It could be the newly elected, fresh faces of our elected officials, the increase in hotel prices or any number of other indicators, but executives participating in this, the ninth annual Power Poll, indicate an optimism that has been missing from the last couple of years.
The Power Poll survey was sent to business owners and executives at the end of 2010. Respondents numbered in the hundreds and were located throughout Nevada. The majority of this year’s participants (40 percent) have been doing business in Nevada for more than 20 years and there was a fairly even split of business owners (55 percent) and executives (45 percent) represented.
As is done every year, a sampling of the participants were interviewed to learn more about their views on the Silver State’s economy and where it is headed in the coming years. The numerical results of the survey are included in the following pages with previous years’ surveys marked for historical reference.
Are We There Yet?
In reviewing previous Power Polls, especially the 2010 poll, it’s interesting that many executives undershot the length of time this recession would last for Nevada. Before 2008, the term “recession proof” was commonly used to describe the Silver State, specifically Las Vegas. No more. It could be argued that Nevada was hardest hit of all the states in this economic downturn and is only now seeing any sort of recovery. Even that much is restricted to certain industries, with many of the hardest hit industries, namely commercial real estate, still a long way from recovery.
The majority (54.8%) of executives Nevada has hit the bottom of the recession. Those that indicated we have hit bottom are up 11 percent from last year. Of those, more than 72 percent indicated it would be a year or less before things start to pick up. For those executives that are still waiting for the end to come, the majority responded it would be another 12 or 18 months before it happened. The reality is most likely somewhere between the two as some industries are seeing an uptick while others are still just hanging on.
Big Brother’s “Help”
Government intervention has been a growing concern for executives over the past two years. Since 2010’s poll, in which 58 percent said they were very concerned about government interference, 4 percent more of respondents expressed concern over the government’s role.
“I’m concerned,” said Valerie Clark, president of Clark & Associates, an insurance company located in Northern Nevada. “I believe there is a time and place for the government to come in and set policy and regulation and there’s a time and place to let innovation, entrepreneurship and the private sector go to work. I’m hindered by massive amounts of regulation, requirements and compliance.”
Bob Gronauer, a Southern Nevada managing partner with Kaempfer Crowell Attorneys at Law, added, “I’m a big believer of letting businesses do what businesses need to do and compete against each other, which brings out the best for the consumer. I prefer government stay out of business.”
“This is the seventh recession I’ve been through,” said Bob Cooper, economic development/redevelopment manager for the City of Henderson. “Back in the 70’s, I saw that the intervention was more targeted and more productive, they called it the Public Works Act. It was construction and public works projects that were in demand and needed. That was a very successful program. The Federal Stimulus programs we’ve seen as of late out of Congress have been a hodge podge and it is disconcerting that they haven’t been more strategic about how they’ve been able to try to insert those dollars to stimulate the economy,” he added.
“If government intervened in the proper way, it would be great, but they rarely ever do that,” said Pam Borda, director of the Elko County Economic Diversification Authority. “From my standpoint, most of the time when they intervene, they end up creating more problems than they solve. We’ve really created a lot more government, but I haven’t seen that come down and benefit the communities, businesses and the people who need it.”
Some executives felt that the government’s intent was correct, but the execution needed work.
Susan Chandler, president and managing partner for Twin Physicians Services in Southern Nevada said, “The intentions are good, the process is wrong. Unless our Legislators and Senators start working together, were not going to come out of this the way we need to.”
Diane Fearon, president of Southern Nevada’s Bank of George added to that saying, “Any legislation that has a hindering affect on small businesses is bad for community banking as well. I think the intention of some legislation is certainly supportable, but the devil is in the details.”
“I believe in free enterprise and private business and, because of that, I believe a smaller government is preferable,” summed up Thomas Schoeman, president of JMA Architecture Studios in Las Vegas.
Most of the executives polled are predicting a pick-up in business in 2011 with over 60 percent saying they expect improvement in their bottom line in the coming year. This represents an almost nine percent increase over last year’s poll.
“We’re starting to see signs of life and signs of rebound happening already,” said Dave Archer, CEO of Nevada’s Center for Entrepreneurship and Technology (NCET)
“People are ready to get on with doing business and some of the things that we’ve done to innovate will spur tremendous growth for us over the next year,” added Jeff Grace, president of NetEffect in Las Vegas.
Comparatively, an overwhelming number of executives feel like 2011 will bring improvement for Nevada’s economy as a whole, with almost 88 percent saying the economy will be the same or better this time next year. Of those executives, over 46 percent indicated that Nevada’s economy today is worse than it was this time last year.
