Analyst: Water decision could hurt economy

The state water engineer's decision to trim Las Vegas' request for water from Northern Nevada brought questions Monday from a local analyst.

Jeremy Aguero, a principal of the economic consulting firm Applied Analysis, said the smaller-than-requested allotment of acre-feet could affect the financial viability of the pipeline.

"The question is whether the capital expenditures necessary to develop the system can be spread over less water," Aguero said. "At some point, there's a threshold where you're not moving enough water to offset the capital cost."

State Engineer Tracy Taylor's order says the Southern Nevada Water Authority, which sought about 91,000 acre-feet of water yearly from Spring Valley, can pump 40,000 acre-feet of water per year for 10 years.

Aguero said he's not sure how many acre-feet of water the pipeline would need to carry for the project to make fiscal sense. It would depend on how much the water would sell for and how much it would cost to build the pipeline and its related infrastructure.

The Southern Nevada Water Authority hired Aguero's firm to analyze how an interruption in growth would affect the Silver State's economy. His company's finding: Nevada's businesses and residents could suffer if fiscal considerations prevent development of the water system.

With 12.5 percent of Nevada's work force in construction, any constraint on future building -- for example, a water shortage caused by the lack of an in-state water source during a regional drought -- could imperil jobs.

"When the economy is so highly concentrated in gaming and development, if you artificially shock one of those industries, you're going to have significant employment and wage impacts," Aguero said. "You'll also see significant impacts on the demand for public services.

"If (the water allotment) doesn't meet critical mass to develop the in-state water project, it's absolutely bad for Southern Nevada and, frankly, for Nevada," Aguero added.

"As goes Southern Nevada, so goes the state of Nevada. Southern Nevada generates the preponderance of the state's gaming tax and sales and use tax," he said.

Monica Caruso, a spokeswoman for the Southern Nevada Home Builders Association, said the trade group submitted letters of support to the state for the water authority's initial water request.

"It's our position that we live in the desert, and we do need to find new sources of water, not just for future growth, but for the people who are already living here -- for the future generations of children and grandchildren," Caruso said.

Assuring the Las Vegas Valley's long-term water supply should be a multipronged effort that includes conservation and finding new sources of water, Caruso added.

Major Las Vegas home builders did not return phone calls late Monday.

The news apparently won't have any impact on hotel-casinos or high-rise condominiums under development.

Projects currently under way, such as MGM Mirage's $7 billion Project CityCenter, Las Vegas' Sands Corp.'s $1.8 billion Palazzo, Wynn Resorts Ltd.'s $1.74 billion Encore, and the $600 million Trump International Hotel and Tower, were all granted their water rights as part of the predevelopment approval process.

"My understanding is that projects have to have their water rights in place before their development permits are authorized," MGM Mirage spokesman Alan Feldman said.

Nevada Power Co. spokeswoman Andrea Smith said the water decision does not affect the electric utility, adding that it would be inappropriate for her to comment.

Review-Journal writers Howard Stutz and John G. Edwards and The Associated Press contributed to this report.