As they welcome the arrival of 2011, economic developers in Nevada look to the New Year with both eagerness and apprehension. Will this be the year of the perfect storm that can propel the state toward sustainable economic diversification? Or will 2011 be another year overshadowed by continued economic hard times and frustrations?
Absent a crystal ball to forecast the financial future, many leaders are betting that the Silver State is well positioned to take advantage of the opportunities presented by the recession. “I’m really upbeat. I’m a glass-full kind of person,” explains Bob Cooper, economic development/redevelopment manager for the City of Henderson. “Being small and nimble we can accomplish great things.” While rolling up their sleeves to tackle the challenges ahead, developers discuss the variety of approaches, strategies and situations that will hopefully play to Nevada’s economic advantage in the coming months and years.
Almost as soon as midterm election results were announced in neighboring California, telephones in economic development offices around Nevada began ringing off the hook. Although the number of businesses relocating from California to Nevada had decreased considerably during the recession, it’s predicted to ramp up once again due to the election of Jerry Brown as governor as well as the implementation and expectation of additional legislation that is unfriendly to business, such as a 29.6 percent increase in workman’s comp. “We’re buried with the number of companies that are calling us,” says Somer Hollingsworth, CEO of Nevada Development Authority (NDA). “Strong, amazing companies are saying they can’t be there anymore.”
Although it might seem easy to pick the low-hanging California fruit once again, Hollingsworth cautions that Nevada will need to work to stay in the hunt as businesses comparative shop among states that offer lucrative incentives for relocation. Successful states will be those whose economic entities work together to design the right packages that include financial and lifestyle advantages that are relevant to current times. “Competition has never been greater,” Hollingsworth emphasizes.
In addition, developers insist that successful recruiting shouldn’t be limited to neighboring states, but expanded around the country and the world. “One of the most important things is to make certain that the global community realizes that Nevada is a business site,” explains Mike Skaggs, executive director of the Nevada Commission on Economic Development (NCED). Despite limited budgets (NDA operates on about $1 million a year for marketing), development entities have embraced the reality of a global economy and recognized the necessity of functioning within it. Skaggs emphasizes the need to encourage and support Reno/Tahoe International Airport’s effort to obtain cargo contracts from Asian airlines, for example.
In an effort to recruit foreign capital to Nevada, Rob Hooper, executive director of Northern Nevada Development Authority (NNDA), describes work underway through the federal government. “We’re forming the Nevada State Regional EB-5 Center,” he says. The center is expected to raise between $20 and $30 million in the next three years with foreign nationals investing a minimum of $500,000 each in Nevada businesses in exchange for green card visas.
Equally important to outside recruiting is growing from within, according to Chuck Alvey, president and CEO of the Economic Development Authority of Western Nevada (EDAWN). “We will always continue to recruit companies from outside the state, but we’re also helping companies (in Nevada) to expand,” he says. Due to the high cost of initial recruitment and relocation, it’s cheaper to create jobs from within. “It’s a better deal to do organic growth internally,” Hollingsworth says.
Because of the lack of local resources, recruiting in the rural communities is especially challenging, according to Pam Borda, executive director of Elko County Economic Diversification Authority (ECEDA). To help better position themselves for success in such communities as Wells, West Wendover and Carlin, for example, ECEDA is establishing an entrepreneurial program for economic gardening. Similar to business incubators, the program will provide an eclectic array of expertise for businesses to tap into as well as access to a revolving loan fund. “There’s a gaping hole for business that we can’t fill with existing programs,” Borda says.
Recognizing that workforce development is critical to job creation, economic developers are forming closer alliances and relationships with industry associations, community groups and educational institutions. “If we want to look at the recession as an opportunity we need to look at the workforce,” Cooper says. There are alternatives to simply putting more money into education (especially in the current lean times). One such alternative can be achieved through targeting funds into training programs specifically aimed at creating sustainable jobs that exist or will be expected to exist in Nevada. “We need skill-specific education around a particular industry,” Alvey says.
