Most executives would agree, 2016 saw a boost to industry across the Silver State. From call centers and manufacturers to new sports teams and residential and commercial development throughout the state, Nevada is on the rise.
This boom in industry is also prompting many business leaders to question when the other shoe will drop. “Cautiously optimistic” has been the phrase bandied about for the past few years as executives live under the shadow of the recent recession. However, because of the downturn, many businesses are leaner and more efficient than ever. Added to that is an increasingly diverse economy, less reliant upon Nevada’s lifebloods of mining and gaming. The mix is leading to a greater certainty in the ability of Nevada companies to weather anything that may come, rain or shine.
“After the recession, the last couple of years, we’ve made great strides and that’s due to the business-friendly nature of the state and our leadership, both locally and at the state level,” said Larry Carroll, managing principal, Poggemeyer Design Group. “The diversification of our economy is really the future of Nevada.”
An annual feature in Nevada Business Magazine, this year’s Power Poll was sent out after the November election in the midst of uncertainty for many business owners. From a crop of newly elected state and national leaders to significant reshaping of the Affordable Care Act (ACA), many executives in Nevada expect to see several changes in the next few years, but are unsure what form those changes will take.
This year marks the Power Poll’s 15th anniversary and, while not a scientific poll, it is a good indication of the mindset of executives in the state. The poll represents a diverse mix of owners and executives from a variety of industries and is a sampling of what Nevada’s leaders are thinking in relation to the state’s business and social issues, economy and political leaders.
As is typical of the Power Poll, there was a nearly even response between business owners and executives weighing in with a 53 to 47 percent split, respectively. In addition, respondents were from across the state with a majority (74 percent) residing in Southern Nevada.
Many of the respondents have businesses that are not new to Nevada. In fact, only 10 percent indicated their company has been doing business in the state for less than five years.
The 2017 Power Poll was sent to a group of business leaders in Nevada and a selection of those were chosen to elaborate on the poll’s questions. With hundreds of owners and executives responding, this year’s results showed that business is up and many expect it to remain so, at least in the near future.
“In the short run, we will see more of the same, a continued upward trend,” said Frank M. Flansburg, III, manager and co-founder of Schwartz Flansburg, a Southern Nevada law firm. “However, the impact of global markets and new political administrations may affect that in the near future. To what extreme and how soon we will feel those impacts, I don’t know,” he added.
According to the poll, 73 percent of business owners and executives think that Nevada’s economy is up when compared to the same time last year. In addition, nearly 80 percent of respondents said they expect Nevada’s economy to be better or much better in a year.
“I think Nevada has definitely improved,” said Gregory Crawford, president of Alliance Trust Company in Reno. “The level of activity that we see in Northern Nevada is quite strong. It’s not just Tesla and the things that get a high profile, but a number of smaller companies below the radar that appear to be moving here as well.”
On the flip side, 21 percent of executives felt that the state would remain the same or be somewhat worse in the coming year.
“I’m one of the people believing it’s a little more flatlined,” said Mike Altimus, vice president and general manager of Peterbilt Truck Parts and Equipment and Silver State International in Northern Nevada. “I get a little nervous about so much growth in so short a time. Maybe throughout 2017 the economy will stay good but I feel we have a little bit of a recession coming, just for the fact that we don’t have the infrastructure to support the amount of jobs they want to create.”
Speaking to companies individually rather than the state overall, business has been looking up in the past year and many believe that trend will continue into 2017. Only 7 percent of respondents said that their business’ bottom line was somewhat or much worse compared to a year ago. Showing an increasing optimism for the coming year, only 2 percent of those polled thought 2017 would be worse and just over 80 percent said that it would be either somewhat or much better next year.
Angela Refsland, owner and founder of Waking Girl Company, a web design and internet marketing firm in Reno, agreed with that assessment and added that she learned from the recession which has helped make her firm more successful.
“Things are significantly better now than last year,” she said. “Part of that is, I’ve grown as a business owner and can make more strategic decisions.”
“We expect the overall market here to grow but grow at a slower pace than it had in the past,” added Brian Kunec, division president of KB Home in Southern Nevada. “My expectations for this time next year is, hopefully, we’ll be doing slightly better than where we are now.”
“Last year was a positive year for business and this year has transitioned just as busy, if not busier, than last,” concluded Flansburg.
Ready to Hire
The increase in business has translated into a growing need for employees throughout Nevada. As such, businesses are in hiring mode and look to remain that way in the near future. Nearly 60 percent of those polled have increased in staff in the last year and 68 percent said they expect to hire in the next 12 months.
