Nothing paints a clearer picture of the results of economic development than the Silver State. Nevada has transitioned from a state with the highest unemployment rates in the country to a state welcoming Tesla to its economy, breaking ground on a 12,000-home master planned community, launching one of the first-of-its-kind interactive medical communities with Union Village and searching for tenants to fill a large industrial park.
This is Nevada and many of its recent economic successes are the result of longstanding policies and practices as well as a business friendly environment, a great corporate and personal tax climate and two large metro areas that provide one-day access to the eleven western states.
Couple those facts with four-year-old Governor’s Office of Economic Development (GOED), aggressive marketing campaigns and eight months of national media coverage as Tesla made its site selection, and Nevada looks like the state where companies want to relocate and entrepreneurs want to start up.
Why Nevada?
Part of what’s driving economic development is a greater realization on the part of companies around the country and around the world that Nevada is a great place to do business, said Steve Hill, executive director, GOED. “We’ve had some pretty high profile successes lately, which have helped open the eyes of businesses everywhere and caused Nevada to appear on their radar more than it has in the past.”
One reason Nevada has been on the radar of both national and international businesses is the media attention covering the eight-month site selection process before Tesla Motors Inc settled on the Tahoe Reno Industrial Center (TRIC) east of Reno on I-80.
Tesla’s not the only reason Nevada’s attracting attention. Another force behind economic growth is the Governor’s initiative to make economic development a priority, said Tom Skancke, CEO, Las Vegas Global Economic Alliance (LVGEA).
“There’s increased consumer confidence given what’s happening in Nevada,” said Skancke. “I think what the Governor has done with his leadership by establishing the Governor’s Office of Economic Development as a secretary level position has really changed what’s happening from a collaboration perspective to the state working as a whole as opposed to separate regions competing.” One aspect that helps is the amount of manpower in this state focused on the subject. For example, on any given day there are approximately 70 people working full time in Clark County alone on economic development.
Some economic development partnerships in Southern Nevada include the university system and the Nevada System of Higher Education (NSHE), College of Southern Nevada (CSN), the Clark County School District (CCSD), the state college, private companies and the banking community.
“It’s everyone rallied around economic development and diversification and I think it’s beginning to work,” said Skancke.
In Northern Nevada, a three-year aggressive marketing program has been in place, a concerted effort to promote the region for advanced manufacturing, warehouse distribution and logistics and e-commerce.
According to Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada (EDAWN), “That effort has significantly increased the number of prospects we have on a monthly basis from four a month to now when we’re averaging between 11 and 12 a month. If we can get a prospect to visit this region, we get closure on someone who makes a decision and more than 70 percent of the time they decide to come here.”
How It’s Done
GOED was formed by the state Legislature in 2011, when Nevada’s unemployment was running between 12 and 14 percent. Formed to take the state into account as a whole, GOED provides an overall economic development strategy for the state. Each of the RDA’s – regional development authorities – interpret the strategy for their own region.
That same year, the Brookings Institute created an economic development agenda for Nevada, identifying seven target industry sectors likely to help grow and diversify the economy. The seven industries were then split into nine which include tourism, gaming and entertainment; clean energy; health and medical services; aerospace and defense; mining; manufacturing; business information technology (IT) ecosystems; logistics and operations and agriculture. Four years later the state is seeing advanced manufacturing in the form of Tesla, more IT in the form of data centers and technology companies, growing health and medical services such as Union Village in Southern Nevada and a burgeoning aerospace sector in regards to the drone testing coming to Nevada.
What’s New
Now that economic development has started moving forward again, it’s moving fast. “We’ve done more in the last 18 months by attracting employers and businesses and economic investments than we’ve done in the previous three years combined,” said Skancke.
“We’re seeing some renewed industrial development activity on the part of our local and regional development partners, and have at least three projects for speculative industrial space to be built in Henderson, some of which could break ground first quarter 2015,” said Barbra Coffee, director for Economic Development and Redevelopment, City of Henderson.
