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Economy

Is our economy at the point where it’s worth considering the UNCONSIDERABLE?

An exploration into risky ideas

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Illustration by Travis Jackson

If you’ve seen the headlines, you know the story: Nevada, and Las Vegas specifically, is in a dire economic condition. From a nation-leading foreclosure rate to a tourism industry reeling from declining visitorship; from layoffs on the Strip to a billion-dollar state revenue shortfall that raises the prospect of devastating across-the-board cuts, it’s becoming clear that the boomtown model that has kept this city propserous isn’t particularly well-suited to these rougher economic times.

In other words, our reliance on gambling and its ancillary businesses isn’t enough.

Of course, Nevada is only part of the larger national and even global financial crisis (although a recent study indicated we’re the hardest-hit state in the nation), and to some degree the solution to our local problems will flow from efforts to fix the whole economic system. But other initiatives are in Nevada’s hands. Proposals have included various taxes on gaming; a broader business tax pushed by gaming; and a vibrant alternative-energy industry.

But this is also a time when it’s fair to ask: Are things bad enough that we’re willing to at least think about previously unthinkable ideas? Or, put another way, is there a threshold of economic turmoil at which Las Vegans will consider legalizing prostitution? Accepting Yucca Mountain? If not to counter this downturn, to help prevent another in the future?

More

From the Archives
Show them the money (5/29/08)
More on Yucca
Yucca Mountain: a project only Toxic Avengers can love (6/4/08)
Atomic party (12/8/05)
GOP Radiates Honesty (5/13/04)
Yucca's fine print (7/22/04)
More on legal prostitution
Inside the “other service industry” with a former madam (11/10/08)
Love at the ranch (2/21/08)
The Life (5/23/05)
Beyond the Weekly
Las Vegas sees 10 percent drop in visitors (Las Vegas Sun, 11/12/08)
Yucca Mountain

Clearly, we’re not near there yet. Other than a few lonely advocates, neither idea has any real traction in this state, and they’re not likely to gain any, particularly with the Democratic party on the rise. (They’re such hot potatoes that the Weekly feels compelled to remind readers that this exploration of these ideas doesn’t amount to an endorsement of them.)

Still, with comparisons between the current situation and the Great Depression becoming ever more frequent, it’s worth noting an intriguing historical parallel: In the early 1930s, Nevada was pulled from much of the Depression by a couple of actions that countered the prevailing morality (legalized gambling; loosened divorce laws) and a huge federal project (Hoover Dam). To varying degrees, each helped improve the state’s economic health.

“Gambling and divorce were an innovation by Nevadans,” says Michael Green, a history professor at the College of Southern Nevada. “The similarity here”—to prostitution and Yucca Mountain—“is another federal project and another innovation that you might expect of Nevada.”

Still, he offers a few caveats. “Las Vegas’ success has had a lot to do with the idea of comfort. In 1930 and 1931, the effort to legalize gambling was part of a broader plan to increase tourism and investment,” Green says. A changing culture over the last few decades has allowed Las Vegas to advertise itself as a more permissive city, and legalized prostitution “could fit in with that. It probably fits with what a lot of people think of when they think of Vegas. But at the same time, it could also be a step too far, something that makes the tourists go, ‘Whoa!’”

Economically, Las Vegas’ position is far different as well. “Nevada, and especially Las Vegas, had not yet become a tourist mecca when the Hoover Dam project started [in the 1930s],” Green says. “In addition, the dam project was planned well before the Depression hit. It wasn’t supposed to counter the Depression, but it served that purpose.”

What Green considers most remarkable is how far Las Vegas seems to want to move away from its image, while other cities seem to be capitalizing on it. “Nevada has had a libertarian tradition in many ways, but it seems to me they’ve been moving away from libertarianism and more toward social conservatism.

“The question is, with this economic downturn, does that give way to a pocketbook issue?”

Which brings us back to the original question. In that light, we should at least know what we’re saying no to.

Prostitution

Let’s ignore the fact that many people in the country already think we have legalized prostitution in Las Vegas. The basic fact is there’s an awful lot of legalized humping going on in the 10 Silver State counties where prostitution is legal, which means a lot of revenues for those counties—anywhere from $1,000 to $125,000 a year in quarterly business fees per brothel and anywhere from $50 to $125 in biannual work permits per prostitute, according to George Flint, lobbyist for the Nevada Brothel Association.

But that’s just the surface of the economic trough, he says. “These brothels create jobs. [One brothel will] spend $1,000 a day for groceries. They spend money on security and fuel and advertising. They contribute to their communities.”

The most revenue is produced in Nye County, which benefits from up to $30 million a year in revenue. All told, legal prostitution in Nevada brings in nearly $50 million a year, and when you consider that the bulk of Nevada’s population is in its remaining seven counties where prostitution is still illegal, the economic potential starts to come into focus.

There’s an awful lot of money spent fighting it as well. Metro’s vice budget is $6.9 million, but Metro spokesman Bill Cassel says that’s only the tip of the iceberg when you factor in the added cost of prosecution and incarceration.