With 2,000 manufacturers calling Nevada home, economic developers have zeroed in on increasing education, awareness and opportunities for employment in the manufacturing sector. “We have purchased a license from the Manufacturer’s Institute, which is the nonprofit organization of the National Association of Manufacturing (NAM),” explains Hooper. “We are spearheading a statewide program using the Dream It. Do It initiative.” To provide nationally portable, industry-recognized certifications, the initiative facilitates collaborations with Western Nevada College, the University of Nevada, Reno (UNR), the Department of Employment, Training and Rehabilitation (DETR) and other economic and educational entities in the state. Although the state already employs around 40,000 workers in manufacturing jobs that pay on average 18 percent more than non-manufacturing positions, NAM reports a shortage of skilled workers nationwide. The goal of the initiative is to help expand both the number of workers and manufacturers in Nevada which will assist in long-term economic stability.
Additional examples of aligned educational and career pathways exist in higher education across the state. Great Basin College in Elko offers programs in healthcare, technical trades and electronics while UNR participates in a public/private relationship with General Electric in Minden through its engineering school. Private colleges, including all 13 in Henderson, are enjoying growth that is off the charts, according to Cooper, as they offer training for specific jobs that are available in the Silver State. “Everest College is in a boom cycle. Their programs are bursting at the seams,” he says. Because private colleges need to place 80 percent of their graduates in jobs in order to retain their accreditation, their programs are highly likely to be relevant to jobs in the area.
In addition to workforce development, the phenomenon of “back shoring” might also help attract additional manufacturing to Nevada. As many American companies realize that outsourcing isn’t as profitable as they thought it would be, increasing numbers are moving their manufacturing processes back to the United States. Although a company might pay 40 percent less in payroll costs outside the country, the loss in productivity might be as high as 60 percent, according to a study by Compass Management Consulting.
Other possible negative aspects of foreign manufacturing include the high cost of freight, poor quality of goods, slower turnaround time, lack of inspections, wasted executive time, a larger carbon footprint and the cost of money being tied up. Also, as more Americans are affected by high unemployment, the desire to buy goods made in America is bound to increase as it will contribute to job creation.
Much like composing a letter to Santa Claus, economic development movers and shakers have their own personal laundry lists of which cluster industries they believe will do the best job of moving Nevada’s economy forward toward long-term sustainability. The lists include a mix of proven sacred cows, such as gaming, along with highly touted alternative energy and glitzy biomedical tourism. Other favorites, as suggested by economic developers, include aerospace, biotech, digital tech, fashion, information technologies, bioscience, homeland security/defense manufacturing, healthcare, administrative back office environment, software publishing, international partnerships, transportation, film and mining.
After years of talking up alternative energy as Nevada’s newest economic savior (following divorce, gaming and construction), it’s pretty much a given that geothermal, solar and wind power will play some type of role in the state’s financial future. For at least a decade, economic forecasters in the state have been inundated with statistics validating the state’s inherent potential. Also, to some degree, Nevada already enjoys the fruits of sustainable energy with wind, solar and geothermal facilities scattered all around the state. “Renewable energy is a goal we could get behind,” Alvey says. “It has the biggest growth potential.”
As planners and politicos begin to actually crunch the numbers, however, the jury is still out as to how large a share of the economic pie will be claimed by green energy industries. Some developers point out that after the initial construction phase of a project, the long-term maintenance jobs are few and far between. Other people insist that the most lucrative approach to capitalizing on green energy is to broaden the commitment to include the manufacture, research and development of equipment and technologies in addition to generating and selling power. And still others emphasize that the healthiest economy is a diversified economy with a number of industry clusters in its economic basket. They believe that alternative energy cannot be the sole savior.
Hollingsworth cites the success of the Cleveland Clinic Lou Ruvo Center for Brain Health and the Nevada Cancer Institute in Las Vegas as proven potential for the development of a cluster around the medical industry. With the hospitality industry already deeply entrenched in Las Vegas, the addition of topnotch medical facilities makes medical tourism a much more attractive possibility. “People worldwide are looking for top medical treatment,” he says. The concern that Las Vegas might not be attractive enough for the best medical researchers and practitioners has also been somewhat debunked. “The Nevada Cancer Institute and Lou Ruvo were gifts,” Hollingsworth says. “It proved you could hire the smartest people on the planet and they would move to Las Vegas.”