“We essentially doubled in size,” said Flansburg.
“We’re definitely looking to hire,” added Kunec. “It’s healthy staffing growth.”
However, as companies seek to grow, the need for qualified staff becomes a bigger and bigger concern.
“It’s our top concern in Northern Nevada,” said Mike Kazmierski, CEO of Economic Development Authority of Western Nevada (EDAWN). “We were over 30,000 unemployed five years ago. We’re now less than 10,000 and most of that 10,000 is not employable or marginally employable so we’ve run out of slack in our system. We’ve put all the people we need to back to work.”
Jeff Parker, vice president of Manpower added that, with so many skilled workers needed, filling those positions will be a challenge.
“There is more demand for specialized employees and that has made it harder to fill positions. And, I believe that there is more wage pressure from all employees so employers are having to adjust their expectations and what they can do,” Parker said.
Kazmierski said EDAWN is approaching the skilled workers issue from two sides. They’re focusing on workforce development and workforce attraction. Essentially, Kazmierski said, it’s a matter of upgrading the skills of the workers in state to help them get better jobs and also recruiting workers from other regions to the area. EDAWN has partnered with area schools and businesses to achieve workforce development and is running promotional ads in nearby regions for recruitment.
One concern some small business owners have had, as a result of recent national discussions, is a change to Nevada’s minimum wage laws. As Seattle, WA works towards a $15 minimum wage by this year and 21 states look to increase their minimum wage in 2017, business owners are concerned. For the most part, executives in the Silver State are against a minimum wage increase with 59 percent indicating they wouldn’t be supportive of it.
“I firmly believe that a company is going to pay a person what they’re worth,” said Kazmierski. “If a company pays them what they’re worth, they’re not going to pay them minimum wage unless what they’re worth is minimum wage. I do understand that our minimum wage has not kept up with inflation. I can fully appreciate the concern of people on minimum wage but I would rather see the state aggressively help people get out of the minimum wage cycle by giving them some development training money that would double or triple their pay instead of having them try to support a family on minimum wage.”
Kazmierski, like other executives, said that minimum wage has a specific purpose for entry level positions and indicated that it should be a jumping off point for employees to better careers. However, some executives felt that, while an increase to $15 an hour was perhaps too high, a small increase in minimum wage would be good for Nevada workers.
“I work in markets where it is $10 [an hour],” said Parker. “I believe once it was implemented, the argument that it would cause small business to suffer never materialized. I see that wage around $10 an hour as reasonable for both the employer and employee.”
An additional influence to the Silver State’s employment pools is unions. The poll asked if business owners and executives thought unions were necessary for Nevada’s workforce and over 70 percent said they weren’t.
“Unions are just another one of those entities that makes it really hard for businesses to innovate; not just businesses but industries in general,” said Refsland. “We’re seeing that in the education system where teachers and parents and even principals have great ideas. They’re there every day and they know what the kids and families need, but we never get to see those ideas because unions have other ideas.”
However, some executives said that unions play an important role for Nevada.
“You want a skilled labored force in any industry,” said Carroll. “I do think the unions provide a service through their apprentice programs in bringing people up through the trades. That’s very important, to have qualified people.”
“Unions have done some good things over the years for people and they’ve also caused some economic problems in terms of operating and workplace efficiency,” concluded Crawford.
The State of Health
One area that has many employers concerned is the state of healthcare, specifically how to pay for it. As President Trump seeks to fulfill his campaign promise of repealing and replacing the Affordable Care Act, many business owners in Nevada and across the nation are watching to see what changes will be enacted and how those changes will affect their businesses and employees. A majority of 85 percent of this year’s respondents indicated that they have concern in regards to the ACA with over 50 percent falling into the “very concerned” category.
“The concern that I have is uncertainty,” said Parker. “Uncertainty in any economic climate is never good.” He went on to add that he believes healthcare reform is important but is concerned about the way the new administration is handling the changes.
“I believe that the Affordable Care Act is imperfect and that there should be significant changes to it. But, we need to know what we should expect in our businesses rather quickly, rather than just very obtuse comments,” he said.
Others, however, are confident in President Trump and his team to reform the system. “I’m not concerned about it anymore,” said Refsland.
“I’m probably more concerned about healthcare in general rather than the actual way we’re going to figure out how we’re going to have good healthcare,” said Altimus. “I am opposed to the Affordable Care Act. I think there needs to be a better alternative.”