Panattoni Development has a project at Eastgate and Lake Mead Parkway that would create 400,000-square-feet of industrial space, and other industrial developers are looking at 100 and 200,000-square-foot industrial buildings.
For Henderson and Southern Nevada, where big box industrial space has little vacancy, it’s hard to compete with sites in Arizona and Utah that have existing space. “We’ve been challenged by that over the last year. Going into 2015, we’re excited to see some industrial development. It’s a good sign that the economy is improving,” said Coffee.
Henderson’s also anticipating growth in the healthcare sector with Union Village, a 150-acre integrated healthcare village at I-95 and Galleria, which broke ground in the autumn of 2014. The anchor Henderson Hospital, part of the Valley Health System, is expected to open by year-end 2016. The Village will include retail, entertainment, senior housing and an athletic center. Henderson is also expecting the new master-planned community, Cadence, to bring more than 12,000 new homes online.
Southern Nevada is seeing more tech, more healthcare and much more warehouse and distribution business, enough to have run out of industrial warehouse space in Clark County.
That presents opportunities for North Las Vegas, which owns 50 percent of the developable land in Southern Nevada, according to Gina Gaven, economic and business development director, City of North Las Vegas. In an area that already has warehousing, fulfillment and call centers, Senate Bill 1 has had a positive impact. The bill allows GOED to approve applications for abatements and tax credits to businesses that meet monetary requirements for investing in the state – tools for economic development that paved the way for creating the phases of Apex Industrial Park, 2,000 acres located 20 miles north of Las Vegas. Apex has remained largely empty because of concerns with water supply. Senate Bill 1 means North Las Vegas finally has the tools to bring water to the industrial park. Some of the first tenants will be from the medical marijuana industry.
Rob Hooper, executive director, Northern Nevada Development Authority (NNDA), said the Carson City region is experiencing high demand for warehousing facilities. “We were very fortunate [during the recession]. Even though we had high unemployment, because we are a manufacturing hub, we were already diversified. As we went through the recession we were already bringing a lot of companies into Carson City.”
In fact, between 2009 and 2012 the industrial vacancy rate dropped from 26 to 4 percent as NNDA filled buildings. Today, demand is even higher.
Business As Unusual
Numbers-wise, some businesses recently located in Southern Nevada are outperforming expectations. SolarCity, expected to hire between 300 and 400 in its first year of operation, and Barclaycard, expected to hire 800 in the first six months, have both hired over a thousand workers.
Other positive indicators in Southern Nevada include Summerlin Mall. According to Skancke, “It sends a signal that people are back to work and have disposable income.” Since the project was put on indefinite hold when the recession hit, The Howard Hughes Corporation having the mall up and running by holiday season 2014 sends a clear, positive economic development message.
In Northern Nevada, EDAWN’s success at increasing the number of prospect visits from four to 12 a month has had a direct impact on jobs. Though there’s still a lag time between the announcement of the company coming to or expanding in Nevada and the actual jobs available said Kazmierski, “We’ve gone from around 850 primary jobs a year announced to 2,500 in 2013 and over 3,500 last year.”
If numbers are correct, Tesla’s presence in Nevada should bring in some 6,500 primary jobs. “It’s the secondary and induced jobs, worth at least another 10,000 that come with it including suppliers, providers and other people that will come to help support the Tesla jobs and the Tesla work. On top of that those are primary jobs so when you add 15 to 20,000 jobs to the region, you need more teachers and more attorneys and the construction industry launches, and all these other jobs that become part of the secondary affect.”
Even discounting Tesla, Northern Nevada was already experiencing fairly significant growth rates. “We will probably bring in more jobs that are not associated with Tesla in the next five years than those that are associated with Tesla,” said Kazmierski. If EDAWN lands the top 15 from the current list of 140 prospects, that would be another 6,500 jobs. “We were already taking off [when Tesla chose Nevada], and had we not had that prior success, there is a good chance we would not have gotten Tesla to begin with.”
