For the past several years, Nevadans have seen a multitude of changes in the state’s economic landscape. Unfortunately, many of those changes have been negative. Despite that, in this year’s tenth annual Power Poll, many executives maintain an optimism that was illustrated in last year’s poll and show hopes for the future of the Silver State.
The Power Poll survey was sent out to business owners and executives at the end of last year. This is not a scientific poll, rather a sampling of opinions gathered throughout the state. Respondents were located throughout Nevada with the majority of them (62 percent) being business-owners. This is an uptick from previous years where respondents were more closely split between business-owners and executives and may indicate a trend towards self-started enterprises due to recent cut-backs and layoffs across nearly every industry in the state. Despite tough economic times, most of the respondents are sticking with the Silver State; the majority (48 percent) has been doing business here for 20 years or more.
A sampling of the participants in this year’s poll were interviewed to learn more about their views on each segment of the Power Poll and what we can look for in the coming years. The numerical results of this survey are included in the following pages. Additionally, previous year’s results are included to give readers a historical reference.
The Theoretical Bottom
No one could have predicted the length of this recession, however, for the past few years, the Power Poll has asked executives to ball-park when Nevada might recover. This year, executives showed slightly more caution with their predictions than last year, with 53 percent indicating the state has hit bottom, compared to 55 percent the previous year. As with 2011’s poll results, the majority indicated the economy has reached its low point.
Of those that felt the state hadn’t quite reached the bottom of the recession, just over half felt it would be around a year before it does. Of those that think the bottom has already come, almost 70 percent think it will be a year or less before things begin to pick-up.
“I am optimistic that, unless we have a double dip, we’re on our way up,” said Dan Adamson, owner of ROI Commercial Real Estate. “You can see it in taxable sales and jobs. There are a lot of positive signs out there.”
Dealing With the “Man”
One issue that has been a growing concern revealed in the annual Power Poll is the role of government in private business. Executives had shown an increasing concern since 2009 about this issue. In both 2011 and 2012, the poll reveals that 78 percent of respondents are either “very” or “somewhat” concerned about governement intervention.
The poll further reveals a shift of nine percent being “somewhat” as opposed to “very” concerned, indicating that government intervention is not as large of a concern as the previous years.
“I think government regulation is very important,” said Don Beebe, owner of Able Appraisal, Inc. “It keeps things in check. It has a lot of safety nets for people that need government assistance and regulation to keep them at an even plane.”
“If they’re protecting the public good, then I don’t have a problem with that,” said James Allen, president of TechWarror.Net, Inc. “I don’t see this year a lot of government intervention that impacts my business directly.”
While the number of “very concerned” readers may have gone down, the issue remains a concern for many executives with 78 percent, the same percentage as last year, indicating concern.
“I am fairly concerned,” said Greg Korte, Las Vegas division president of the Korte Company. “Right now they’re dampening the free market by trying to control it through legislation, which I think is dangerous. The result is non-intended consequences.”
Rich Abajian, general manager and owner of Findlay Toyota agreed, saying, “We do have some fear that they will over-regulate everything where the controls are so tight you have no freedom to make money.”
“Some of the regulations seem to be far and above what legislators intended them to be,” added Susan Fisher, president and owner of Fisher Consulting, LLC. “We need to make it easier to get businesses up and going rather than making it harder.”
Back in the Game
In last year’s poll, the majority of executives predicted their business would pick-up in 2011 and, according to this year’s poll, they were right. In 2011, nearly 67 percent of executives said their business’ bottom line was the same or better as compared to the previous year. The 2012 poll reveals even more optimism with almost 90 percent indicating their businesses would be about the same or better a year from now.
“In the last two months I have had more calls from potential clients than any two month period ever,” said Fisher.
Another positive trend for businesses, is that lay-offs have decreased with nearly 56 percent of executives polled having no staff reductions in 2011. This compares to 69 percent of companies reporting staff reductions in the previous year.
“We’re definitely optimistic as far as the future,” said Gerd Poppinga, owner of Offsite Data Depot. “We like seeing local Nevadans put back to work.”
“We’ve actually increased our staff since August, by about 50 people,” added Abajian. “We had to reduce about three years ago and it was awful, but we increased to back to where we were and it’s because business has been better.”
Unfortunately, this isn’t true for all industries, particularly real estate and construction, that were hit harder in Nevada during the recession.
“We lost a lot of business in 2011, compared to 2010,” said Keller Hackbusch, CEO of Dinter Engineering. “The architecture and construction industry is one of the worst industries in the country and in Nevada.”
Allen added that, “The housing and construction industry is in for more of a challenge. Probably another 12 to 24 months before it starts to turn around.”
