LV economic growth to keep slowing

Friday, Dec. 15, 2000 | 10:47 a.m.

The white-hot economic growth that characterized Las Vegas in the '90s but slowed last year will continue to cool in 2001 and 2002, experts at UNLV's Center for Business and Economic Research say.

Southern Nevada's bid to diversify its economy and become a high-tech center also is sputtering, said Keith Schwer, director of the center, in his eighth annual Economic Outlook presentation.

The absence of an opening of megaresorts in the next two years, while indicative of the expected slowdown, may actually be a long-term advantage as a rush of new visitors creates demand for more rooms to be built and investors size up the potential for more growth in the market.

About 200 business people attended the Thursday conference, sponsored in part by Colonial Bank.

Schwer and the center's associate director, Mary Riddel, described how the national economy also is losing steam, a factor that will be a drag on Southern Nevada's fortunes.

The UNLV experts say the seven leading economic indicators for Southern Nevada will be higher in 2001 and 2002 than this year, but they won't be at stratospheric levels to which local residents have grown accustomed.

The number of hotel and motel rooms in Clark County is only expected to grow by 1.3 percent to 127,148 next year and by 1.7 percent to 128,801 the year after that, as Southern Nevada takes a breather from the megaresort boom.

After the opening of Bellagio in 1998, Mandalay Bay, the Venetian and Paris Las Vegas in 1999 and the Aladdin in 2000, Riddel said the lull may be beneficial.

It means that occupancy rates will climb and may presage more casino building in the future, she said.

The slowdown in resort construction will lead to only modest gains in three other growth categories -- visitor volume, gross gaming revenue and new housing permits.

The UNLV study expects Clark County visitor volume to increase 1.5 percent to 36.8 million next year and 1.4 percent to 37.3 million in 2002. Gross gaming revenue for the county is projected to rise 3 percent next year to $8 billion and another 2.8 percent in 2002 to $8.2 billion.

The biggest statistical dent is expected on new housing starts. The report projects a 0.3 percent increase in 2001, to 26,805 for the year and a 3.9 percent boost in 2002, to 27,851 for the year. Construction of new houses usually accompanies the arrival of new resorts because of the thousands of new employees they hire.

The report predicts there will be more jobs and the population will continue to grow at lower levels. The population will increase 5.3 percent to 1.48 million next year and 4.6 percent to 1.54 million the year after that.

Employment is expected to grow 4.9 percent to 728,834 jobs in 2001 and 4.3 percent to 760,174 jobs in 2002.

The percentage increase of total personal income will continue its downward slide, the UNLV researchers said. Personal income is expected to increase by 7.6 percent next year and 7.1 percent in 2002. It's a continuation of a decline from 12.1 percent that began in 1995.

Schwer and Riddel made special note of Southern Nevada's bid to diversify its economy by attempting to attract the information technology industry.

The report was critical of Southern Nevada's use of the low cost of housing as an incentive to attract IT companies and their workers.

"One must be on guard for endogenous measures of desirability -- those measures that are inextricably tied to the revealed desirability of an area," Schwer's report says. "For example, one often sees the cost of housing included in quality-of-life indices. Presumably, areas offering more affordable housing are preferred to other areas.

"The problem with this thinking is that people prefer areas that offer a high quality of life, forcing up housing prices. Cheap housing prices, other things equal, reflect low demand for housing in an area. Thus, rather than low housing prices suggesting a high quality of life, the reverse is true: Areas that people perceive as desirable have high housing prices."

The report also says Southern Nevada is lacking in other features that are attractive to high tech.

"Notably, we lack an intact high-tech base from which to build," the report says. "Furthermore, Southern Nevada currently does not have a top research university that will generate high-tech spinoffs and provide a high-tech labor pool. Together, these factors comprise a significant obstacle to high-tech development. And, although housing costs are relatively cheap compared to California, we have shown that this may be an ambiguous indicator of the relative quality of life between the two regions."

Other economic factors also were analyzed in the UNLV report.

"According to the U.S. Department of Commerce, the tax burden borne by Nevada firms ranks in the middle third of the U.S. states," the report says. "Per-capita state and local government expenditures ranks 28th among the 50 states. The costs of doing business are low relative to California, our closest regional competitor for high-tech firm location.

"Land costs are well below that of the major California metropolitan areas such as Los Angeles and San Francisco. Wages are below the national average for skilled workers; in 1998, the national average wage for an employee in manufacturing was $40,862 in the United States compared with $35,751 in Clark County."

And, the report details some expensive solutions.

"Given that some obstacles to high-tech development exist, we might ask what policies would best encourage new high-tech development within Southern Nevada," the report says. "A study done by Arizona State University distilled the salient points to consider when designing policies to attract high tech.

"First and foremost, work-force development is crucial to attracting high-tech firms and provides the additional benefit of shoring up the quality of the labor pool for other industries as well.

"Work-force development means establishing and maintaining high levels of educational performance. Such development includes education and training in modern computer and science skills beginning in grade school and continuing through college or vocational training.

"Related to this is the idea of encouraging research and development. Providing adequate funding to universities and encouraging other public and private research create an environment where high-tech spinoffs are likely, while concurrently developing and maintaining a highly trained work force.

"Finally, it is important to be honest about the quality-of-life assets that the community currently has and be ready to invest in areas that are lacking and augment existing assets. Here in Southern Nevada, urban open space and air quality have been pointed out as areas of concern. Rather than turning a blind eye, policy makers keen to attract high-tech firms would be wise to target quality-of-life issues for measurable improvements and gain affirmation from the community of the importance of these issues."

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