City Council Throws Away $732,615.83 On Irresponsible Regional Development

Mesquite, NV. April 23, 2018

Editor’s note:  This is not about the advantages of economic growth and higher wages. It is, about ignorance and the dangers of putting something as important to a community as economic development in the hands of people ill prepared to handle the task.      

Overview

On October 31, 2012, the Mesquite City Council approved the formation of the Mesquite Regional Business Incorporated (MRBI) to privatize the industrialization of economic development for the community.

As of March 20, that effort cost taxpayers $732,615.83 for zero return, and the council continues to give away $15,833.33 per month in an ill-advised attempt to move the retirement centered community to an industrialized zone.

Here is why that investment failed.

The community

Mesquite NV is a retirement community that grew along Interstate 15 in the arid desert of south-east Clark County Nevada. It sites on a narrow strip of the Arizona border between Las Vegas to its south and St. George, Utah to the North.

Population growth

The population of Mesquite was 1,100 in 1984 when it was formed as a city. Today the population is 20,838 today.

Mesquite like the rest of Nevada has had its ups and downs. Nonetheless, on average, the community grew by 8% with a median increase of about 6 %.

Today Nevada has one of the strongest growth rates in the country, reflecting a 7.05% population growth between 2010 and 2015, which ranks 6th in the nation. These rates are skewed up because of the population increases in the larger metropolitan area of Las Vegas. Nonetheless, since 2013, Mesquite has had a steady increase of about 4.2 %. If the median rate holds one could expect Mesquite to grow another 2 % to 6+%.

Labor

In 2010 about 39% of the population was between 20 and 55 years of age, and 47 % were above 55. That age disparity is consistent with Mesquite as a retirement community.

Full employment does not mean that everyone has a job. It does not mean zero unemployment. Unemployment that is too low leads to inflation since employers must compete to hire workers. That quickly pushes up wages. To economists, full employment means that unemployment has fallen to the lowest possible level that won’t cause inflation. In the U.S., that is about 5 percent. [i]

According to Sperling’s Best Places, the unemployment rate in Mesquite is 6.90%, with job growth of 3.53%. If growth were met with those unemployed, it would drop the unemployment rate to 3.37 % and signal job wage competition and inflation.

Valuation

The City of Mesquite uses the value of its permits to decide the current worth of an asset or a company coming to or developing in the community. How detailed their process of valuation remains unknown. Generally, an analyst placing a value on a company looks at the company’s management, the composition of its capital structure, the prospect of future earnings and market value of assets.

City employees issued 5,170 permits between 2014 and March of this year valued at $263,292,131. The average value is $52,333. Such a low value suggests a higher growth of homes and remodeling and very little industrial or major business growth, as promised by the MRBI.

Mayor and Councils present trend

The current Mesquite City Council aided and abetted by the Mayor continues to increase the current taxpayer debt of 732,615.83 by $15,833.33 per month with a goal of bringing in natural gas to industrialize the retirement community.

Natural gas has a multitude of industrial uses, including providing the base ingredients for such varied products as plastic, fertilizer, anti-freeze, and fabrics. And the U.S. electrical power producers are retiring aging coal plants and turning to natural gas to generate electricity at an unprecedented rate.

However, while this shift may be better on the internment than coal and have some economic benefits, it also brings on risks associated with persistent price volatility and rising global warming emissions.

To some degree, the natural gas problem can be overcome by expanding the use of renewable energy and energy efficiency in our power supply.

Conclusions

Supporters argue that their MRBI brought at least three businesses to the community: Star Nursery, Deep Roots Harvest, and  Eagles Landing truck stop, Opponents point out that Star Nursery had plans to locate in Mesquite once the population got to a certain level. Deep Roots business model is to locate on border towns to capture out-of-state traffic expectantly from Utah. Adding another truck stop to the area was always, for some unknown reason, in the cards for the city council.

Regardless, giving three-quarters of a million taxpayer dollars to inexperienced people to start-up a local business to privatize the community’s economic development has been a resounding failure. Continuing to spend brings the Mayor and City Council close to malfeasance.

This failure could have been avoided had the Mayor and the City Council done even cursory due diligence. If so, they would have found, that while there have been ups and downs, the population is growing at a reasonable rate.  Had they taken a better look at the labor market, they would know that driving it to low through industrial growth would inflate the economy and cause wages to rise. Had they looked at their permits, they would know that home construction is signaling retirement and not industrial development.

Finally, the drive for natural gas appears inconsistent with the retirement nature of the community. A rational City Council would have performed an economic analysis of energy alternatives, to include the one now offered by Overtone Power, before to launching into a pro natural gas drive.

Most important before they do any economic development they need to determine how much water is actually available to support such efforts. That is a task that they have recklessly avoided

Note: One of the founders of the MRBI is current city councilman Dave Ballweg. He is running for reelection this year.  Running for is seat is George Gault, another founder of the MRBI. City Councilman Geno Withelder is also running for re-election. He is an MRBI supporter.

Endnote:

[i] Crook, Clive, Bloomberg QuickTime, April 018 at: https://www.bloomberg.com/quicktake/full-employment