While Cassel could not estimate the number of prostitutes operating in Clark County, the arrest statistics would seem to indicate it’s rising: In 2006, there were 5,692 vice-related arrests and 1,747 enforcement operations; in 2007, arrests totaled 7,122, with 2,448 enforcement operations. And while this year’s totals won’t be known until January, the current number of arrests stands at 5,718, with 2,033 enforcement operations.

Cassel could not comment when asked if he felt those numbers would drop dramatically were prostitution to be legalized. “There’s really no way to answer that.”

Flint, who has been with the association since its inception in 1985, estimates that illegal prostitution is bringing in “between $2 billion to $3 billion a year.” He also estimates legalizing prostitution here could bring in $500 million a year.

Any decision to legalize prostitution in Clark County, however, would have to be made by the Legislature. Clark County is the only county in Nevada that cannot make the decision itself, because of a state statute that makes prostitution illegal in counties with 400,000-plus population. Flint explains the history: “In the 1930s, ’40s and ’50s, prostitution operated here without the blessing of legalization, but when they opened Las Vegas Air Base [now Nellis], some brigadier’s wife told her husband to do away with prostitution because of the bad message it would send to the wives of the airmen.” The original population threshold was 150,000, but as other counties such as Washoe began to increase in size, the Legislature increased the figure. When the Legislature meets in 2011, that figure will likely be increased because of the continuing growth in Washoe County.

Any push to legalize prostitution in Clark County would have to be made by local lawmakers. Las Vegas Mayor Oscar Goodman once suggested to a reporter that if it were to be legalized, the legal casinos would build fabulous brothels, but that’s about the most positive statement that’s been made within these county lines.

“I just don’t support it, period,” Assembly Speaker Barbara Buckley says. “It has been discussed in the past, certainly, and I really don’t want to relive the horrible puns that were brought up when we did.”

Prostitution is such a political burning skillet that Assemblywoman Sheila Leslie, D-Reno, couldn’t even get her fellow lawmakers to support taxing the brothels that currently exist. To do so would legitimize their existence as responsible contributors to society, so guess what, Nevada? Even though prostitution is legal in certain parts of the state, our schools, our roads, our public services don’t see a dime from it. Nor are they ever likely to.

Leslie has twice proposed taxing legal brothels, in 2003 and 2005, and both times, she says, it was a nightmare.

“In no way am I in favor of legalizing prostitution, and I’d vote tomorrow to get rid of what we have, but it’s very hypocritical of Nevada to say it’s going to be legal, but then not tax it,” Leslie says. “But it became a very diversionary issue. It was the only time I was featured in the New York Times. People were calling me from Hollywood and wanting me to do The Tyra Banks Show to talk about it. The media just totally overran it.”

Even with the current economic crisis, Leslie doubts she would want to revisit that issue. Buckley agrees.

“I can’t imagine it that will ever be brought up again,” Buckley says. “Certainly every time there’s an election you have new representatives, and they have new ideas, but …”

Las Vegas Convention and Visitors Authority officials declined to comment on the impact legalized prostitution would have on tourism, but Green offered a position.

“I wouldn’t be amazed if it increased tourism,” he says. “I don’t advocate it, but I can see the possibilities. I just wouldn’t want to be Harry Reid or John Ensign explaining this to the Senate.”

And while Green feels prostitution will never be legalized here, he does see another sex-fueled revolution coming. “I think we’re going to end up seeing topless clubs in Strip hotels as an effort to regulate them, keep them on the up and up and keep the money that goes into them from leaving the Strip and going to other locations.”

Yucca Mountain

This much is a given: There’s only one site for nuclear waste being considered in the entire country, and that’s 90 miles north of Las Vegas. Furthermore, it’s also a given that no lawmaker at the local level supports it, nor are they likely to any time soon, for all the understandable reasons: health concerns, security/safety concerns, impact-on-tourism concerns.

And even if the nuclear industry’s wishes were granted, and every Nevada official woke up tomorrow thinking, “Hey, why not?” it would still be 10-15 years before the project was fully operational, so any economic benefit Las Vegas and Nevada might derive wouldn’t be instantaneous.

What would that potential financial impact be?

Robert List, a former governor of Nevada and a strong supporter of Yucca Mountain, is more than happy to spell that out, starting with what Nevada has already received:

• A current payroll of $100 million a year to employ approximately 1,600 workers, most of whom are college-educated and degreed. “These aren’t minimum-wage jobs,” List says. When you consider that payroll has been in place for more than a decade, that’s more than $1 billion in income circulated throughout Nevada’s economy.

• Annual grants that have gone to public entities for monitoring and for research relating to the project. The State of Nevada has received close to $100 million over the last 20 years, and the university system has received $100 million over the same time period for its own research into the project.

