Wednesday, Sept. 8, 2010 | 7:31 p.m.
Las Vegas needs to get over its hangover and face its economic woes before casting blame and seeking any federal solution, according to a member of a commission studying the nation’s financial meltdown.
Bill Thomas, a former Republican U.S. representative from Bakersfield, called on Las Vegas to do a self-assessment and a better job of diversifying its tax base, planning its growth and fixing the state’s budget woes.
“The first step in sobering up is understanding,” said Thomas, a member of the Financial Crisis Inquiry Commission that held a hearing Wednesday at UNLV. “We are long overdue in getting that across all over the country.”
Thomas made his comments after colleague Heather Murren, co-founder of the Nevada Cancer Institute and wife of MGM Resorts International CEO Jim Murren, sought answers from a panelist about the impact of outside investors coming into Las Vegas and creating the housing bubble.
Thomas jokingly said that those like him who have followed Nevada long believed it was created by outside forces.
Thomas said Las Vegas has the ability to control its own destiny through planning and mentioned multi-billion-dollar resort projects such as Echelon and Fontainebleau that were halted before their completion.
Nevada, facing a $2.9 billion budget shortfall, has a tax system that invites growth from the outside without dealing with the consequences, he said.
“Are we coming to an agreement in Nevada that government basing its revenue on gambling is gambling?” Thomas said.
Thomas mentioned the “irrational housing bubble” driven by the building industry and people speculating on homes, and he again raised the issue of Nevada doing a self-assessment.
“We are looking at the national level to make sure it doesn’t happen again,” he said.
But to what extent have Nevadans “ changed tactics and accepted the responsibility. How are they going to realize that they are going to work their way out of this problem?” he said. “To what extent are you going to, by your own bootstraps, deal with this issue.”
Thomas said he doesn’t want to look back and complain, but Las Vegas needs to learn from its mistakes.
Business leaders and analysts who testified before commission members talked about how Las Vegas was overbuilt with not only single-family homes and condominiums and resorts but with office, retail and industrial buildings as well.
William Martin, vice chairman and chief executive officer of Service 1st Bank of Nevada, said the overdevelopment resulted from too much liquidity in the system. Banks and investors were flush with cash and needed to deploy it, he said.
“There was too much money chasing too few opportunities, and that historically leads to heightened risk-taking and a lessening of investment standards,” Martin said. “Those lessons are forgot in a time of great prosperity.”
“In the case of Nevada, those seeking high and quick returns poured into the state, allowing for a high level of speculative investment,” he said. “They thought 20 years of speculator growth was a predictor of greater things and profits to come. It created artificial demand.”
Steve Hill, former chairman of the Las Vegas Chamber of Commerce, said the one lesson the region can learn from the recession is that it might be wrong in its expectations about the economy.
“For 20 years, it was hard to be wrong in Las Vegas,” Hill said. “That was a period where we had profitability and growth and that certainly lulled us to sleep.”
Las Vegas isn’t going to be building new hotel rooms anytime soon, Hill said. The key to the region’s economic future is determining what three or four new industries it can attract that will drive growth.
During an interview afterward, Thomas said Nevada wants the country to see it as if it’s like any other state, but it doesn’t want to operate like other states.
He said the state is too preoccupied with growth and worrying about having another airport in the Ivanpah Valley only to bring in people to fill hotel rooms.
“So rooms drives the entire economy,” Thomas said. “At some point, if you have that focus, you will wind up with these bust projects, because the boom slows down or stops.”
In retrospect, no one could stop the growth train in Nevada, Thomas said. But if the state wants to moderate its growth, it shouldn’t have put a cap on property taxes, he said.
If the state doesn’t want developers to pay for highways and parks, that doesn’t lead to the kind of sustainable growth that is more appropriate, said Thomas, who jokingly conceded his comments don’t sound like they are coming from the Republican he is.
“Growth in and of itself may be good, but sustained growth is the best possible thing you can have,” Thomas said.
“If your resources are the gaming industry and tourism, don’t do things that jeopardize that in terms of not planning in a reasonable and responsible way to maintain that economic base, while at the same time you do everything you can to diversify,” he said.
Murren was reluctant to criticize her colleague’s statements in an interview afterward, and she acknowledged that people and businesses in Nevada were more optimistic about economic growth than they should have been.
One of the advantages of having a hearing in Las Vegas is that it allows outsiders to “see the substance” of the people are who live here, Murren said. She said Las Vegas has a perception of being a place of too much risk taking.
“I think to some extent we all need to share responsibility to have allowed this group euphoria to consume us.” Murren said. “But this is nationwide. I don’t think we are unique in that regard. I think there are other regions that have been just as badly affected, California and Florida among them. Look at Wall Street. The distinction is we were profoundly affected, but we have been dealing with our own consequences and actions. Back in New York City, the banks have been bailed out.”