On June 30, the Las Vegas Valley Water District will end fiscal year 2010-11 with its balance sheet showing it spent $17.8 million more than it made from selling water in Clark County. If fiscal 2011-12 plays out as the accountants predict, the Water District will end up $37.3 million in the red. People aren’t moving into the Valley, and water conservation efforts have paid off, leaving sales dwindling.
If the Water District were a for-profit business, somebody in the executive suites would be in a panic. It has about 1,000 employees, $930 million in long-term debt and a shrinking demand for its product. But it’s not a business; it’s a 57-year-old government agency with cash reserves of $119 million. And there will always be demand for what the Water District sells. It will just have to do a better job of balancing revenues and expenses.
But one particular expense has brought the Water District in for criticism, a line item that runs down the ledger like a drippy faucet: the Springs Preserve.
Las Vegas is justifiably proud of this trailblazing facility, but the way it was conceived and built all but guarantees it will never pay for itself. Even if the economy were to rebound this year, it’s hard to imagine a scenario under which the $250 million Springs Preserve would break even. It was conceived and developed during our period of irrational exuberance, when making the desert itself a tourist attraction apparently didn’t strike anyone as outlandish. And now, four years after opening, it stands as an expensive cautionary tale.
Ten years ago, when Water District planners were trying to figure out how to develop the site where Las Vegas was born, they had a choice: Should the Springs Preserve be a minimally developed nature preserve, or an eco theme park complete with rides? They ultimately chose a middle path, one that emphasizes the land’s significance while showcasing forward-thinking design and landscaping. It’s an undeniably beautiful space. The buildings adhere to exacting LEED-Platinum standards and contain a research laboratory, a sustainability exhibit and the Origen Museum, which tells an interactive story of the Valley from prehistoric times to the present. There’s an art gallery, a gift shop, a restaurant and hiking trails. In the fall, the Springs Preserve will also be home to the $51.5 million Nevada State Museum.
It’s all top-shelf. And so is the cost of running it. The Water District will spend $6.4 million to operate the Springs Preserve in fiscal 2010-11, down from $7.8 million in fiscal 2009-10, thanks primarily to cuts in staffing. But it also has to pay back the $160 million in bonds it took out on the facility, which come due at a rate of $11.2 million per year. Add the two figures together and you get $17.6 million in operating and debt costs for fiscal 2010-11. In its annual budget report, though, the Water District rolls the Springs Preserve bonds into its overall debt service rather than breaking them out separately. That’s like not counting your mortgage payment to make your household budget look more manageable.
“Usually, debt service on a public facility isn’t considered part of the operating costs,” says Stephen Brown, the director of UNLV’s Center for Business and Economic Research. But the Water District, unlike your municipal parks department, is not in the business of building parks to improve the quality of life—and the Springs Preserve isn’t your typical public facility. When a city builds a park, it has no expectation the park will pay for itself. If the city goes into debt for construction, that’s the price of life in a city that values open space. The Springs Preserve, however, was sold to the public as a facility that would pay its own way, if not make a profit. Most of it isn’t open to the public without a fee, which puts it in the category of an attraction, albeit one backed by a governmental agency.
“Recreational facilities of that type tend to have a difficult time with covering their original funding,” Brown says. “The number of visitors willing to pay to go to something like that usually isn’t enough to pay for it.”
That’s not the conclusion the Water District came up with a decade ago. Back then, researchers polled visitors of attractions such as the Hoover Dam, Red Rock Canyon National Conservation Area and Mount Charleston—a self-selected group predisposed to off-Strip and nature-themed excursions—to find out if they’d pay for a facility showcasing the desert ecology. They plugged their findings into a formula that factored in the Valley’s then-booming population and the 38 million or so tourists who visited annually, and out popped an astonishing figure: as many as 600,000 Springs Preserve visitors per year. As a point of reference, consider that Hoover Dam, one of the wonders of the world, draws about 1 million visitors annually.
The Springs Preserve’s numbers have never come close. The actual totals range from a low of 157,000 in fiscal 2007-08, to a high of a projected 217,000 in fiscal 2010-11, which is good for only $1.7 million in revenues. What kind of magical realism produced attendance figures three times the best year yet? That’s tough to say due to a kind of collective amnesia about the Springs Preserve’s early years. The Water District couldn’t produce a copy of the original feasibility study, circa 2000, done by the Connecticut research firm ConsultEcon. There is supposed to be a copy at the UNLV Architectural Studies Library, but library personnel couldn’t find it.
Robert Brais, vice president of ConsultEcon, remembers the project, though. Brais says Water District planners hadn’t yet decided what the Springs Preserve would become when the feasibility research was being done. “It really morphed as the concept was considered,” Brais says. “I’m not so sure any of the documentation would reflect what is on the ground.” In other words, researchers didn’t know what the Springs Preserve actually was before asking people if they’d pay to go there.
There isn’t anyone left at the Springs Preserve who can talk about the old days. The first director, Francis Béland, has long since left to be a vice president of the XPrize Foundation in California. His replacement, Elizabeth Herridge, left last August after only 13 months, saying that she had not been given a clear picture of Springs Preserve’s finances.
“These numbers, if accurate, are shocking,” Herridge says. “I would never have taken the job if they had disclosed this. When I was the managing director, I was never shown any documents about the debt or debt service.”
So the questions now fall to the new director, Julie Wilcox, a 17-year veteran of the Water District who has only been with the Springs Preserve for two years. Wilcox’s job is to get locals to pay attention to the place and visit more often than twice annually, which is now the average for those who visit at all. She plans to bolster attendance by hosting special events such as the Brews and Blues Festival earlier this month that drew 2,500 attendees, and adding art exhibits that are cheap to produce and will draw a crowd.
She sounds a little exasperated when talking about the past, which is understandable given her mission to put the Springs Preserve in the black. When pressed, Wilcox can only offer an oft-heard Las Vegas aphorism for the facility’s predicament: “It was a very different economic time.”