• Sums paid out to the counties that will have oversight over the project. Over the last 20 years, eight Nevada counties—White Pine, Eureka, Nye, Lander, Churchill, Mineral, Esmerelda and Clark—and one California county, Inyo, have received an aggregate $100 million due to their status as affected units of local government (AULG). (List is president of the Robert List Company, a government-affairs consulting company that represents Esmerelda County in their oversight of Yucca Mountain.)

And what does Nevada stand to make if and when the site begins accepting nuclear waste?

“It’s larger in scope than the Panama Canal, Hoover Dam and the World Trade Center combined,” List says. “This is a project that will be bringing in more than a $100 billion over its lifespan. I can tell you that the majority of that money would be spent in Nevada on the construction industry, labor force, and for goods, supplies and services.”

The Nuclear Waste Policy Act establishes that the repository make it worth our while for storing all that nuclear waste. “That’s funding for transportation, for education, for public safety, for environmental monitoring, etc.,” List says. “While those sums still have to be calculated and arrived at by the Nuclear Regulatory Commission, I think it will probably add up into the tens of millions of dollars.”

Yucca Mountain would stand to get Nevada huge sums of money because of payments in lieu of taxes (PILT), List says. “Historically, federal installations are taxed as if they were privately owned. The federal government makes these payments in lieu of taxes to the local counties and state for the installations that they put in.” As one example, List explains Nevada is already getting a sizable amount for the Nevada Test Site.

“When this waste is placed in the repository with its tremendous value, the PILT is enormous,” List continues. “So I see huge relief for Nevada taxpayers.”

Keith Schwer, director of the Center for Business and Economic Research at UNLV, conducted his own economic impact study on Yucca Mountain in 2003, and while some of the figures are somewhat dated, they spell out a pretty lucrative outlay of cash—from the thousands of workers it would take to build a new rail spur in Nevada to transport the waste to the higher-than-average pay rate for Yucca Mountain workers once the project is complete.

According to Schwer’s report, the gross state product would be boosted by as much as $228 million a year during the peak of the construction phase, and by as much as $102 million a year over the transportation and operations phase.

While that sounds like a lot of money, it should be kept in perspective: When the Legislature convenes in February it’s likely to deal with a shortfall of more than a billion dollars.

What Schwer says these days is based on the ongoing opposition to the project, and the subsequent lack of communication between the Department of Energy and the population of Nevada.

“The government is saying, ‘Tell us what you’re willing to accept,’ but Nevada keeps saying, ‘What are you willing to offer?’” Schwer says. “It’s an impasse situation, and we just don’t know [what the economic benefit would be] at this point, because we haven’t gotten to that stage.”

No one doubts that the money coming in from Yucca Mountain could be substantial, but, as Schwer puts it, “Who will be the winners and losers? Reasonable people can differ about that.”

Allen Benson, director of the Office of External Affairs for the Department of Energy in Nevada, confirmed List’s numbers, adding the project will dump “several hundred millions of dollars a year into the economy, and a considerable amount into the local economy.”

He pointed out, however, that the impact will be less dramatic than when the facility was first proposed. “Nevada has grown dramatically, but nevertheless, there will be a significant impact.”

And the impact on tourism? Again, no comment from the LVCVA, but Bob Loux, executive director of the Agency for Nuclear Projects, which represents the state on all issues related to Yucca Mountain, says the most recent study points to a 5-10 percent decline.

Loux adds that any speculations about economic benefit are “wild-eyed musings of guys looking to justify a project that is dangerous with an agency that is incompetent. There is no authority under the [Nuclear Waste Policy Act] to give benefits to the state of Nevada. [The window to negotiate that] expired a long time ago.”

In addition, Loux cites a Clark County study that predicts a $3 billion negative impact a year, including the cost of training and equipping emergency responders and other safety-related issues.

“I think it’s safe to say that Nevada would gladly give up its annual appropriation to see this go away, and with the election of our new president, it looks like that’s going to happen anyway.”

Ultimately, Green likens Yucca Mountain to the Mint Act, which Congress passed in 1873 to demonetize silver, just as the Comstock Lode was taking off.

“I call that the original ‘Screw Nevada Bill,’” Green says, referring to the legislation that targeted Nevada exclusively for the nuclear waste repository. “There’s a parallel to Yucca Mountain in the sense it provided something Nevadans could unite to fight against. If Yucca Mountain were eliminated, I sometimes wonder what we’d talk about.”

Green says perception of what’s going on in Nevada with Yucca Mountain can be summed up by a sign Mississippi erected in its attempt to draw away gamblers from Las Vegas: “We don’t have nuclear waste.”

In the end, the momentum of public and political opposition will likely keep both of these ideas in check, despite their potential payday; the thought of accepting Yucca Mountain in exchange for money strikes many Nevadans as pretty much the same as selling their souls.

Yet there’s a lot of public and political sentiment against tax increases and other methods of economic improvement, and there’s only so much you can cut from budgets. It seems inevitable that at some point, Nevadans will have to make hard choices, these or others.

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Ken Miller is Las Vegas Weekly's associate editor, having previously served as assistant features editor at the Las Vegas Sun ...

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