GROWTH: Push to slow Las Vegas growth sparks economic debate

      In 27 years as an economist, John Mitchell has seen the pendulum of public opinion about growth swing in both directions.
      When an area's economy slumps, residents clamor for economic development to provide much-needed jobs, but with little discussion about the environmental, social or cultural consequences. When the economy thrives and jobs are secure, people cry out for moratoriums on new development to slow or stop growth because they're unhappy with traffic congestion, construction noise and dirt, and air pollution.
      Mitchell said he's not surprised sentiment in Las Vegas is swaying toward no growth or slow growth.
      "It's a cry that the current situation can't continue. The negative externalities (such as traffic congestion, air pollution and insufficient infrastructure) are going to have to be dealt with," said Mitchell, senior vice president and chief economist at Portland, Ore.-based U.S. Bancorp., which operates banks in Nevada.
      But the cry fails to take into consideration the economic consequences of interfering with the market, many Southern Nevada business executives said.
      Las Vegas Chamber of Commerce officials are concerned about a recent public opinion poll that indicated a majority of local residents don't understand how no-growth and slow-growth actions affect the economy, said Kara Kelley, vice president of government affairs at the chamber.
      "A majority of the public responded that Las Vegas' economic vitality has contributed to their well-being. But more than 50 percent don't believe that stopping or slowing growth will lead to higher unemployment or economic recession, or will lead to reductions in sales taxes and higher taxes to make up the difference," Kelley said of the chamber's poll of registered voters.
      Economists debate the severity of anti-growth policies' impact on an economy -- whether such policies can trigger a recession, or simply force a community to readjust to new economic conditions.
      "There's a lot of room for argument, but economists agree that when it comes to policies regulating growth, prices will be driven up, housing costs will rise, wages will rise, the cost of living will rise," said Thomas Black, urban development economist for the Urban Land Institute in Washington, D.C.
      It's a fundamental principle of economics that when the supply of goods or services is constricted while demand remains unchanged or increases, the price will rise.
      In many communities that adopted growth-restriction policies, which led to higher prices and cost of living, the wealthy adjusted and enjoyed increased property values; low-income residents survived by "doubling up" in living quarters and sharing expenses, thus increasing the densities in some neighborhoods; and middle-class residents were displaced, forced to look for cheaper housing and other commodities in outlying communities, Black said.
      Contracting industry veteran C. Doug Johnson witnessed the economic devastation that hit Texas, Oklahoma and Louisiana in the 1980s when the bottom fell out of the oil industry.
      "It was heartbreak upon heartbreak upon heartbreak. The middle class lost everything they had worked for almost overnight and they're still recovering," Johnson said. "About 32,000 people had to leave Louisiana because there was no work and they didn't come back."
      Johnson said he's apprehensive anti-growth sentiment will gain in Las Vegas and hurt the area's economic health, leading to higher prices, job losses and mortgage foreclosures.
      "There's no such thing as no growth. It's an oxymoron. You're either in a thriving economy or a stagnant economy," said Johnson, a principal of Abat-Johnson Enterprise Inc., a Southern Nevada general contracting firm.
      "People don't understand that growth is bringing necessary services to the community. It pays for good medical facilities, good hospitals, good schools. But people are frustrated that we're in (traffic) gridlock and the gridlock isn't going away. Interfering with growth is the nonintelligent way to solve the problem.
      "What we've got to do is continue constructing infrastructure, such as primary and secondary roads, water and sewer systems, utilities, telecommunications, and that's paid for with the tax dollars that growth is funding."
      Southern Nevada is about 10 years behind in construction of infrastructure to support the area's growth, and growth-funded taxes will be needed to catch up with the community's infrastructure needs, said Steve Holloway, executive vice president of the Las Vegas chapter of the Associated General Contractors, a trade organization with more than 450 member firms.
      "Growth pays for infrastructure. If we stop growth, where is that money going to come from?" Holloway asked.
      Approximately 47,000 people work in the local construction industry and contribute significantly to the area's economic well-being in terms of the taxes they pay and the goods and services they purchase, Holloway said.
      "A very large segment of the population is involved in construction. Their jobs and livelihood depend on construction growth."
      Both the Associated General Contractors and the Southern Nevada Home Builders Association, another building industry trade organization, are working on studies to determine how much money their industries pay in taxes and other government-imposed fees. They'll also be looking at how and where those dollars are being spent by government.
      That's because the construction industry may be asked to pay even more to fund government's growth-related expenses -- costs that are typically passed on to the consumer in the price of the goods and services.
      When costs become so high that the consumers will no longer purchase the product or service, companies begin to bear the additional costs at the expense of profitability. As profits diminish, companies may cease operations -- a scenario that was common in communities that adopted development impact fees, economists said.
      About $25,000 to $30,000 of the price of a new home in Las Vegas represents the costs of building government-mandated infrastructure such as streets, plus taxes, fees and licenses.
      "About 25 percent of the cost of a new home is going to fund growth," said Joanne Jensen, director of public affairs at the Southern Nevada Home Builders Association.
      "It's about $500 million to $600 million per year to government. All forms of construction contribute more than $1 billion annually in public infrastructure improvements for the community. We're paying this kind of money; why isn't it enough?"
      The association is proposing to generate another $11 million annually for Southern Nevada infrastructure construction by raising the real property transfer tax 60 cents to $1.25 per $500 of property value transferred. Currently, the tax is 65 cents per $500.
      "This method would have an equitable impact on everyone involved in real estate transactions," Jensen said.
      The Nevada Taxpayers Association also is studying growth's contribution to the tax base, according to Carole Vilardo, president of the nonprofit group devoted to tax issues.
      "You need economic growth to enjoy a favorable tax climate or you end up becoming a New York City or a Boston where the cost of living is burdensome. You don't want to hurt your economic growth," Vilardo said.
      Nevada's low taxes are a leading factor for population and business growth. Many of the state's residents moved from other states to escape high taxation. However, some of those residents are demanding the same level of government-sponsored services that they enjoyed in their home states. In Nevada, the tax funds are not available to provide those services, Vilardo and others said.