- In the near term, the proposed development of Blue Diamond Hill would further depress Clark County homes prices.
According to a recent analysis by CBER, Clark County has 20,000-30,000 vacant homes. It’s no secret that when supply exceeds demand, prices fall. According to the US Federal Housing Finance Agency, home prices in the Las Vegas Valley have fallen by 56% since the peak price observed in the 4th quarter of 2006. The decline in home price shows no sign of abating. Prices have fallen an estimated 9.7% in the past year. Clearly, overbuilding was a key contributor to price declines. Adding 7,000 more residential units will further depress residential home values.
- Even lower home prices mean continued economic distress for Clark County.
Home equity comprises roughly 60% of the average US household’s total wealth. Wealthier people consume more and their consumption stimulates the economy. According to the Bureau of Economic Analysis, consumption is 65-70% of total GDP. However, over 70% of households in Clark County have negative equity in their homes, ranking us as the worst metropolitan area in the nation in this respect. People who owe more than they are worth are forced to cut back on spending. Lower spending means slower economic growth. In Clark County, the slow-down in consumption spending has led to many businesses failing, increased unemployment, and double-digit declines in sales-tax revenues.
In recent months, taxable-sales growth has begun to move into positive territory but most of this growth has been based on improved spending by visitors. The local economy is still extremely fragile as home prices continue to fall. More downward pressure on home prices will induce yet another round of reduced consumption spending which will lead to more business failures, more unemployment, and further declines in sales-tax revenues.
- We cannot build our way out of this recession.
The developer argues that the project will boost employment and help pull Clark County out of the recession. This is a specious argument. The citizens of Clark County have already seen the economic consequences of overbuilding. Overbuilding in the residential and commercial sectors is the reason why Clark County has been ground zero for the “Great Recession.” Building more units will slow absorption of existing residential and commercial units. The small, temporary, boost to employment from the development will be offset by lower consumption spending and job losses in all other sectors. In short, construction that is not motivated by new demand is simply unsustainable and has severe negative economic consequences. There is no need for today’s Commissioners to repeat mistakes of the past. We know now that sustainable economic development is the real key to economic growth.
- In the medium term, the development will irreparably damage a unique recreational, cultural, and scenic resource.
Currently, over 1 million visitors per year enjoy hiking, biking, climbing, picnicking and driving the scenic loop in the RRCNCA. During the construction phase, which according to the proposal could last a decade or more, dust will be an ever present problem. According to the proposal, SR 159 will be used for construction vehicles and workers as the primary entrance to the site. Ground-level ozone from increased vehicular traffic in the canyon will mix with dust from construction creating smog. The canyon will be far less appealing to recreationists and other visitors when urban smog inhibits visibility and literally chokes bikers, hikers and other visitors. Construction-vehicle traffic will also pose an extreme hazard to hundreds of bikers who ride SR 159 and the scenic loop each day.
- Destroying the important cultural and recreation resource that is Red Rock Canyon will ultimately hurt, rather than help, economic development prospects for Clark County.
Research over the past three decades makes clear that one of the foundations of sustainable economic development is social and recreational opportunities for new and existing residents. Given the same infrastructure and tax structure, firms will choose to locate in communities that provide these important resources for employees. For example, communities such as Denver, Boulder, and Ft. Collins on the Front Range in Colorado have managed to attract numerous telecommunications and high-tech firms in the last two decades. These new firms claim that the numerous recreational and cultural opportunities help them attract skilled labor. These opportunities exist in Colorado because of the foresight of community planners in the 1970s and 1980s.
Rather than compromising some of our most valuable resources through short-sighted, reactionary decision-making, the County commissioners would do well to act with long-term outcomes in mind and emulate what has worked in other areas to attract new firms and retain existing firms.
- The proposed Blue Diamond Hill purports to be sustainable and eco-friendly, but the proposal merely plays lip service to these goals.
Careful reading of the proposal makes clear that the developer’s intentions are high-density land use with little attention paid to open space. Of the 3,466 acres, only 20% will be left in open space. That means an astounding 80% of the acreage will be converted to urban uses. Accordingly, RRCNCA will be physically and environmentally dominated by an urban environment. The desert character of the Canyon will be forever lost and will be replaced by what is best characterized as a congested, polluted urban park.
- This developer has a history of failed real-estate investments and bankruptcy. If this should happen again, we would be left with an expensive eyesore and irreparable damage to one of Clark County’s most valuable natural resources.
Following Rhodes’ 2009 bankruptcy filing, creditors (including Credit Suisse), allege that Rhodes misappropriated funds from their investments. They claimed that they “have no confidence in Rhodes’ ability to rehabilitate the company and formulate a workable plan for reorganization” (Las Vegas Sun, “Rhodes’ lenders want him out,” 5/25/2009).
Developing the Blue Diamond Hill would take an exceptionally high degree of business acumen that Rhodes clearly lacks. The site has extreme engineering challenges and current cost estimates will likely have to be modified as more is learned about the site. Moreover, financing a large project such as this will be particularly difficult given his reputation with creditors. If the developer runs out of money, irreparable harm will be done to Red Rock Canyon and the community will be left with a site that demands far more reclamation than would be necessary to mitigate the impact of mining.
In summary, the proposed development on Blue Diamond Hill will have permanent deleterious environmental and economic impacts on Clark County. As an economist, I recognize that at some point, new residential and commercial development should be part of a sustainable economic future for Clark County. But the proposed development is the wrong development in the wrong place at the wrong time. There are hundreds of thousands of acres that can still be developed in the county when the time is right. Why forever damage the finest and most spectacular environmental resource we have in the County when there is nothing to gain and so much to lose?