And, when it comes to what is most concerning with the ACA, executives overwhelmingly agree that cost is the biggest issue. In fact, only 12 percent said that quality would be the biggest issue and only 8 percent indicated access is most concerning.
“Cost is always at the forefront of everyone’s mind,” said Refsland. “Quality and cost pretty much go hand and hand. When doctors and clinics aren’t getting paid for six months for the services they’re doing today, it’s going to affect the motivation and the ability to provide better care.”
“Cost is fundamentally important both from an employer and an employee perspective,” said Flansburg. “The employer providing it and the employee having the substitute pay, having to find some other type of healthcare to pay for it.”
Parker added that, “costs were not contained under the Act, as was promised. They continue to skyrocket and, with those costs that are higher, you’re not seeing quality or access.”
Flansburg also added that, while quality was certainly a concern, he has, “great faith in our medical community and the physicians and hospitals with whom I’ve worked. I have faith in their quality just from an American perspective.”
The Issue of Tax
With the historic change to Nevada’s tax structure passed in the 2015 Legislature, taxes have been a hot topic for executives over the past several years. Despite the changes, Nevada’s decision makers still maintain that the state is business friendly, a trend that has been overwhelmingly consistent for the Power Poll. In fact, for this year and last, only 10 percent of those polled would disagree with Nevada’s business friendly status. Both polls having been administered after the Legislature’s tax changes.
“Absolutely [it’s business friendly],” said Kazmierski. “It always ranks high in a business friendly way but it’s not something that just happens. We have to keep working to be business friendly and I think we can be more business friendly to entrepreneurs.”
“Compared to some of the other states we practice in, Nevada’s probably the most business friendly,” added Carroll.
When asked if Nevada businesses have too much of a tax burden, executives had more of a mixed response. Only 32 percent of respondents said that Nevada businesses did not have too large of a tax burden.
“It all depends on what you classify as businesses,” said Altimus. “There are industries in Northern Nevada that don’t have enough of a tax burden. Then there’s small business and middle-sized business that definitely have enough of a tax burden.”
“There’s always room to make improvement there,” added Kunec. “Ultimately, the better job we can do of lessening the burden on the companies, it will only create more jobs relocating here. I don’t think it’s overburdensome, but I think it’s something that could always be worked on and made better.”
While executives are somewhat conflicted on whether there is too much tax burden, most agree that more certainly isn’t needed. Ninety-two percent of respondents opposed a state income tax. Additionally, when it comes to the state’s largest industries, executives agree they’re paying their fair share. Seventy percent of respondents indicated the gaming industry is paying its fair share and 58 percent said the mining industry is paying its fair share of taxes.
Finally, the most talked about change from the 2015 Legislature is SB 483, commonly known as the commerce tax. While many expected the tax to have a huge impact on business, so far, the impact has been less than anticipated. However, 58 percent of respondents did indicate that the tax has negatively impacted their business.
“Obviously it did [have an impact], but it’s not that significant to us, at least so far,” said Carroll. “Taxes are necessary in some sectors so we have a sound functioning government, that’s both at the local and state level. I’m not afraid to support taxes that are necessary for those areas.”
“The commerce tax has almost no impact on the companies we’re working with,” said Kazmierski. “The reason for that is, it doesn’t tax their sales outside the state.”
Crawford added that, while the tax hasn’t directly impacted his business, he did see a negative effect just from the talks surrounding SB 483.
“Every time we talk about a new tax in Nevada, the people in Delaware, South Dakota, New Hampshire, they use that against us,” he said. “Even the fact that it’s being debated is used against us. That had a negative effect on our opportunities when it was kicked around the legislature. From a practical standpoint, it hasn’t made a dramatic difference to my business. But, the notion that Nevada is stepping back from its business friendly, low tax posture is immediately used against us by other states.”
Time to Learn
Billed as a way to pay for education, the stated purpose of SB 483 is to help fix Nevada’s education system which, unfortunately, ranks at or near the bottom nationally. When asked to grade Nevada’s education system, only 1 percent of respondents gave it an “A” ranking and an overwhelming 97 percent ranked the system at a “C” or below.
“The data shows us very low nationally,” said Kazmierski. “You can’t totally ignore the data. I think some of that is skewed by the over-focus on teacher pay. Our results are, in many cases, much better than those results indicate. I would probably rate it low but not as low as the national survey.”
