Business owners and managers tend to overbook their schedules and are constantly wishing they had more hours each day to accomplish their goals. Yet, when Nevada Business Journal sent out survey forms to 250 business leaders in the state, almost 80 of them took the time to promptly answer questions about political and economic issues affecting Nevada. They apparently felt it was important to let their voices be heard, not only by our 68,000 readers, but also by Nevada’s legislators, who are currently deciding our fate in Carson City. The surveys were sent only to business owners or chief executives of Nevada companies. They were not sent to government officials or to rank-and-file employees. Respondents were almost equally divided between owners and CEOs, and represent many economic segments throughout Southern Nevada, Northern Nevada and rural communities. The results of our “Power Poll” give an overview of what Nevada’s business leaders think about today’s hot topics, with many volunteering to have their comments quoted in this article.
Are Tax Increases Necessary?
Over 76 percent of our respondents agreed with Governor Kenny Guinn that tax increases are necessary to solve Nevada’s budget shortfall, but the majority only agreed “somewhat”.
Mike Micone, owner of Accountants Inc., a staffing agency, strongly disagreed. “If my company was running a deficit, I’d have no choice but to lay off people,” he stated. “Government should run more like a business and cut programs or reduce salaries. It shouldn’t look to private businesses to balance its budget. Also, there are many instances where city, county and state agencies are duplicating each other’s services. More streamlining could be done if somebody was willing to step up and make the effort.”
Tax Proposals
On a scale of one (best) to seven (worst), the survey asked people to rank seven tax proposals calculated to resolve Nevada’s budget crisis. Two respondents marked everything on the list “seven”, while many others added written comments in the margin. After all votes were totaled, the gross receipts tax proposal, not surprisingly, came in dead last. John Guedry, president of Business Bank of Nevada, stated the gross receipts tax would affect many industries that would be unable to pass the cost of the tax on to their customers. In addition, he said, “We could be opening a Pandora’s box. [The gross receipts tax] starts out at 1/4 percent, but it could just keep rising.”
Many respondents expressed the belief that setting up a new government structure to collect and administer the tax would be cost-prohibitive. Jeffrey Vilkin, owner of Tradewinds Construction, put it bluntly. “I think it’s a horrible idea,” he said. “The construction industry operates on high volume and low margin. We’re just getting by, and with higher insurance costs and a proposed increase in the employee head tax, how can we absorb this cost, too?”
Mary Kaye Cashman, CEO of Cashman Equipment, pointed out, “Increased property taxes provide a stable source of revenue that is paid by businesses both large and small, homeowners, renters (through increased rental rates) and even gaming.” Others disagreed, especially those who depend on real estate sales for their income. So-called “sin taxes” seemed the least painful solution to our business people, but many felt gaming was not paying its fair share.
Yucca Mountain
Despite public pronouncements from state officials pledging to lie down in front of trucks bringing nuclear waste to Nevada, the state’s business community takes a more pragmatic approach to the question of establishing a waste dump at Yucca Mountain. Less than 20 percent proclaimed the state should do whatever is necessary to prevent it. Many of the respondents believed we should first exhaust all our options, and only then negotiate the best deal for compensation.
Rich MacDonald, owner of MacDonald Companies, admitted he thinks Yucca Mountain would be “a spill waiting to happen.” Nevertheless, he attests that, “The time to stop it was earlier in the process – not now.”
Greg Pike, owner of McFadden Insurance Agency, admitted he feels pulled in two directions when considering this issue. “From a personal standpoint, I worry how a waste dump will impact the lives of my three young children,” he stated. “I’m concerned about groundwater contamination and making Nevada an instant target for terrorism. But, as a businessman I say, ‘If we can’t prevent it, then we should capitalize on it and get enough money to take care of the state’s budget problems.’”
A Business-Friendly State?
Over 86 percent of those polled agreed Nevada is a business-friendly state, although one respondent who answered, “Strongly agree,” added the caveat, “Until Governor Guinn’s tax speech!” Real estate developers testified that problems with permitting were affecting their ability to complete projects on time and within budget. “Cities and counties have a customer-satisfaction attitude,” said Brooks Williams of Jaynes Corporation, a former head of Associated General Contractors. “They want to make the system work, but they are getting too bureaucratic, and they are so fearful of lawsuits that they return plans again and again to be re-done.”
