The signs of growth in Nevada are everywhere. Dozens of new schools are built each year, traffic crawls along on overly congested roadways, and a new housing community seems to sprout up in the desert just about every week. Such is life in Nevada these days, where the population has literally doubled in a decade.
“There are some folks who suggest stopping growth would be a good thing,” said financial consultant Guy Hobbs, president of Hobbs, Ong and Associates and a member of the Clark County Growth Task Force. “But at the same time, growth is really one of our largest industries in the state,” he said. “There are some vital economic reasons for understanding what growth means to our economy, how many jobs it creates, how much income it produces and how much tax revenue it produces.”
Keith Schwer, director of the Center for Business and Economic Research and professor of economics at the University of Nevada, Las Vegas, said those who have lived in Nevada the longest often report the highest dissatisfaction with growth. Newcomers who came from a major urban area, like Southern California, don’t have such a negative view, and the fact of the matter is that growth translates into steady paychecks for the vast majority of the state’s population. “The availability of jobs is one of the real benefits of growth and a benefit that is sometimes forgotten,” Schwer said. “It gets lost in all the other things going on.”
It doesn’t look like growth in the state is slowing down anytime soon, according to figures recently released by the U.S. Census Bureau. Projections indicate Nevada will experience a 114 percent population growth by 2030 over the 2000 census numbers, adding an additional 2.3 million people.
Housing
One of the most visible signs of growth in Nevada is the housing market, which has made national headlines recently as the center of the real estate boom in the West. New roof tops are rising daily, and the U.S. Census Bureau recently ranked Nevada first in the nation for the most rapid housing growth, with a 4.5 percent increase in the number of new houses constructed from July 1, 2003 to July 1, 2004. The median price of a new home in Southern Nevada alone is $314,065, not including condominium conversions, according the Southern Nevada Home Builders Association. That is a remarkable 20.6 percentage increase from just a year ago.
The resale housing market also remains strong. According to figures provided by Restrepo Consulting Group, the median price of a resale home in the first half of the year in Las Vegas was $273,000, up 13.8 percent from the same time last year.
Shawn Minassian, president of the Reno/Sparks Association of Realtors, said the median price for residential property in Reno has continued to rise. In the second quarter, the median price jumped 6 percent, from $317,000 to $336,000. “We are even experiencing a stronger market this year compared to last year,” Minassian said. However, because of the increasing prices, Minassian said many young people – especially those fresh out of college – are being pushed out of the market. To help, Minassian has implemented a program called American Dream Affordable Housing, which is geared toward educating Realtors on various loan programs and incentives for first-time buyers. “I feel very strongly about doing something for our youth who are graduating from the universities, enabling them to live in our areas, because once they leave, we will be losing a very important resource,” Minassian said.
Nevadans also will most likely see a change in the way neighborhoods are developed in coming years. Clark County is revamping its planning policy to cope with the massive growth. It is integrating more mixed-use facilities within residential areas, bringing more commercial buildings such as stores and workplaces closer to home.
Russell Roberts, principal management analyst for Clark County’s Department of Air Quality and Environmental Management, said the goal is to create walking-friendly neighborhoods and reduce dependence on the automobile by bringing everything closer together. The policy change is a direct result of the recommendations brought forth by the Clark County Growth Task Force, Roberts said. The concept is similar to the master planned communities of Summerlin and Aliante in Southern Nevada.
Paul Curtis, CEO of Kiley Ranch Communities, a new master-planned community underway in Spanish Springs Valley in Sparks, said these types of neighborhoods, particularly master plans, help curb air pollution and traffic congestion and require less infrastructure to support a larger population.
“We’ve created an environment whereby anytime we want to go anywhere we have to hop in the car,” Curtis said. “That was great, as long as you had cheap fuel, abundant land and liked to drive around. As a society and as an industry, however, we need to head in a different direction.”
Kiley Ranch is being developed on about 800 acres of land owned by the Kiley family, which served as a working ranch since 1932. It will feature about 4,500 residential units, a business park, marketplace and town center, as well as walking and bicycle paths.
Commercial Development
Limited land availability and steep price increases are taking their toll on commercial developers in the state, with industrial developers feeling the most impact. Ralph Murphy, president-elect of the National Association of Industrial and Office Properties and executive vice president of Marnell Properties, said land zoned for industrial that sold several years ago in Las Vegas for $3 to $5 per square foot is now going for $12 to $20 per square foot.
