As the Silver State struggles to pull itself out of the worst recession many Nevadans have seen in their lifetime, executives are beginning to see a light at the end of the tunnel. This year marks the eleventh annual Power Poll wherein Nevada Business Magazine asked executives throughout the state to speak up on issues that affect their businesses. This year’s poll illustrates that “light at the end of the tunnel” mentality and executives have expressed their hope that the worst is over for Nevada.
The Power Poll survey was sent out at the beginning of 2013 to executives and business owners throughout the state. Several hundred business owners and executives responded to the poll, weighing in on issues ranging from healthcare to education to taxes. Those responses were reviewed and tallied to tabulate percentages for the state as a whole. The numerical results from this year’s poll, along with interviews from participating executives and historical numbers from previous polls are included in the following pages.
While not a scientific poll, the Power Poll does shed some light on where business is going into 2013. The poll is very nearly split between executives and business owners with the latter representing 54 percent of respondents. This year’s poll followed population trends with 70 percent of respondents hailing from Southern Nevada, 2 percent from Rural Nevada and the remaining 28 percent from Northern Nevada. Additionally, companies that have been in Nevada for over 20 years have increased with 53 percent of respondents having been here for that time period or longer.
Up, Down, Flat
While it’s tough to predict the end of a recession, the number of respondents that said Nevada has hit the bottom is up by five percent. For the past two years, over half of those polled have said that the recession has ended, with a high 58 percent this year indicating Nevada has finally seen the end of the recession, compared to 53 percent from 2012’s poll.
Many executives feel that, not only has Nevada reached the bottom, we’re already seeing an improvement. Fifty-two percent of business owners and executives stated that they are already seeing a rebound.
“We’ve hit the bottom and we’re already bouncing up,” said Nat Hodgson, CEO of the Southern Nevada Homebuilder’s Association. “We’re not going to go straight up but we are going back up. I’m very optimistic. I don’t think we’re going to go back down.”
“I do think things are starting to pick back up,” said Tim Erlach, president of Erlach Computer Consulting, a Northern Nevada IT firm. “Just looking at my clients, they’re investing in their IT infrastructure more from the idea of looking forward. There’s an attitude which is more of a positive. I think that drives the economy. If people feel secure, they will spend money. It becomes a domino effect.”
On the other side of the coin, of the 42 percent of respondents that said we haven’t reached the end of the recession, a resounding 94 percent said there would be another 12 months or more before we hit bottom. Differing opinions have executives either seeing an uptick already or continuing to batten down the hatches for the long haul.
“I don’t think it’s over,” said Katy Simon, county manager for Washoe County. “In every other case, the jobs that were lost during the recession were gained within a short period of time, generally, within a couple years. We’re nowhere near recovering the jobs that we lost. Frankly, it’s a structural reset of the economy. We’re stabilizing, but we’re not out of the woods.”
“The housing market was hit pretty badly in Nevada,” added Gary Pierce, the owner of Reno-Tahoe Tour Company. “I don’t think the foreclosure crisis is nearly over, we’re just in the middle of it.”
“What occurred four or five years ago was a wake-up call for our community,” said Todd Sklamberg, CEO of Sunrise Hospital and Sunrise Children’s Hospital in Southern Nevada. “I think we’re seeing strong public/private partnerships to address some of these opportunities. It’s going to be a long haul, but it just gets back to the overall optimism.”
The involvement of government in the day-to-day operations of business is a hot topic amongst many executives. This year, 71 percent of respondents indicated they were concerned about the trend of government intervention, clearly a majority of those polled. However, the percentage of those concerned is down from previous years.
“The system is challenged,” said Jack London, president and CEO of London Medical Management. “I’ve always been an advocate of capitalism and its sense of competition. That’s what we do every day. If you don’t live it, you can’t manage it. If you don’t experience it, how can you direct it? It should be left to the marketplace.”
“I’m quite concerned about it,” said Joseph W. Brown, director for Fennemore Craig, a statewide law firm. “It tends to grow every time the legislature meets, every time Congress meets. People want more and more from government, they want government to do more for them. So, government flexes its shoulders to regulate everybody and doesn’t feel that anybody is confident to run their own business and take care of themselves.”
“I believe in smaller government,” said Hodgson. “I believe in letting the local areas run their municipalities like a business. Unfortunately, when I’ve seen the government step in at any level, it’s usually not good for business and not good for citizens of the state.”
Simon, who works in government, has a different perspective when it comes to government intervention. “I bristle when people talk about government intervention,” she said. “We are very much at the local level. Just like local citizens, we feel victimized by mandates from the federal government and the state government. We believe in local decision making. I’m not intervening in your life; I’m supporting your life. One of the things we’re frustrated by is people will say, ‘I’m tired of government regulation.’ My response has always been, ‘Which government regulation? Tell me what you want to change.’ We can have a dialogue about that.”
The Affordable Care Act is another concern for many business executives with the vast majority expressing some level of concern about its affect on their business.