Elko County enjoys prosperous times even in recession not only because of the mining industry, but also because of its persistent efforts to diversify the region’s economy. In operation less than one year, the Northeastern Nevada Regional Railport has already had an impact of more than $20 million. Companies with facilities at the railport include Pacific Steel and Recycling, SAS Global and Liebherr Mining. With 350 total acres available for development, the project has barely scratched the surface as far as its potential economic impact. Elko’s location along major transportation routes also makes it an attractive site for trucking companies, such as Cummins and Kenworth Truck Company, according to Borda. “Transportation is huge,” she says. “We’ve got so much land and wide open spaces.”
With the economy uppermost in most people’s minds, great attention is turned to the 2011 session of the Nevada State Legislature as it convenes in Carson City. At the very least, economic developers say they hope (and expect) that lawmakers will not erode the business-friendly environment that Nevada has used to its advantage over the years. Killing the goose that lays the golden egg is hardly the way to deal with today’s economic malaise. They also hope that budgets for economic development can at least remain intact. “The legislature needs to continue to fund and support the agencies that are helping to recover the economy,” Borda explains.
Alvey says he looks forward to working with lawmakers as they tackle the thorny issues of budgeting and economic development. “I want to provide support and be a source for them,” he says. “How can we be of help to them? We don’t care whose idea it is.”
In addition to general advice, Skaggs says he will formally request that financial incentives given to manufacturers with 75 or more employees be offered to companies with as few as 10 workers to help in recruitment efforts.
“Most of our clients are in the 30 to 40 job category,” he says. Cooper cites the need for government to prioritize which industry clusters should be supported. “The first thing I’d suggest to the government is to ask what future industries could lead to job creation,” he says. With new faces in Carson City and a renewed sense of purpose, economic developers have high hopes that a path to economic recovery will be found. “I’ve got a lot of confidence in this legislature,” Hollingsworth says.
Everyone’s in the Game
As the pressure to bring ideas to the economic table increases, more groups and individuals are becoming involved in the process. “Everybody is scrambling to do economic development,” Alvey says. Although some critics perceive the present process as sometimes lacking direction, many people at the helm of development organizations say that efforts are unified and resulting in high levels of success. “There’s very good harmony between development authorities,” Hooper says.
To obtain greater participation in development work, groups around the state are adopting the open source or community activist approach to the process. Open source embraces community volunteers who can serve on a variety of action committees, such as workforce education or real estate, depending upon their interest and expertise. “Taking away the mystery of economic development and having these smart people involved is working,” Hooper says. Rather than reinventing the wheel in Elko County, Borda says ECEDA is moving toward open source beginning with a strategic planning committee that has representation from all areas of the community.
Along with casting a wider community net, developers also emphasize the importance of reaching a consensus and then working together. “We need to all sit down together and look at the best ideas and work toward those goals,” Alvey says. “We need a state viewpoint.”
Where We’ve Been and Where We’re Going
After the euphoria of being the fastest-growing state in the country for 19 years, Nevada has lost around 70,000 residents or 2.6 percent of its population this past year, according to the state demographer. Unemployment remains high, with the rate including those who’ve stopped looking for work and those who are underemployed hovering around 20 percent. The statewide foreclosure rate is around 1 in 60 homes and the once vibrant construction industry remains gutted.
Despite these sobering statistics, however, economic leaders in the Silver State remain optimistic and excited about the ultimate recovery of the state’s economy. “We’re very bullish on Vegas and on Nevada,” Hollingsworth says. “We will get through this recession.” Having attended local schools and raised his family in Clark County, he is still eager to sell his hometown’s lifestyle to potential new business clients.
Borda admits that the path ahead is less than rosy, but that it’s at least going in the right direction.
“I’m anxious and a little stressed, but I’m optimistic to see that we’re on a slow road to recovery. Let’s take this as an opportunity to improve ourselves,” she says. Hooper also sees a bright light at the end of the tunnel. “We can’t hide from the truth, but we have to have the belief that we’ll emerge and be better in what we do,” he says. In the final analysis, perhaps Nevada doesn’t need a perfect storm for economic recovery, but just the continued optimism and creativity as expressed by its economic leaders.