“That (2010) was the most painful year I’ve ever experienced from a business and loss standpoint. I’m not feeling we’re going to go that direction again this year,” said Clark.
While the optimism for Nevada’s economy is certainly there, it’s guarded, with many executives saying they expect improvement, but it will be a long slow climb to anything significant.
“I’m hoping it will start to pull up, but I’m projecting about a 15 percent improvement in the second half of 2011,” said Schoeman.
“The ability to get financing did not exist a year ago and it’s getting better but it’s still nowhere close to what it needs to be,” added Borda.
Cooper who works with several businesses looking to relocate to Henderson adds that, “a lot of businesses perceive that we are at the bottom of the recession and are starting to make plans for future development”
He added that, “It’s going to improve; it’s not going to be a gigantic leap.”
While many businesses are still feeling the pinch of the economy, waiting and hoping for improvement, the unemployment rate continues at unhealthy highs. Almost 70 percent of respondents said they had to reduce staff in 2010, up almost 3 percent from previous years. Economic development agencies have been working to combat unemployment by bringing more companies to Nevada but it’s an uphill climb.
“Our job is to work to create jobs and it’s been difficult because of the economy,” said Chuck Alvey, president and CEO of the Economic Development Authority of Western Nevada (EDAWN).
The gaming industry, an essential part of Nevada’s economy, has also been one of the hardest hit.
Almost 70 percent of respondents in this year’s poll indicated that the gaming industry is paying its share of taxes. This is down slightly from the previous years. Many also responded that gaming was perhaps paying more than its fair share, especially in light of the troubles the industry experienced in the recession.
“It’s wrong for anybody to think that one business should pay more than anybody else,” said Borda. “We all need to pay our fair share. They (gaming) are clearly paying their fair share; they’ve been the lifeblood of the economy and shame on us for not diversifying and doing something else to be less dependent on them.”
Clark added saying, “I don’t believe we should ever single out any particular industry to pay more tax than anybody else.”
While gaming may have been one of the industries shouldering the burden, over 70 percent of executives responded that businesses in Nevada have too much of a tax burden. That compares to almost 64 percent from last year.
“The amount of taxes that all businesses pay absolutely impacts the bottom line of what you can do in regards to the growth of a businesses,” said Gronauer. “It does go into the decision making process on how much can you grow because you always have to look at the bottom line as far as the expenses, such as allocating money to pay for your taxes that are required.”
“As a small business owner I think I pay my fair share. The larger corporations can afford more; their margins seem to be much greater,” Chandler added.
A Great Place to do Business
Despite the sentiment of too high a tax burden, most still responded that Nevada is a good place to do business with almost 89 percent of respondents agreeing that the Silver State is business-friendly. As encouraging as this number is, it’s down approximately 5 percent from last year’s poll.
“Nevada is the best place to start and run a business,” said Archer. “We make it so easy and at the same time we don’t impose regulations and barriers that other states do.”
However, some feel that more should be done to diversify and improve the incentives new businesses have to move here.
“It’s not enough to say that we have some of the lowest taxes because that’s not all that businesses look at when they’re looking to locate,” said Borda. “It’s extremely difficult to attract business if you can’t provide the basics for them to come build a business,” she added speaking about Rural Nevada.
One option to balance Nevada’s budget and bring in more revenue is the addition of a state income tax. Business owners and executives aren’t as opposed to the idea as they once were with almost 19 percent saying they would support a state tax. This is compared to only 11 percent in 2010.
“I would support anything that would give us a balanced budget,” said Grace.
In regards to a state tax, Clark said, “Not until I feel the tax dollars that we are paying are being used in the most efficient way possible.”
“Once a mechanism to have a tax is in place, no matter how small it is it never gets any smaller,” added Archer. “Nevada is just fine without it.”
The Three R’s
Education has recently been the focus of even more attention because of the proposed budget cuts. The implication that the system needs work is echoed by many executives in Nevada with almost 66 percent of respondents giving education in Nevada a grade of “D” or lower and none giving it an excellent rating.
“The fact that 50 percent of our students don’t graduate from high school is concerning,” said Lesley A. Di Mare, president of Nevada State College. “There has got to be ways to address this, but the state needs to work together, it can’t just be one person or one organization or just the government’s responsibility. We have to discuss this as a state,” she added.
“There are some success stories we can learn from,” said Fearon. “Improvement is possible with the right kind of motivation and focus and I’m optimistic that’s what we have in place with our present legislature and our new governor.”