“I don’t think that many people in our community understand the nuances of that law,” said Dana Serrata, executive director of Helping Hands, a Southern Nevada non-profit that assists the elderly and disabled. “There are some good things in there and there are some things that will create a burden for people. My concern is surrounding the fact that nobody really understands it.”
One executive expressed his concern, not just for his company, but for his employees as well, whom he fears will face higher costs because of the Act.
“At some point, I believe that when the company pays for healthcare, the employee is going to have to start paying income tax on that,” said Frank Martin, president and CEO of Southern Nevada based Martin-Harris Construction. “That’s my big fear and that’s the piece that is hidden in this healthcare bill that I’m afraid is going to come to be. For the first time, in 2012, we have to show the cost of that healthcare on the employee’s W-2 form.”
Another concern businesses are facing now is the possibility of an increased tax burden arising from Nevada’s current legislative session. It’s clear there is a budget deficit, the question then becomes, who pays to close that gap? Sixty-nine percent of respondents expressed concern that their businesses would be the ones tapped to balance the budget through increased taxes.
“I don’t think anybody likes to see taxes go up,” said Deborah Danielson, president of Danielson Financial Group, a Southern Nevada based investment firm. “I think there are essential services that we need to fund. There are salaries that need to be addressed. But, I also think there is a lot of waste and things that have not been reassessed that should and could be.”
Speaking of Taxes…
The issue of taxes is a continual concern for business executives in Nevada. Sixty-five percent of respondents felt that Nevada businesses have too much of a tax burden.
“I think the balance of the tax burden is not centered right,” said Lori Bryant who serves as campus director for DeVry University. “It’s not balanced with other taxes that should be in place to keep a balance between businesses and individuals and industry.”
This sentiment is mirrored for both the mining and gaming industries. Fifty-two percent of respondents felt that the mining industry is paying it’s fair share of taxes, an increase of 10 percent over last year. For the gaming industry, that number is even higher with 67 percent of respondents saying that gaming is paying its fair share. However, that number has come down from last year’s poll with fewer executives saying gaming is paying its fair share.
“We’re quick to say, let them pay more,” said Danielson. “I’m sure everybody would like to say, ‘Let the other guy pay more.’ Gaming has brought a lot to our community and we want to be mindful that we don’t always go back to the deepest pockets and say, ‘Why don’t you pay more because you can.’ For the most part they are paying their fair share.”
In regards to the mining industry, Brown said, “They pay a lot of taxes in this state. The price of gold is very strong right now, not at its high, but still pretty strong. Because the world economy is so fragile right now, I wouldn’t bet my life’s savings that gold will stay at the price it is.”
When asked if they would support a state income tax to help pick up the slack, 86 percent of respondents said no. Many feel that instituting such a tax would hurt both existing business and economic development for Nevada, both of which are vital to the state’s continued survival.
“That’s one of the things that has made the state attractive to businesses coming in,” said Erlach. “Once you start a state income tax, it may start small, but it will rapidly expand. It’s a government mentality. I would rather have control over my money than someone taking it from me and deciding where it needs to go.”
Movin’ On Up
The majority of respondents (52 percent) indicated they expect their businesses to continue to improve in the coming year. Additionally, many businesses saw an uptick from 2011 to 2012 with that trend continuing in this year’s poll. Nearly half of the respondents said that, when compared to this time last year, their businesses are doing either much or somewhat better, with only 21 percent indicating their business was worse.
“We saw improvement over the last year and I think we’re going to continue seeing improvement,” said Serrata. “We’re seeing companies start to loosen up their belts and giving out sponsorships, donations and grants that they weren’t a year ago.”
“My business is better today than it was a year ago,” said Martin. “My 2012 was better than my 2011 and my 2013 is looking like it’s going to be better than my 2012. Some of it is in projects that have been put on hold that are starting up again.”
In addition to the improvement of business’ bottom line, 65 percent of respondents indicated they didn’t have to reduce staff in the last year, up 10 percent from 2012’s poll. This is good news for Nevada, a state that has had significant unemployment woes in the past several years.
What’s Up, Nevada?
As far as the state of the state goes, according to executives, Nevada isn’t doing half bad, especially considering the effects of the recession here. When asked how Nevada’s economy is when compared to a year ago, 83 percent of respondents said the state is about the same or better off than we were this same time in 2012. Executives are expecting a long, but steady, recovery moving forward. Over half of the respondents indicated that they expect improvement in the coming year.
Part of that improvement is likely due to economic development efforts to keep Nevada as business-friendly as possible. An overwhelming majority of 87 percent said that Nevada is a business-friendly state. This is good news for economic development agencies.
“Nevada is a state that entrepreneurs are welcomed,” said Bryant. “They’re allowed to get started with their businesses.”
“It’s very welcoming,” said Brown. “It’s a whole lot cheaper to operate here without all of the unitary taxes, corporate taxes and personal income taxes. That’s why we have had a real upsurge in businesses relocating here. That is the reason I see a bit of improvement in our economy, though we still have a long ways to go.”
That’s not to say there aren’t issues that can hold up the economic development efforts. For example, many business owners feel that unions are no longer necessary for Nevada’s workforce. Seventy-three percent of respondents said they strongly or somewhat disagree when asked if unions are necessary in Nevada today.