“The land is too expensive to justify industrial development,” Murphy said. “The problem for industrial is that the market can only support a certain level of rent, and at some point the cost to develop the building becomes non-economical.” With the cost of development increasing, the rental demand for industrial properties has grown, causing vacancy rates to drop considerably in Southern Nevada. The vacancy rate went from 9.3 percent in the second quarter 2004 to 5.5 percent in the second quarter of this year, as reported by Restrepo Consulting Group.
Paul Perkins, senior vice president for industrial development at Alliance Commercial, said industrial developers in Northern Nevada are starting to build in more rural locations as a result of the higher land costs. Land in the valley sells for about $6 to $9 a square foot, and in the outlying areas, it drops to about $1.80 to $2.50 a square foot. Perkins said because construction costs are also on the rise, many Northern Nevada developers are looking at refurbishing existing buildings to cut costs.
In the office sector, Murphy said a limited supply of Class A office space in Las Vegas has created a heightened demand. Marnell Properties is developing Marnell Corporate Center – 500,000 square feet of Class A office – south of McCarran Airport on Sunset Road. Murphy said tenants are gobbling up space as soon as it is completed.
The demand for office and retail space is strong in Northern Nevada as well. “As long as there’s a strong appetite for California companies and people to relocate to this region, the momentum and the growth that we currently have will probably continue for a fair amount of time,” said Scott Shanks, vice president of office development for Alliance Commercial. Gary Johnson, senior vice president of retail development at Alliance Commercial, said shopping center sites that once sold for $5 to $6 a square foot are now in the $15-per-square-foot range.
“In the case of office and retail development, developers will likely make up for high land prices by developing more densely, going vertical and developing mixed-use projects that also include high-density residential,” said John Restrepo, of Restrepo Consulting Group.
Air Quality
Despite the record number of cars driving over Nevada’s roadways in recent years, air quality is actually improving in the state, according to experts. “Back in the ’80s, we would have between 30 and 40 bad air days (per year) due to one of the three pollutants: either carbon monoxide, ground-level ozone or dust,” said Ron Smolinski, spokesman for Clark County’s Department of Air Quality and Environmental Management. “In the last three or four years, we are down to five or six (days per year).”
Smolinski said most of those bad air-quality days can be attributed to natural events, such as smoke from wild fires and wind stirring up dust. “The air in Las Vegas is much better than it was 15 to 20 years ago,” he said.
Andrew Goodrich, director of Washoe District Health Air Quality Management Division, said the same is true for Northern Nevada. “We’ve seen an improvement in air quality, and a lot of that is attributed to improvements in automobile technology,” he said. “We have cleaner fuels and cleaner technology in cars. We’ve been lucky so far in that technology has kept up with growth or actually outpaced growth.”
Water
Pat Mulroy, general manager for the Southern Nevada Water Authority (SNWA), said the community has made significant strides in conserving water, even though demand has increased substantially.
“We have taken out enough turf to save 18 billion gallons of water a year,” Mulroy said of SNWA’s landscape conversion program. “The (amount of turf removed) is equivalent to a strip of sod (that would stretch) a third of the way around the world.”
Mulroy said the authority is creating a 50-year plan to make sure water supplies keep up with growth, and it has been able to reduce the amount of water delivered from the Colorado River by almost 65,000 acre-feet during the last two years despite a population increase of about 170,000 in its service area.
Andy Gebhardt, supervisor of customer services and conservation for the Truckee Meadows Water Authority (TMWA), said TMWA doesn’t foresee any problems with water shortages as a result of growth in the near future. In the greater Reno-Sparks area, water rights are allocated differently than in Southern Nevada because developers must purchase water rights before they can build. The water rights are similar to real property and are sold on the open market.
Historically, a set number of water rights were dedicated to the Truckee River – a number that can’t change, Gebhardt said. And the price for water rights has skyrocketed in recent years. Gebhardt said three years ago they were going for about $3,000 for an acre-foot, enough to provide indoor usage for about four households. Now they are selling for $10,000 or higher.
When a housing developer buys the rights, he turns them over to TMWA once the houses are sold. “It’s a finite number of water rights and we can’t resell them,” Gebhardt said. “So if I get 10 people to cut their water use in half, I can’t now sell that to another developer to build five more homes.” Gebhardt said the water that isn’t used goes to upstream storage, and it helps delay the building of treatment plants and public water stations. “I don’t know when the time will come, but there will come a time when water rights are out,” he said. “What we do then is find a new supply.”
