Las Vegas is asking companies that want to move or expand there to show how much water they plan to use

• Las Vegas is trying to balance economic growth and water conservation.
• The city is evaluating how much water a new businesses will use before green lighting them.
• Conserving water helps sustain the Colorado River, which is at historically low levels.

Las Vegas isn't just a hot spot for revelers.

Thousands of businesses, particularly from California, have moved to the region over the past few decades, and the population is booming alongside other Southwestern cities.

All of that growth in a region plagued by extreme heat, drought, and a dwindling water supply raises tough questions for city and state officials who want to spur economic growth without draining the Colorado River dry. In one example of that challenge, Arizona's governor in June halted construction in areas around Phoenix, citing a lack of groundwater.

Yet officials in greater Las Vegas told Insider their city is well positioned for growth thanks to decades of water-conservation measures — the latest of which involves a new tool that evaluates the water use of companies interested in moving to the region or expanding operations.

"We realized that water didn't have a seat at the table when economic-development decisions were being made," Dave Johnson, the deputy general manager of the Southern Nevada Water Authority, told Insider. "We needed to change that."

The tool was recently applied to Juanita's Foods, a California company known for its canned menudo and other Mexican soups and sauces. The producer plans to move to northern Las Vegas and requested $2.28 million in tax incentives from the Nevada Governor's Office of Economic Development.

Johnson said that, initially, the water authority didn't recommend Juanita's Foods because the company would use too much water. While 99% of indoor water in southern Nevada is recycled, an operation like Juanita's Foods also uses water that can't be reclaimed — known as consumptive water — including during the canning and pasteurization process and for the building's cooling systems.

As a result of that recommendation, Juanita's Foods agreed to look for more water-efficient technologies, such as steam capturing, Johnson said. On Tuesday, Juanita's Foods won the tax abatement.

"This is the first time there's been a conversation with a company about the need to reduce water consumption," Tina Quigley, the president and CEO of the Las Vegas Global Economic Alliance that promotes business growth in the region, told Insider.

The water-investment tool works like this: First, the Southern Nevada Water Authority analyzes how much consumptive water a new or expanding company would use. That determines whether a project gets recommended, not recommended, or falls somewhere in between. If it's in the last category, a project's water score is adjusted by other factors, including job creation, average pay, tax revenue, and other social benefits. That way, local and state officials have a balanced view of the pros and cons.

"The tool gives us the opportunity to talk with companies from a water perspective extremely early in the process," Johnson said. "If their score isn't the greatest, we can talk about project design."

Both Johnson and Quigley said the tool won't eliminate entire industries. Even data centers, which often use vast amounts of water, can invest in technology to reduce consumption, for example.

Johnson said the next steps include making sure officials in every city in greater Las Vegas are using the tool in the same way.

"We don't know of any other entity anywhere that has put together something like this," Johnson said. "We believe that this tool is novel."

The water-investment tool builds on a long list of conservation measures in Las Vegas. The city has mainly focused on water used outdoors, because unlike indoor water, it can't be restored to Lake Mead — a reservoir on the Colorado River that serves 90% of southern Nevada.

Las Vegas has limited the size of swimming pools at single-family homes, ripped out thousands of acres of turf from lawns, sports fields, roadway medians, and ordered the removal of any existing grass by 2026.

Yet the city's efforts will only go so far to sustain the Colorado River, which also supplies California and Arizona. Nevada has the smallest water allocation among the three states.

In order to temporarily stave off a water crisis in the region, Nevada, Arizona, and California in May agreed take significantly less water from the river through 2026 in exchange for about $1.2 billion from the federal government. The deal buys time for states to find a longer-time fix.