“The union concept was wonderful when it was founded,” said Danielson. “When there was a small guy who had no voice and needed the right to be able to work safely and fairly, at a fair prevailing wage. With competition today, that’s not necessarily needed.”
Education is an issue that continues to plague the Silver State and is another factor that can harm state development agencies’ recruiting efforts. For the fifth year in a row, education in Nevada hasn’t scored a single “A” grade in the Power Poll. Fifty-seven percent of executives gave education a “D” or below which is nearly identical to the 2012 results. In fact, 95 percent of respondents wouldn’t grade education in Nevada above a “C” level.
“I would fail them,” said Bryant. “It’s very difficult when you have people come in that are seeking a degree and they have a 4.0 in high school but cannot pass an entrance exam. It makes it challenging. The level of education, when compared to other states, is significantly less valued.”
That’s a huge problem for a state that is looking to recruit new business. However, not all hope is lost. Executives recognize the importance of education and its value to their businesses.
“If we don’t do something about it, children won’t get an education, people aren’t going to want to move here, therefore businesses won’t want to open up their doors here,” said Hodgson. “I’m in homebuilding, you can’t sell homes to people that aren’t coming to our state.”
“Obviously we have opportunities,” said Sklamberg. “Look at some of the national statistics and it highlights the opportunities throughout our entire educational system. There’s commitment to improve from Clark County. The superintendent is doing a strong job. The commitment by the universities here is very positive.”
“Overall, I would say it’s below average,” said Erlach. “But, I do think there are still opportunities for people to get excellent education within the state.”
The first step is recognizing the problem. Nevada is well beyond that and is working on several ways to improve education in the state.
“There is a bright spot,” said Martin. “There are these technical training centers. I hired three interns [out of a technical training center] that are outstanding. They have a great work ethic, their teachers were interested in their future and they came ready to work.”
It Always Comes Down to Politics
Elected officials aren’t adequately addressing the state’s needs according to many Nevada executives. In this year’s poll, only one scored above a “C” grade in the statewide average; there wasn’t an “A” in the bunch. Whether this is due to disengagement between the elected officials and their constituents or an indulgence in too much politicking rather than actual leadership is debatable. What is clear is that Nevadans expect more from their elected officials.
“The people who are representing us should find out who we are,” said Serrata. “The ones that take the time to find out who their constituent is and what the needs are of the community are the ones that should garner our support. They’re the ones we can look to and say, ‘They are our leaders, they want to help our state, they want to help our community.’ The other ones, I’m frustrated with. If they don’t stand up for us, we see that.”
In the poll, Governor Brian Sandoval faired best with an average “B” score. Meanwhile, President Barack Obama and Senator Harry Reid didn’t do as well, both scored in the “D” range. The remaining politicians were in the average range when it came to their grades.
No matter who is in office or what the economy looks like, there are a few issues that remain vital to Nevada executives. These issues are ongoing concerns for the state. For the past several years, the Power Poll has asked respondents to rate their concern in five of these areas ranging from the state of healthcare to water shortages.
This year, the biggest concern for executives, with 87 percent of respondents rating it as a concern, is the issue of quality education in Nevada.
The availability and cost of healthcare is the second biggest concern for executives and garnered 79 percent of the response as a concern.
“We have a severe clinician shortage,” said London. “That has no immediate fix to it. That’s a long term fix. We’re going to face a severe opportunistic shortage of availability.”
“We need that primary care physician base,” said Sklamberg. “As we look at the education system, one of the keys is going to be for the community here and for the School of Medicine to continue to produce increasing numbers of primary care physicians who will be committed to both Las Vegas as well as the entire state.”
Coming in a close third to healthcare is state budget shortfalls; 78 percent of respondents expressed some level of concern over the issue.
“From my perspective, Nevada is woefully behind in terms of having a balanced and modern tax system and having adequate resources to be the best state to live in and to be the best state to invest in,” said Simon. “We’re not going to be able to keep up with the road system and infrastructure and all of the things a good community needs. We’re not going to be able to keep up with doing that on the resources that we have.”
With 57 percent of respondents saying it was not a concern, the issue of available water has taken a backburner position to some of the state’s more pressing matters. While there are still 43 percent of executives that ranked this issue as a concern, many recognize the efforts on the part of state and local agencies to mitigate the problem.
The least concerning issue for Nevada business owners and executives is transportation. A total of 79 percent of respondents ranked transportation as not very concerning or not concerning at all.
“We are doing a better job than many states in transportation,” said Simon. “There’s certainly a lot more we could do if we had more resources. But, I think NDOT does a great job. They’re thoughtful, they’re planning ahead. They’re trying to encourage new thinking about transportation.”
Between a positive business environment and the state’s enthusiastic efforts to improve shortfalls, Nevada executives rate Nevada a great place to live and work.
“It’s a result of hard work rather than just economies of scale,” said London. “We’ve gone through a number of different challenges in our local community. We continue to live and thrive and do our very best at what we are doing.”