Yesterday I wrote about the potential growth and/or decline in the Las Vegas economy. The blog post focused primarily on fiscal drivers to speculate on how The Strip will ether grow or decline in the future. Though such factors are important considerations, an additional factor may have a more short-term impact on the city’s growth.
Water is a make or break resource. When it runs short the ability for businesses exists and for residents to maintain a comfortable living situation becomes very challenging. The Hoover Dam creates Lake Mead where Las Vegas receives 90% of its water supply. Unfortunately, drought conditions have brought Lake Mead to historic lows. To get a sense of the magnitude, one of the two pipes used to draw water from the lake is nearing the point where it’s no longer functional. The lake’s water elevation is at 1,087 feet, while one pipe is at 1,050 feet and the other is at 1,000 feet. By the end of the summer, the water level is anticipated to drop an additional 20 feet.
In all actuality, the problem isn’t the Las Vegas Strip. The Strip provides roughly 70% of the economic activity of the city, while consuming around 7% of the city’s water. This happens because the majority of water related activity is recycled/treated and sent back to the lake. The issue comes with the fact that the growth of the Strip is the primary driver in the city’s growth. With more residents comes a greater need for water and not every residence in Las Vegas is equipped with a state of the art water management system.
If the drought in the west subsides next year, then such stories will likely go away, yet the danger will still exist. Once another strong drought returns in 10-20 years and the population has grown significantly, how will the area be able to cope with its citizens/visitors need for water?
The investing lesson in what was written above is simple…reduce, reuse and recycle. The reduce part comes from voluntary or forced action. In this area I do not see many obvious investment ideas. When you come to reuse and recycle, then you come to companies that are specific in their development of the infrastructure and filtration systems to enable water reuse and recycle to be a reality. If an area can generate 70% of a city’s economic activity, yet account for only 7% net of its water usage, then you would have to assume the rest of the city has lot of water saving potential. This speaks directly to companies involved in water purification and recycling.