Las Vegas needs to let the market decide where the water goes
The famous slogan, "What happens in Vegas, stays in Vegas," once assured visitors that they were exempt from the wages of sins committed in the city of lights. It was the inspired product of the Las Vegas convention and tourism bureau. Not to be outdone, the local water authority is still promising cheap water in the middle of a scorching desert. Try to figure this out: A family of four in Las Vegas pays $1 a day for 400 gallons of water; meanwhile, a family of four in Atlanta -- with 13 times the precipitation -- pays $2 for the same amount of water.
While most big cities sit on the banks of a river, lake or ocean, bone-dry Las Vegas owes its existence to Hoover Dam, 34 miles away. The dam is the source of the region's cheap water and power. Without the one, the fountains along the Strip would cease to dance and at least 60 golf courses would wither. Without the other, the lights would dim, and the air conditioners would stop humming. In the words of one official, the sprawling metro area of 2 million people would revert to "a place of sand dunes, mosquitoes and rattlesnakes."
Originally, it was thought that Mormon farmers would use the Colorado River water captured by the dam to create a smaller version of California's Imperial Valley. Instead, when work on the dam began in 1931, the city was invaded by a rowdy army of construction workers. Their employer, the U.S. Bureau of Reclamation, "invented modern Las Vegas." As Emily Green of the Las Vegas Sun tells the story: "(The workers') needs could be largely summed up in a telephone book under B: boarding houses, brothels and bars. Moreover, that same year, Nevada legalized gambling. Las Vegas added a C to its key services: casinos."
No one expected the small number of people in and around Las Vegas at the time to pick up any portion of the capital cost of building the dam. Like other big Depression-era projects, it was both launched and paid for by the federal government.
Three-quarters of a century later, a super-sized Las Vegas continues to rely on Lake Mead, the reservoir behind the dam, for nearly 90 percent of its water. The water still costs very little. And the federal government continues to supply cut-rate electricity.
Will Las Vegas ever outgrow the great store of water that makes the desert bloom and allows the lights to burn so brightly? The city's water czars live in fear of that possibility. The Southern Nevada Water Authority and its smaller sister organization, the Las Vegas Valley Water District, have adopted a wide range of restrictions to limit water usage. They include the following rules:
- Sprinkler watering is prohibited from 11 a.m. to 7 p.m., May through October.
- Mist systems at commercial businesses may not be used September through May.
- Fountains are restricted at commercial and multi-family properties.
- New grass is prohibited at commercial properties and new residential front yards.
- Car washing requires the use of a positive shutoff nozzle to reduce water flow.
To enforce these regulations, the Las Vegas district employs its own "water police," who go around town looking for violations. But it is the supply side rather than the demand side where the water authority hopes to hit it big. In October 1989, the Las Vegas district applied for unclaimed groundwater in northeastern Nevada, with an estimated pull of as much as 800,000 acre-feet of water, or just about double the allocation from Lake Mead. To bring that water to Las Vegas would require a 300-mile-long pipeline. There was fierce opposition from ranchers, farmers, environmental groups and others in Nevada and Utah. The controversy continues today, with opponents saying it would turn a sparse but beautiful desert landscape into a giant dust bowl reminiscent of California's Owens Valley.
The controversy died down for a while as the water level rose, when Lake Mead reached an all-time high in 1998. But that marked the beginning of a 12-year drought, which caused the lake to fall below 50 percent of capacity. Suddenly, alarm bells were ringing inside the water authority. Now, the Southern Nevada Authority and its supporters are demanding immediate action on the proposed pipeline. Opposition groups have become increasingly energized as well. The authority admits that a near doubling in water rates may be needed to finance the $7.2 billion project.
Here's a proposal that the water authority seems not to have considered: Since water rates appear to be going up anyway, why not move to a pricing system that recognizes the scarcity value of the resource?
Allow water rates to double or triple. Encourage free trading in water rights by homeowners and others. See if that doesn't avert the need for any construction. Call this a market-ready -- as opposed to a shovel-ready -- solution.
Andrew B. Wilson is a contributor to Writers on the Range, a service of High Country News (hcn.org). He is a 2011 media fellow at PERC, the nonprofit Property and Environment Research Center in Bozeman, Mont., and writes for PERC Reports as well as the Wall Street Journal.
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