Commentary - April 2004

The Crisis of Growth

Danger or Opportunity

by Lyle Brennan

The Chinese symbol for "Crisis" is composed of two other symbols: "Danger" and "Opportunity."

There’s been a lot of talk over the last few years, especially in Southern Nevada, about the problems associated with growth: traffic jams, water shortages, lack of affordable housing, etc. Anti-growth or slow-growth movements are nothing new in both ends of the state. Now the Clark County Commission has set up a 17-member task force "to help determine what the Las Vegas Valley will look like in coming years." Commissioners Bruce Woodbury, Mark James and Rory Reid, who came up with the idea, claim the county has been giving developers whatever they want for years, and it’s time to step back and do some long-range planning.

I’m all in favor of long-range planning, especially considering such issues as water supply and traffic. But the real question is this – is growth actually good or bad? Although it has presented a number of challenges, does that mean we want to halt growth in Nevada? One source of information on this subject is a 642-page study commissioned by the Southern Nevada Water Authority (SNWA) and conducted by Hobbs Ong & Associates, Inc. and Applied Analysis, both Nevada-based consulting firms specializing in public finance, policy research and applied economics. This was a follow-up to a 1992 study that concluded an interruption in growth would have a negative impact on the entire state. The executive summary to the 2004 report says, "We have likewise concluded that an interruption of growth would have significant negative economic, fiscal and social consequences." It goes on to say, "The losses in employment, output, income, population and tax collections (would be) devastating."

While we’ve all had to listen to predictions of how our economy is spiraling toward destruction because of record-breaking growth rates, here are some statistics taken directly from the report that cannot be refuted:

The construction industry in Clark County supported 77,700 direct jobs in 2003, or roughly 8.6 percent of the 907,700 positions within the county.

When indirect jobs are added, the construction industry supports a total of 157,400 jobs, or 17 percent of total positions.

Construction-related activities accounted for 11.2 percent of total labor income within Clark County in 2003.

For every $1.00 in construction activity, $1.59 is created within the total economy.

Construction-related activities were responsible for generating $244 million in annual state and local revenues in fiscal year 2001-2002 from taxes, fees, etc.

An additional $486 million in required infrastructure improvements (roads, water and sewer lines, etc.) were paid for by the construction industry.

So, before we decide that growth is a menace that must be stopped, let’s attempt to take a more balanced approach. As the report points out, "In the end, it is more a question of whether the benefits of growth outweigh the costs of growth or, conversely, whether the benefits associated with constrained growth are worth the accompanying costs."

The report contains many charts detailing scenarios based on minor or major interruptions in growth, with slow or fast recovery. It’s worth a read. Here is just one scenario: a 65 percent reduction in construction employment followed by a moderate recovery would have the following results:

$3.8 billion per year is lost in labor income (an 11.5 percent decline).

Total economic output is reduced by 12.3 percent, as fewer consumers demand fewer goods and services.

State and local governments lose roughly $2.9 billion in collections.

Based upon both Nevada’s fiscal system (which ties various local governments together through the sharing of intergovernmental revenues) and the interplay between industries within the state, an interruption in Southern Nevada’s growth would be felt throughout the state.

Here’s another factor to consider: "Growth, through policy initiatives, can be artificially limited or halted. However, it cannot be as easily stimulated/created." Ask anybody in a no-growth or negative-growth state about their lifestyle or their hopes for the future. These are the very people who are coming here, hoping to trade their problems for ours. So, before we panic about the "danger" produced by this crisis, let’s remember the "opportunity" it presents and be thankful for what growth brings to the state.

A copy of the executive summary of the SNWA report may be downloaded from the Water Authority’s website at: snwa.com/html/news_economic_impact.html. The same page contains a link to a request form where you can order the entire report on a CD.

Lyle Brennan Publisher
COMMENTS? email: lyle@nbj.com