Las Vegas Sun

March 29, 2024

Public works on the cheap

In the recession, valley construction bucks are going further — while creating jobs and enhancing infrastructure.

infrastructure

Steve Marcus

A truck sprays to keep down dust during construction at the Horse Drive/U.S. Highway 95 interchange, part of what one official calls the county’s “own stimulus plan.”

The collapsing construction industry is allowing local government to get public works projects done at fire-sale prices.

Regional Flood Control Director Gale Fraser told local government officials Thursday that his engineers expect tax dollars spent on infrastructure to stretch 25 percent to 50 percent further than before the recession because of increased competition among construction firms.

“We are getting 18 to 19 bidders for each project, where we used to get three or four,” he said. “With the engineers estimates we’re using today ... we can probably build $300 million worth of projects ... with $200 million.”

About 30 projects are under construction or will be over the next six months or so. Fraser referred to the numerous projects, nine of which will be funded by a new $150 million bond issue, as “Clark County’s own stimulus plan.”

Those nine projects include underground storm drain work on the Las Vegas Wash at Decatur Boulevard and Elkhorn Road ($38.6 million), a 222-acre Lower Flamingo Detention Basin with parks and ballfields ($17 million), expansion of a bridge over the Gowan Outfall Channel, and replacement of 900 feet of channel at Simmons Street ($5.5 million).

When all 30 projects are up and running, about 1,700 workers will be directly employed in construction and another 1,000 jobs could be created by the ripple, or multiplier, effect in service businesses that support the projects and their workers.

The projects are attracting so many more bidders than in the past because residential and commercial construction has come to a standstill.

The industry’s troubles are reflected in its rising unemployment.

Associated General Contractors, a trade organization for the construction industry, said that from April 2008 to April 2009, 14,400 construction workers lost their jobs, a decline in that workforce of 15.2 percent. A more recent estimate by the AFL-CIO put unemployment among union construction workers at 25 percent.

Since the recession began, construction employment in Southern Nevada has fallen from 125,000 to 76,000, experts say. Thousands more construction jobs will be lost when much of CityCenter opens in December.

Clark County Commissioner Larry Brown, chairman of the Flood Control District’s board of directors, said officials are keenly aware of the effect public projects have on the local economy, especially now that private projects are few and far between.

“That helps keep the private sector engaged and open for business, so we have to be focusing on our ability to get capital projects on the street,” Brown said after the meeting.

Although the dropoff in private construction work is driving down the cost of public projects, Brown said officials must balance such funding with the other demands on government. The county recently moved about $50 million from its capital projects fund to cover operational expenses because tax revenues are down.

“But how far do you freeze capital projects at the expense of the private sector?” Brown said.

Some of those questions are being examined by the Committee on Community Priorities, a citizens group formed to examine how Clark County can control spending and shape budget priorities. And some will be addressed early next month when the Las Vegas chapter of the Associated General Contractors holds a strategic planning retreat at Red Rock Resort.

Jeremy Aguero will address the group and talk about the connection between publicly financed projects and economic health. Aguero, principal analyst of his firm, Applied Analysis, said some the benefits are clear.

“For one, a capital project creates an economic impact because contractors have to buy services,” he said. “Secondly, at the end of the day, you’re left with an asset that adds value to the community.”

He said one estimate is that every public dollar spent on capital projects generates $1.56 in overall economic benefit. By that formula the Flood Control District’s $150 million in bond-funded projects would generate a $234 million benefit to the economy of Clark County.

To obtain that $150 million, the district — which manages flood control for Clark Clark County, Las Vegas, North Las Vegas, Mesquite, Boulder City and Henderson — is taking advantage of Build America bonds, which are part of the federal stimulus package.

Through Build America the district pays a rate of 7 percent on taxable bonds it sells. The federal government then reimburses the district 35 percent of the interest cost every six months. In the final calculation, that means the district is really paying a rate of about 4.5 percent.

Brown, meanwhile, sees publicly funded projects as one way to help prop up local companies until the economy rebounds.

“We have very little private-sector development and the public sector is critically important to bridging this gap during a recession,” he said.

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