Executives are guardedly hopeful in regards to Nevada’s economy with nearly 46 percent expecting Nevada’s economy to be better and about 44 percent expecting it to be about the same. The general consensus (72 percent) is that Nevada’s economy is the same or better than last year. Only 28 percent think the economy is worse than in 2011. Another positive indicator is that only 10 percent of executives believe the economy will be worse in 2012.
Our economy is what I like to consider a healthy economy,” said Jack Novak, owner and broker at Las Vegas Commercial and Business Sales. “We probably will see a very gradual increase in consumer confidence and consumer spending over the course of the next two years.”
“There’s pessimism in the respect that we’re not going to get the big money coming in like we’ve seen in the past, before the recession,” said Allen. “But, there’s optimism going forward that things are not as bad as they were.”
Who Should Pay?
Throughout the recession, tax issues have been bandied back and forth, especially considering the increased financial burden several industries have had to face. The debate as to which industries do pay the most taxes and which industries should pay the most taxes can, at times, get heated. Most executives (70 percent) agree that, especially in light of their recent hardships, the gaming industry pays its share of taxes.
“For the longest time, during the good times, the tax rates were just fine and everybody was happy,” said Korte about Nevada’s gaming industry. “However, if we want to maintain and remain the home to all the large gaming corporations, there has to be give and take. We need to provide a more favorable tax rate than the rest of the country.”
For the first time in Power Poll’s history, we also asked respondents what they thought of the mining industry and whether they were paying a fair share of taxes. Throughout the recession, the mining industry is one of the few sectors of Nevada’s economy that has been doing well. Surprisingly, 58 percent of respondents felt that the mining industry should be paying more taxes with only 42 percent agreeing that they were paying their fair share.
As far as general business is concerned, the consensus is that businesses in Nevada have too much of a tax burden. Sixty-six percent of executives polled felt that Nevada business’ tax burden was more than it should be. Many felt that increased taxes, as opposed to controlled spending, wasn’t the answer for Nevada’s economic woes.
“I would be in the camp of Nevada [that says we] need to spend less instead of tax more,” said Steve Oshins, managing partner for the law office Oshins & Associates. “Similar to the business entities, if you tax them more you hurt them, especially in a bad time in the economy.”
Poppinga added that, “Taxes are obviously necessary, but it needs to be spread out evenly across the industries. Whether it’s a small business or large, as long as it’s proportionate to your yearly income or revenue, it’s not necessarily a large burden.”
As with previous years, this poll also asked respondents whether or not they would support a state tax. The overwhelming majority, 88 percent, said no.
“Not at all because I wouldn’t want to pay it,” said Novak. “I don’t think it’s necessary. There are other ways of running the state more efficiently than to add more taxes to businesses or individuals.”
Korte agreed saying, “That’s one thing that, for the future economic growth, it’s important we stay income tax free. It’s one thing that’s going to help bring us out to of the recession we’re in.”
Another aspect most executives agree on is that Nevada is still a business-friendly state. A majority 83 percent of respondents said that Nevada is business-friendly, down over six percent from last year’s 89 percent.
“A lot of industries are looking to Nevada for the tax breaks, the cost of living and the environment as far as leisure is concerned,” said Poppinga. “I also believe it’s positioned well.”
Unfortunately, one of the statistics Nevada is known for is poor education rankings. It’s increasingly becoming a deterrent to bringing new business to the Silver State and executives agree that it needs to be improved, fast. A mojority of 58 percent gave Nevada’s education a grade of D or lower and not a single respondent gave the system an A.
“[The] graduation rate is pathetic,” said Korte. “I’m optimistic, I think [Superintendent] Dwight Jones is making some headway, but it takes a long time to steer a ship (so to speak) and this one has been of course for quite some time. [Jones] has been a great addition to the education system. Finally somebody from the outside as opposed to the good ol’ boy network that existed for too long.”
“It just seems like we’re getting so many kids in the classroom, that there is not an ample amount of teachers per student and it lessens the education,” said Abajian. “The focus has been so much on building new schools that we haven’t been fundamentally sound in running the business of the schools. Our school system should be able to give everybody an opportunity for a great education, no matter if it’s a public or private school.”
“I think we’re making some good changes though,” added Fisher. “We’ve got some great innovators. Speaking locally of Washoe County, we’ve got one of the best superintendents of schools in the nation. We’re very fortunate to have him and I think his influence is going to be very positive for the entire state.”