Herman Ross, owner of National Insurance Consultants, “strongly disagreed” that Nevada is friendly to non-gaming businesses. “The state is controlled by the gaming industry,” he stated. “And gaming does not want Nevada to be friendly to other types of businesses that would compete with it for employees and drive up the cost of salaries.” Ross suggested the solution to the problem lies in education. “We need to educate our children, and let them know that gaming isn’t the answer. If they receive a good education, they can get a decent job outside gaming, and businesses from other states will see we have an educated workforce and will want to locate here.”
Impact of War
At the time our survey was taken, rumors of war with Iraq were causing turmoil in the stock market, and the country was in the state of heightened alert. Yet, most of the business people polled thought a war would have only a short-term negative effect on Nevada’s economy. Most agreed with Lance Bradford of L.L. Bradford CPAs, who said, “A war would cause a reduction in tourism, but Nevada would not be hit as hard as other areas of the country. I hesitate to say we’re ‘recession-proof’, but history has shown that people want to vacation and gamble when times are good, and when times are bad, they want to vacation to forget their worries.”
Gaming in Other States
Fully three-quarters of those answering our survey expressed concern about the proliferation of gaming in other states, especially in California. Gary Baker of Lee & Associates in Reno said Northern Nevada is already feeling the effects of new Indian casinos in Northern California, which are drawing Bay area residents who used to come to the Reno/Tahoe area to gamble. “When the new casino in Roseville [Calif.] opens, there will be three major casinos between the Bay area and the state line,” he pointed out. “And that’s just the tip of the iceberg, because [California] Governor Gray Davis is in favor of expanding the gaming options Indian casinos can offer.”
Attracting New Businesses
Business owners and executives agreed that Nevada’s tax structure plays a major role in the state’s ability to attract new businesses. However, the related issues of a trained workforce and the education system came in second and third respectively. Ron McMenemy of NAI Horizon Commercial Real Estate, who deals with national companies seeking information about Southern Nevada, said he often hears concerns about the quality of the workforce. “When people see that the majority of the workforce is tied to service-related jobs – not technology or research or even manufacturing – they look elsewhere. They go to Salt Lake City or Phoenix or even Bakersfield, [Calif.],” he said. “NDA [Nevada Development Authority] works hard to bring companies in, but so far they haven’t been able to pull it off.”
Greatest Concerns
The availability of water in our desert state was ranked as the number-one concern for most of those answering our survey. However, one healthcare executive placed a write-in vote for “availability of affordable healthcare” and pointed out that we erred in leaving it off our survey.
Problems caused by growth came in a close second, with Charlie Mack of Mack Realty stating that population growth has been a big factor in the state’s budget shortfall because of increased demand for services and schools. Pressure from developers wanting to build homes for new residents drives up land prices for everyone, said Mack.
Asked for his opinion on why business people did not seem overly worried about homeland security as the country moved closer to war, Curt Anderson of Fair, Anderson & Langerman CPAs said, “It’s not a question of concern. It’s just that this is the least controllable factor on the list. People think there’s not much they can do about it. My clients tell me they think we can make it through these troubled times as long as we don’t have a terrorist event. If we do, all bets are off.”
Predictions for the Future
Encouragingly, over 93 percent of those surveyed thought Nevada’s economy would recover from its slump and be better five years from now. One respondent wrote it would be, “somewhat better if the gross receipts tax is not passed” and “somewhat worse if the gross receipts tax is passed.”
Soozi Jones Walker of Realty Executives of Nevada said three important challenges need to be resolved in this year’s Legislature: the medical malpractice crisis, which has made affordable, quality healthcare less available to all Nevadans; the construction defect controversy, which has “put a stranglehold on contractors, who will either leave the state or pass their insurance costs on to the end user;” and the tax issue which, Jones Walker said, overrides all other questions under discussion in the Legislature.
Brian Loy of Sage Financial Advisors in Reno, said in order to ensure a future substantially better than today, “We need to plan, diversify, keep education and training cutting-edge, protect and enhance our quality of life and adopt a fair taxation policy.”
It sounds like Nevada business leaders and lawmakers have their work cut out for them.