What Has Happened
In November, the defeat of the Nevada Margin Tax for Public Schools Initiative removed a stumbling block for companies whose leaders were looking to come to Nevada but held off because of the potential tax.
Representatives of those companies are calling again, and many are from the manufacturing sector. “A lot of manufacturers will operate on a 1 to 2 percent net profit,” said Hooper. “If you take 2 percent off the top, [which the tax would have done] why would a company want to be here?”
Other businesses that would have been harmed by the tax are entrepreneurial and startup companies that may have a very high gross margin but are aggressively channeling money back into their companies. On a gross level they make enough to have been hit with the tax, but would have had to take out loans in order to pay the tax and stay in the state. Many believe that the ability for startups to grow here as opposed to having to go somewhere else is critical to long term success.
While the Margin Tax, if passed, may have been a game changer – or just plain game over – the problems the tax was meant to provide solutions for haven’t gone away.
“The Margin Tax was more a cry for help than a real solution. Clearly there is a need to invest in our education system at a level higher or more significant than where we are now,” said Kazmierski. “It’s the ‘how’ part of the equation that really is the challenge for the Legislature in this coming session.”
What Needs to Happen
In order to capitalize on the recent successes in economic development, leadership in Nevada now needs to look to a number of challenges.
“Three years ago our unemployment rate was probably still in the 12 to 13 percent range and now unemployment is down below 7 percent, and that trend looks positive,” said Hill. “Moving forward our focus will be more about helping to assist in the creation of higher paying jobs and cutting edge technology areas and setting the foundation or platform for that with advanced manufacturing, robotics and the IT sector.”
There’s a need to improve Nevada’s education system and to increase the state’s science, technology, engineering and math (STEM) workforce. There’s going to be increasing demand for talented individuals trained in STEM.
So, how do we improve education, train the workforce and improve the supply chain? What steps does Nevada’s leadership need to take to get to the next level?
“That’s exactly the question we’re wrestling with now,” said Kazmierski. “When you’re at 14 percent unemployment you’re looking really hard to bring jobs in. But we’re at the point now where we can project out to where we’re going to have workforce issues.”
Nevada’s workforce has to meet the needs of employers. If it can’t, they’ll go elsewhere. “So we have started to look at the strategic plan, what do we do different and how do we support the needs of employers through workforce development?” asked Kazmierski.
“We have to participate in K-12 education, and in transportation, water, infrastructure, healthcare – all those issues are inextricably linked to economic development,” said Skancke. Employers aren’t going to bring employees and their families to Nevada if the education system is failing, transportation systems aren’t in place, there’s not enough water to last or the healthcare system is poor.
Redevelopment also plays into economic development. Interesting, attractive, complete communities attract businesses, especially entrepreneurial ones. Looking to attract unique, small companies, Henderson is working on downtown redevelopment.
“We’re creating a mid-scale, mid-rise downtown and actively recruiting companies to come in and start up here,” said Coffee, who expects they’ll see small but significant businesses with 15 to 20 people coming into downtown.
The big ticket item on economic development authority’s wish list is funding for projects. Beyond that, many are seeing the light at the end of the tunnel.
“The main message is that things are actually going really well,” said Hooper. “Our agency is looking at a five-year economic impact study, 2010 to current, we have logged $1.3 billion in economic impact.
Through expansions and relocations we have added 4,824 new jobs and supported 2,600 households. We’ve impacted $280 million payroll impact from the state’s point of view and our $1.3 billion impact has resulted in $388 million in estimated taxable expenses.
“For every dollar the state has given us, we have returned to the economy $1,531. So what we’re doing is working. Now is the time to put more fuel in the tank, not to create new studies or departments and agencies. We need a fund the actual outreach programs. We’ll see major returns on investment if we continue doing that.”
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