One of the largest concerns in regards to Nevada’s education statistics, which continue to be among the worst in the nation, is the perception it gives to companies looking to relocate here.
“If I were in the position to move my company from a state that’s outside of Nevada to Nevada I would look at those reports and say ‘Well how am I going to get a good enough workforce?’” said Grace.
From the economic development standpoint, Cooper noted that education has been a deterrent to businesses considering relocating here saying, “To some businesses it’s a grave concern and after doing their data analysis we are eliminated.”
“I’m sure for some of the companies that would be looking to move here they’re looking for a certain education base and if you don’t have it you’re not going to be an attractive place to go to,” added Gronauer. “It’s probably the biggest negative of living in Nevada. I love everything else about Vegas, but personally I’m just disappointed with what we as a community do about the school system.”
The 2010 elections brought on quite a change in Nevada’s government. The poll indicates that executives are hopeful that the new faces will bring much needed change to the Silver State. Executives participating in the poll gave seasoned politicians, such as Ensign and Reid, higher marks than in previous years possibly indicating the anticipation that new ideas will affect their leadership. Overall, statewide, executives graded each politician in the “B” & “C” range with none receiving overwhelming positive or negative marks. It looks as though many are waiting to see the results of this legislative session.
One of the most recognizable new faces in Carson City is Governor Brian Sandoval whom many expect will put Nevada back on the right track. He received an overall grade of “B” from executives in this poll and he has barely begun his term as Governor.
“Sandoval’s a conservative governor at a time when the state is being economically challenged,” said Schoeman. “As a state we need to have good business practice and I think a conservative approach is what we need.”
“Brian understands the value of economic and business development and growth and the importance of education,” added Alvey.
Chandler said, “I’m hoping that he’s going to look at the small businesses more. I think he’s going to emphasize education, which I’m excited about.”
“I was encouraged by his comments on revamping the state’s economic development commission and his interest and understanding that the way to grow and get out of this economy is through business recruitment and assisting our local businesses,” added Cooper.
Di Mare summarized those thoughts saying, “The governor sincerely has the best interest of the state at heart.”
“He has the potential for being one of the best governors we’ve ever seen,” concluded Clark.
The Little Dutch Boy
Like the proverbial Dutch boy with his finger in the dam, Nevada’s businesses have had a struggle to stay alive in this economy. The silver lining is that Nevada’s leaders and business community have begun to recognize an even greater need for economic diversification. If, as many suspect, the Silver State is indeed seeing the light at the end of a very long tunnel, it would be an opportune time to take note of the issues that have had the biggest impact in these troubling times.
The largest of these issues, according to those polled, is the budget shortfalls. This will continue to be a major issue as state legislatures work to get Nevada out of the red.
“It largely drives everything were talking about,” said Alvey. “If that’s not done you’re going to have a difficult time providing good education, which I would rate pretty high [on the list of concerns], or healthcare, transportation and water availability. Those needs all have to do with the budget that we have to work with.”
Fearon agreed with Alvey saying, “The gap in the state budget impacts the other two in a significant way. I’m hopeful that the fine group of citizens in our legislature are able to come up with something to build a foundation on going from here.”
Schoeman added, “Balancing our state budget is a priority. A balanced state budget is attractive to other businesses to invest in our state.”
The second largest area of concern for executives is the quality of education in Nevada. This concern will continue to be foremost in the minds of business leaders as the legislature works out the specifics of budget cuts and the potential reorganization in the public sector begins.
“We’re trying to raise our kids,” said Chandler. “We want them to live here, provide here, spend money here and how do we expect them to do that when we’re not even graduating kids correctly.”
The availability and cost of healthcare was also a concern this year, albeit less of a concern than in 2010. With the passing of healthcare reform many executives are waiting to see how the bill will affect businesses in the long term.
At the bottom of the list of concerns is the availability of water and transportation issues. The availability of water, which was a huge concern a few years ago, has become less so with only 9 percent of respondents indicating concern.
“I think the right people are in place so I’m not as worried about water as I am about the other [concerns],” said Gronauer.
Transportation issues received just over 1 percent of the votes as the most concerning issues so it appears that, for now, Nevada’s Department of Transportation and both the North and South Regional Transportation Commissions can rest easy.
All in all, it’s evident that Nevada still has a long way to go before it can safely be termed “in recovery”. The expression “bouncing along the bottom” is an apt description for the state’s economy. That being said, diversification and the tools necessary to avoid a repeat of the last few years are on the minds of Nevada’s leaders. As both will lead to a more stable Silver State, many in the business community are being carefully watchful that the lessons learned in this economy are carried through into the future.