Las Vegas Sun

February 11, 2012

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Real Estate column:

Construction industry is no fan of federal stimulus

By Buck Wargo

Fri, Aug 20, 2010 (3 a.m.)

Don’t list the Las Vegas construction industry as one of the big fans of the $787 billion federal stimulus.

The Associated General Contractors of Las Vegas has released a report saying the construction industry hasn’t benefited much from it.

Executive Director Steve Holloway, in a July 30 In Business Las Vegas story, was quoted as saying the construction stimulus was negligible. Most of the money went to underwriting government jobs and had no direct or indirect bearing on the industry. Of the stimulus funds allocated to Nevada, much of it went to maintenance and wasn’t enough to make an impact, he said.

“It’s worse than I thought it was,” Holloway said after reviewing the report prepared by Las Vegas consulting firm Applied Analysis.

The report said the fate of the Southern Nevada construction industry had rested on the stimulus money because the oversupply of housing and commercial space has curtailed work.

The state is estimated to be in line for $2.3 billion in stimulus money and $2.1 billion had been awarded by the second quarter. Of that total, the state had actually received $1.53 billion and spent $1.49 billion, Applied Analysis reported.

That breaks down to $848 million to the Nevada Employment, Training and Rehabilitation Department, of which $537 million goes for unemployment benefits. Nineteen percent goes to health and human service programs, of which $353 million is offsetting increasing Medicaid costs.

“It is more of a welfare package than it is a stimulus package,” said Applied Analysis Principal Jeremy Aguero, who said it has had only a modest effect on infrastructure programs.

The biggest chunk, $288 billion (36.5 percent) went for tax cuts, but the rest of the money didn’t go for the traditional stimulus of creating jobs in the private sector but to the public sector, he said. Nevada gets less benefit from the tax cuts than other states because it doesn’t have a state income tax to deduct on federal taxes, he said.

The state estimates 4,194 jobs have been created through stimulus expenditures, but only 134 have been construction jobs, Aguero said.

“I think a lot of people think the stimulus is for building roads and highways, airports and major capital programs, but that is only a small part of the actual stimulus program.”

The state reported that $208 million in transportation funds were awarded — 10 percent of the state’s stimulus total — but only $33 million had been received, Aguero said. That is not good when 65,400 construction workers have lost jobs since the recession began, he said.

“The good news is that more of what we need for putting people back to work is coming, but the bad news is we are 34 months into the recession and for many workers and families, it is simply too late,” Aguero said.

Nevada has been awarded $571 in stimulus money per resident, ranking the state 45th out of 50 states and the District of Columbia, Aguero said. The national average is $654 per person, he said.

Nevada falls below the national average in terms of jobs created by the stimulus spending, Aguero said. Nearly $356,000 has been spent for every job created, he said.

Charles Harvey, the state’s stimulus director, declined to comment on the report. He said his role is more to tell what the state has received and is doing with the money since the allocation funds was decided at the federal level.

AGC report on Las Vegas

The report lists the Las Vegas Valley as having $357 million in commercial construction permits going back one year ending in June. That’s down from just over $1 billion for the previous 12 months ending in June 2009.

The amount of taxable construction over the past year was $1.78 billion, down from $3.1 billion from July 2008 through June 2009, the report said.

The amount of commercial construction in the pipeline is way off as well.

Office had 590,000 square feet planned over the past 12 months, down from 2 million square feet a year ago. Retail had 6.5 million square feet planned, down from 11 million square feet. Industrial had 1 million square feet planned, down from 5.5 million square feet.

The 975 permits for multifamily units over the past 12 months were down from 4,468 in the preceding 12 months. Las Vegas had 7,555 hotel rooms with planned completion dates on average over the past year, down from 21,217 in the previous 12 months.

The aberration is single-family homes, where 5,128 permits were issued over the past year, up from 3,941 in the preceding 12 months.

All of this has meant fewer construction jobs in Southern Nevada with the 12-month average of 53,975 jobs, down 32 percent from the 78,755 in the preceding 12 months, the report said.

Construction costs have come down because of the lack of work. Applied Analysis reported over the past 12 months they have fallen by 7 percent compared with the preceding 12 months. Construction wages have also fallen 3 percent to $22.75 on average.

Construction cost index

Construction consultant Rider Levett Bucknall released its quarterly report showing that commercial construction costs in Las Vegas continue to decline. In July, it listed the cost as $11,556 per square foot, down from $11,572 in April. Las Vegas was among the four of 13 cities tracked to show a decline. New York City the highest cost at $18,991 per square foot. Phoenix’s cost was lower than Las Vegas’ at $11,438.

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