Highway Construction
Keeping pace with Nevada’s traffic isn’t always easy. But Nevada Department of Transportation (NDOT) spokesman, Scott Magruder, said the department is working hard to reduce congestion and keep traffic flowing in the state. “We’ve got a record-setting year of projects going out,” Magruder said.
NDOT has more than $1 billion worth of highway projects planned over the next three years, and another $8.6 billion in needed construction and maintenance projects from 2008 to 2014. One of its largest plans in Southern Nevada includes redesigning the Spaghetti Bowl Interchange and surrounding areas to make freeway access easier. The project is estimated to cost $543 million, with construction set to begin in Oct. 2008.
Magruder said NDOT also has plans to widen a number of freeway areas, including U.S. 95 from the Spaghetti Bowl to Craig Road and Interstate 15 from Tropicana Avenue to the Spaghetti Bowl.
In Northern Nevada, the department is beginning construction this fall on the final phase of Interstate 580 from Mt. Rose Highway to Winters Ranch. The nine-mile, six-lane extension of the freeway will cost about $200 million and is expected to open to traffic in late 2008. “We’ve identified about $6.2 billion in revenue for those projects between 2008 and 2014,” Magruder said. “We’ve got about a $2.4 billion shortfall.”
Healthcare
One of the industries hardest hit by growth in Nevada is healthcare. “We’ve had trouble keeping up with the rate of growth for a decade, and now it’s at a critical level,” said Lawrence Matheis, executive director of the Nevada State Medical Association. “We had the medical liability crisis, during which we lost a number of physicians. We are beginning to recruit more, but we haven’t yet made up for the physicians we lost, let alone the new population growth.”
Matheis said Nevada ranks last among the states in the number of physicians per 100,000 population. “We are 50th in nurses-to-population,” he said. “We are at the bottom in almost every one of the medical care professional areas, whether it’s physical therapy or radiology technicians.”
The number of physicians training in Nevada has increased, with the addition of Touro University College of Osteopathic Medicine, which opened last year, and additional residencies recently approved by the state Legislature for the University of Nevada School of Medicine. As a result, Matheis said the state should see several hundred new physicians in the next several years, but it’s a slow process and still requires recruitment from outside areas. “We are doing everything that needs to be done and it’s not enough so far,” he said.
In addition to the shortage of medical professionals, Nevada’s hospitals have been slapped with declining profits. Dwight Hansen, financial analyst for the Nevada Hospital Association, said there was a 35 percent drop in hospital profits statewide in 2004. “The declining profitability for Nevada hospitals is the result of a number of factors,” Hansen said. “But chief among these factors is reimbursement from government payers, Medicare and Medicaid, which is insufficient to cover the cost of caring for these patients, and the growing number of uninsured or underinsured patients.”
Education
Growth continues to take its toll on the state’s public education system, showing up in overcrowded schools, teacher shortages and lack of funds. Last year, 401,123 students were enrolled in Nevada’s public schools. That is almost 16,000 more students than the previous year. In fact, Nevada leads the nation in new student growth.
“I don’t see any end in sight at least for the next two to four years,” said Keith Rheault, Nevada Department of Education’s superintendent of public instruction. “All the same things we are doing now – building schools, having teacher shortages – I just see it perpetuating in the future.”
The much-publicized teacher shortage in the Clark County School District has led the district to recruit teachers from every state in the nation, as well as overseas. Yet many of the recruits are declining offers, citing the high cost of housing. In Clark County, the starting salary for a first-year teacher with a bachelor’s degree is about $28,500. “I think the key will be to raise the minimum starting salary for teachers in the state to where we can compete, particularly now with the sharp rise in housing costs,” Rheault said.
The state is also pitching alternative licensure programs for people who want to teach and have degrees in areas other than education. For example, one bill that was passed in the last legislative session will allow medical doctors, accountants, engineers and various other professionals who possess state licenses to be issued a teaching license.
“It will have a few strings,” Rheault said. “They will have to go in for maybe 120 hours of training to learn how to deal with record books and classroom management.”
Another bill that was passed will allow college or university instructors who have not gone through a teacher education program and have at least a master’s degree and five years’ experience in teaching to obtain a license.
Rheault said another challenge to growth is the high number of non-English speaking students moving to the state. Rheault said, “It takes three years at least just to get these students to be somewhat proficient to be able to read and do some math. We had 600 percent growth in 10 years in non-English speakers, so by maintaining our state average, we’ve done pretty well.”
