in improvements start on I-15 from Speedway Boulevard to Apex. A $276 million interchange at U.S. 95 and the Southern Beltway near Kyle Canyon Road has been pushed back to 2020 because of funding issues. And $300 million in work on a Boulder City bypass is on hold indefinitely until money is available.
Plus, Nevada lags on needed improvements to water pipelines and sewer systems, Madole said.
The state is still hurting fiscally, though. Lawmakers had to cut $500 million from Nevada's budget in the legislative session that ended in June, so it could be difficult to find billions to finance infrastructure.
Madole and his construction-sector colleagues have some ideas. The Building Jobs Coalition of Nevada trade group published a study earlier this year calling for increasing sales or property taxes to raise an estimated $100 million a year that would be used to pay off $1 billion in construction bonds. The coalition also wants a legal mandate that state and local governments no longer "underfund" building maintenance, and it called to eliminate the 2025 sunset on Clark County's quarter-cent water infrastructure tax. Throw in a streamlined permitting process for larger projects, as well as higher gasoline taxes, and the state could fund 27,070 infrastructure-construction jobs offering $1.6 billion in wages and generating $3.7 billion in economic activity, the coalition said.
"We have seen gas prices double in the last two years, yet everyone seems to be scared to death to put another nickel or dime in the gas tax," Madole said. "Truthfully, most people would not be paying that much attention if we had incrementally raised gas taxes over a period of years."
He added that driver's licenses are "tremendously underpriced" at $22 for a four-year renewal. Charging $25 a year for a license could raise additional infrastructure money.
ARGUMENTS AGAINST MORE TAXES
Those funding methods have their detractors.
Geoffrey Lawrence, deputy director of public policy at free-market think tank Nevada Policy Research Institute, said it's one thing to advocate for better infrastructure but spending just to create jobs for a specific industry isn't sensible.
"At best, it has zero net-economic impact, because you're talking about taxing the populace more," Lawrence said. "That will limit job creation, because you're going to have lower demand for goods from most consumers to benefit a specialized group, which in this case is predominantly unionized construction workers."
What's more, virtually every building job is temporary, Lawrence said. The state could spend billions now to boost building jobs, but as projects wrap up in nine months to a year, construction workers will be applying for jobless benefits once more.
Finally, Nevada has a balanced budget mandate, which means the state can't rack up deficits. So increased spending in one area must be offset by decreased spending -- and fewer jobs -- elsewhere.
Rather than spending more to jump-start infrastructure construction, Lawrence said, Nevada's leaders should recognize that the state had a building bubble, and it's not going to need 150,000 construction workers again soon, if ever.
Contact reporter Jennifer Robison at email@example.com or 702-380-4512.