New Year, New Nevada?
The new year is almost upon us.
Democrats will control both houses of the state's legislature.
We have a new president taking office in Washington in a few weeks.
Before that, Nevada's newest senator will get Harry Reid's seat in Congress.
Meanwhile, unemployment statewide continues to fall.
Gaming revenues are up.
But, questions about Faraday Future and Tesla remain.
And will a football stadium be built in Las Vegas? Will the economic recovery continue?
Tesla and Faraday Future
We’ve given Tesla and Faraday Future promises of tax incentives to move to Nevada. Is that something we’re going to see more of in 2017?
Jon Ralston, editor, The Nevada Independent: The issue of the large tax incentives given to both of those companies… there are two things to remember. First of all, Steve Hill, the head of the Economic Development Department, and the Legislature and the governor put protections in for the state. This wasn’t just a giveaway. There are claw backs. There are benchmarks that have to be met.
But the threshold question before you get into those deals like Tesla and like Faraday is: Are you going to play in the economy development market in America the way that it exists? If you are going to play, then you are going to give away things to get these companies. Otherwise you are going to lose them to other states. Ultimately, are the giveaways worth what we’re getting for it? From neither of those deals can that judgment be made yet.
Construction seems to have stalled at the Faraday Future site in North Las Vegas. What is happening?
Sen. Patricia Farley (I-8): I’ve heard that it has stopped. There’s a natural course of a project coming up out of the ground going vertical. There’s no bonding. There’s doesn’t seem to be any activity. When things start to delay and you haven’t even started, that’s a huge red flag.
The insurance markets, the bonding markets don’t seem to be here courting them. That’s concerning. I think all the safeguards are there from a tax perspective. I don’t think most people realize that Faraday moving forward also helped get the infrastructure going out to Apex, which was truly the prize of that bill.
I think we need to as a state look at bringing in some known factors, getting an Amazon or Microsoft to relocate here. Those are good projects for us.
Construction industry and real estate:
What about commercial construction are we seeing an uptick in that?
John Knott, executive vice president, CBRE: There are two phases of economic opportunity or economies in Las Vegas. One is outside the resort corridor; the other is inside the resort corridor.
Outside the resort corridor things are going along pretty well. Office construction is good. Industrial vacancy is low. Values are rising.
Inside the resort corridor, which is where the mega-transactions happen that fuel our economy, we are still struggling. The numbers have gotten better, but the availably of capital has been very difficult. I think it has put strain on both Genting [Resorts World] and also the Alon project as well. It is trying to get its capital stack arranged. We need something that is going to make those projects happen.
We are just at a point now where you can start looking at -- and we've had some conversations about -- people looking at condominium development once again. We were going to build 45,000 condominium units back in the day, which was crazy. But a modest pace of about maybe 500 or 1,000 high-end condominium units in the resort corridor in the next project certainly is reasonable. Prices are up to the point where you can justify new construction. So, there are some things I think point to a bright more stable future I hope.
The gaming industry
In 2016, casinos had some huge wins. Do you see the gaming win continuing to be big for the gaming industry in 2017?
Scott Roeben, editor, Vital Vegas: I think the casinos are really being nimble and they’re just adjusting to whatever trend is happening. So, if the gaming flattens out, they’re going to find other ways to get your money. They’re going to do a new nightclub or some new attraction. I don’t know if gaming necessarily is going to spike, but I think overall that revenue is going to continue to be generated because they are so good at knowing their customers and adjusting course as they go along.
Knott: We’ve seen higher ADR [average daily rates], record ADRs. Occupancy remains strong. MGM had a great quarter, great performance. As you look into 2017, Caesars comes out of bankruptcy -- I think that will spur some additional flexibility for projects on their properties to start taking place. And whether we get the mega-project built is still yet unseen… nothing is happening on the Fontainebleau to my knowledge. That’s going to stay that way for a while longer it would seem.
I think we did a great job with the tourist infrastructure committee when the governor said, "Hey, can we afford higher room tax and is this a good place to spend the money?" The convention center expansion, keeping us in the forefront of the best meeting facility in the world, I think is critical to our success.
The Nevada Legislature
Democrats are leading the way this legislative session, with Assemblyman Jason Frierson as the new speaker and State Senator Aaron Ford as the top leader in the senate. What will be their focus?
Ralston: The Republicans were able to get a lot of things done by controlling both houses because they also had a Republican governor -- at least most people will still say that Brian Sandoval is a Republican, even though he got a lot of heat for raising taxes. He was on their side on a lot of things that would never have gotten through, like school choice, like some construction defect reforms, like some tort reforms, like some other things that the unions hated and trial lawyers hated -- traditional Democratic constituencies because they had the governor as a backstop.
Now, you have the governor in his legacy session, who wants to do some things to leave his final indelible mark and you have the Democrats controlling both houses.
The real question for this session is: what can they get that the governor will agree not to veto, because they cannot override a gubernatorial veto in either house? Although, it might be close in the Assembly, but they certainly can’t do that. So, what kind of agreements can be made?
Jim Jobim, President of the National Alliance on Mental Illness Southern Nevada, called in and said there will be more people accessing the already strained mental health services in the state because of the legalization of recreational marijuana.
Farley: We watched Colorado and Oregon, and we’re watching those trends and how they are resourcing those issues.
I always step back and say, "Marijuana is in our culture now." I do expect heightened use. I do expect more people will be turning to it and using it for ailment or for whatever reasons they would elect to use a drug for.
I’m very supportive of and I’m working very hard with the addiction and mental health community to get more money and to raise the awareness of these issues, and I think that, if the marijuana industry grows, it needs to pay just like alcohol and these others. They need to be giving back some of these tax dollars into these programs so they can help not only marijuana users who are accessing these programs but alcohol, opioid, other drugs that we’re seeing in schools and with adults.
I’m waiting to see the governor’s state of the state to see where he puts this on his level of priorities. My heart and my gut say it is going to be very high. It needs to be very high. We have a big problem here in this state.
Ralston: Members of the [Republican] party always used to say, "You can’t just throw money at the problem." Well, how about just trying to throw a little money at the problem, because that is how you get more beds. That is how you get more specialists. That is how you improve care.
We don’t know the impact legalizing marijuana is going to have. I understand Jim [Jobim, the caller] is very well intentioned, has a lot of data. We don’t know what’s going to happen that is inconclusive in Colorado from what I understand.
But opioids and the meth crisis we’ve had in this state are much more serious and acute problems, and the fact [is] that so many people go through the criminal justice system who turn out to be mentally ill. So many of the homeless are mentally ill. There is no obvious constituency for them as there is for labor unions or for the gaming industry.
Farley: I agree. This has to get dollars to it. It is the only way we’re going to address and solve these problems.
(Editor's Note: This interview originally ran in December 2016)
Jon Ralston, editor, the Nevada Independent; John Knott, executive vice president, CBRE; Scott Roeben, editor, Vital Vegas; Sen. Patricia Farley (I-8)