Matters of State
More and more in recent years, confidence in elected officials has been eroding. Between public perception and attempting to bridge an economic gap that, geographically, could be compared to the Grand Canyon, many politicians are perceived as being less and less effective. According to this year’s poll, the majority of Nevada’s elected officials did an average job, neither excelling at their roles but not flunking either. Statewide, that eroding confidence is evidenced by the fact that many of Nevada’s politicians received a lower grade than in last year’s poll.
Sandoval has remained consistent with a solid “B” in the rankings, however the Lieutenant Governor, Secretary of State and both Senator Heller and Reid received lower marks this year. Additionally, both Representatives Berkley and Heck went down a letter grade in the poll this year. With several of those positions up for grabs in November, executives are taking a closer look at whoever is in the seat and whether or not they deserve to remain there.
As far as Governor Sandoval’s “B” is concerned, many executives still feel that he’s doing a good job in a tough economy.
“He’s got a good grasp of what’s wrong, but he has a huge undertaking,” said Korte. “Results are not going to be to quick to come, I fear.”
In the past year, Sandoval made several changes to the Lieutenant Governor position, which in Nevada is part-time. These changes could have affected Krolicki’s “C+” ranking in this year poll, which is down from the “B” he received last year.
“For what our Lieutenant Governor does, he’s a great representative for the state,” said Fisher. “He’s probably the best President of the Senate we’ve ever had, the way he handles the senate floor sessions.”
Secretary of State Miller, who also received a “C +” (down from a “B –“ in 2011) was mostly praised for helping to bring Nevada into the 21st century. Poppinga said, “He’s worked diligently on getting the [Secretary of State] website up to par, he’s given a better form of access to the government.”
Senator Dean Heller who, in last year’s poll, was a Representative for the state, came down from a “B” to a “C +”. Despite the lower score, Novak said, “He’s done a very good job as a public servant for the state of Nevada. He’s open to new ideas and listens to people.”
Senator Harry Reid also came down a grade going from a “C –“ in 2011 to a “D” in this year’s poll and receiving the lowest grade of any of the elected officials. Korte felt that he may have forgotten his roots saying, “He has been so engrained in Washington politics that he’s lost sight of what is needed and what’s best for Nevada.”
This year’s poll also asked executives who they would vote for President and US Senator if the election were held tomorrow. As the poll was open only to Nevada Business Magazine readers, most of whom are conservative republicans, the results tend to lean to the right. A majority would vote for Newt Gingrich in the Presidential poll and Senator Heller won out in the poll for the Senate seat with an overwhelming majority of 69 percent.
No matter the economic climate in Nevada, there are a few areas of concern that have always, and most likely, will always remain on the horizon for business leaders. The level of concern may change from year to year but, typically, Nevada’s business leaders worry over five issues: quality of education, state budget, availability of water, healthcare costs and transportation issues. Over 90 percent of those polled expressed some concern in regards to the quality of education in this state. This is a change from previous years in which the state budget shortfalls have been the most concerning issue with education and healthcare issues coming in second and third, respectively.
In regards to the education shortfalls, Korte said that, “It’s huge. For all the efforts we make to try to make Nevada more attractive, it’s going to be dampened by the fact that our education system is so poor. We need to continue to be vigilant on that and improve to really take advantage of the other things we’re doing to make the state so attractive.”
“Why would you form a business in a spot where there’s nobody to hire because they’re uneducated,” questions Oshins. “It has an ultimate effect on how a business can operate in Nevada if we don’t have educated employees.”
The state budget still remains a large concern for business owners and executives with just over 81 percent of those polled expressing some level of concern for the issue.
“I just think the state should have to adjust like businesses do,” said Adamson about the budget shortfalls. “When revenues are down, they need to make adjustments.”
Healthcare in recent years has been a near constant concern for business executives, especially in light of the uncertainty of the ramifications from the Patient Protection and Affordable Care Act. “I don’t want to see us go to where the level of service goes down and the health of the individual suffers,” said Adamson. “We should attack that now before it becomes problematic.”
“It’s a national issue that needs to be tackled,” Korte added. “Our healthcare [costs] company-wide has gone up exponentially this year.”
Less of a concern than in previous years is the water issue Nevada has historically dealt with. Abijian credits the lack of concern to the trickling number of new residents in Nevada saying, “It was more troubling when people were all moving here instead of moving out. I do think in the very near future it could be a problem.”
Oshins attributes it to the other concerns that have taken precedence in recent years. “I think if we were on our last gallon of water, I would be saying that’s a big concern. But, I feel we are on our last ‘gallon’ of money to pay for everything they want to pay for, such as education,” he said.
Transportation issues definitely seem to be under control with less than 22 percent of respondents expressing any concern about the issue.