Fixing education is something state leaders have made a priority in coming years and executives are mixed in their opinions as to what would be most helpful in that regard. “It doesn’t need more, it just needs less,” said Refsland of Nevada’s education system. “It needs fewer regulations, less control over the teachers, fewer mandates and rules, fewer administrators and a lot less bureaucracy, to start.”
With a variety of suggestions to fix education, respondents ranked accountability and parental involvement, respectively, as most important. Teacher salaries were near the bottom of the list with only 7 percent ranking it as most important to improve education.
“I’d probably say teacher salaries [is least important],” said Crawford. “I only say that because I know a lot of teachers in town and most of them don’t do it for the money. So, an extra $5,000 a year really isn’t going to motivate them differently, they have some other motivating factor. If you go into teaching, it’s never going to be a high-paying profession. It’d be wonderful if we paid teachers more, but I’m not sure that’s going to change how hard they work in the classroom.”
When it comes to school choice which, in Nevada, has taken on the form of Education Savings Accounts or ESAs, many executives acknowledge that it can be very helpful to fixing education but few ranked it as most important when compared to other factors. ESAs were approved by the 2015 Legislature but have since faced funding challenges.
“I think it’s good, people should have the choice for their kid,” said Kunec. “If they have the wherewithal to have the ability to send them to a charter or private school and, right now, that’s a better education, I’m okay for that choice.”
New Players, Same Game
Last year’s political season will surely go down in history. Whether for the new heights of vitriol flung between parties or for the candidates themselves who represented firsts for the U.S. in many ways, few would disagree that it was a season fraught with tension and a historic outcome. In Nevada, we had a changing of the guards with Democrats winning all of the state’s national seats up for grabs. The opposite was true on the national scene with Republicans taking control of the Presidency, Senate and House of Representatives.
The 2017 Power Poll, which was held after the election results came in, asked respondents to rate politicians for the job they’ve done for Nevada. For those that are new to office, the poll asked for them to anticipate the kind of job they’re expected to do.
For the newly elected President Donald Trump, there is a “wait and see” attitude prevailing with executives cautious to judge him one way or another. He was given a “C+” average for the job he’s expected to do.
“I feel like Trump is approaching issues more like the business owners I get to work with every day,” said Refsland. “There’s a belief that there is a solution and a willingness to implement the solution and adjust.” She added that she felt that, “Trump has the momentum and enthusiasm a small business owner has. That’s exciting.”
Governor Brian Sandoval, who has had a fairly stable track record over the years did more poorly in Rural Nevada than previously, but overall remained in the “B” range slipping to a “B-” in this year’s poll.
“He’s thoughtful and not dedicated to any one sort of ideology,” said Crawford of Sandoval. “He tries to generally find a good common ground for everyone in the state to work from.”
“He has worked on very tough issues, such as education and taxes, in a non-partisan way,” added Parker. “He’s been able to bring everyone together in order to do what’s best for the state.”
For the remaining politicians, most received rankings in the “C” range with only retired Senator Harry Reid receiving a grade of “D+” from the poll.
Issues of State
Regardless of the political climate and due to Nevada’s desert location, tax system, growth and a variety of other factors, the state has some concerns that carry over from year to year, with varying degrees of importance. When asked to rank what the most important issue for Nevadans is right now, respondents rated education as a top concern with the availably and cost of healthcare as second most concerning.
Altimus said, for him, the three biggest issues were transportation, shortfalls in the budget and education. “Transportation issues because I know that’s been a hold back for Northern Nevada,” he said.
Carroll reiterated that and said, “it’s critical we have great infrastructure to get us accessibility and connectivity throughout the Southwest to our neighbors for industry, commerce.” He added that I-11 would be an important boon for Southern Nevada and indicated that Nevada’s transportation leadership should extend I-11 all the way to Reno. “I think it’s a shame our two largest cities aren’t connected by an interstate system,” he said.
This year’s poll overwhelmingly indicated that many executives think Nevada is on the right track in a number of key areas from diversification to improving the broken education system. Executives, many of whom are coming off of a banner 2016, are excited about 2017 and looking forward to seeing how Nevada’s lean business community handles a burgeoning economy.
“I’m happy and privileged to be a Nevadan,” said Flansburg. “We have a very unique state that is different than any other state in the union in our hospitality and the amount of people that come to our city, both for work and for visit. It’s really helping our state transcend to the next level. I’m proud to be from Nevada and I don’t know that was always the case for all the previous generations.”
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