Fitch: Las Vegas, Tucson and Phoenix Economies Cushioned From Drought Stress, For Now
AUSTIN, Texas--(BUSINESS WIRE)--A continued drought or a permanent shift in weather patterns in the southwest U.S. could impact development activity and growth in Arizona and Nevada's major cities, according to Fitch Ratings. However, the agency projects that growth in Las Vegas, Phoenix and Tucson will not be curtailed due to water supply issues for at least the next 10-15 years.
'For the states located in the lower basin, the historic severity of this drought brings the issue of water supply provided by Lake Mead and the Colorado River to the forefront,' says Steve Murray, Senior Director in Fitch's U.S. Public Finance group. 'While many desert cities are intimately familiar with drought and water supply issues and have planned accordingly, a permanent climate shift would dramatically alter long-term growth prospects.'
Water levels in Lake Mead have fallen by more than 100 feet since 2000 due to reduced runoff and snowmelt from upper basin states, while releases to users in Nevada, Arizona, California and New Mexico have remained steady.
Currently, the Las Vegas area receives about 90% of its water from Lake Mead and also faces issues in accessing the Colorado River as water levels drop. However, the city has positioned itself for tighter water supplies for the near to medium term, primarily through successful conservation efforts.
While Arizona has a more diverse water supply with 40% coming from groundwater, reduced allocation from the Colorado River would likely impact local agriculture first, as users without long-term water contracts are lower in the state's water hierarchy. Agriculture accounts for 70% of all water consumption in the state.
In both states, where major cities have been cushioned by conservation, the recent recession also supplied much-needed breathing room, as thousands of job losses led to stalled population growth.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Southwest U.S. Cities Drought Implications (Near to Medium Term Growth Likely Not Impaired)