Las Vegas Sun

December 9, 2016

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Why out-of-state companies won’t move to Nevada

Politicians pretend to know how to best draw them here

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John Coulter

Brian Sandoval

Brian Sandoval

Brian Krolicki

Brian Krolicki

Nevada politicians have offered a host of reasons — sometimes contradictory — to explain why businesses are reluctant to move here.

Senate Majority Leader Harry Reid told the Legislature that by clinging to legal prostitution and the morals of the mining camp, the state was setting itself up to be shunned by potential suitors.

Sen. John Ensign told lawmakers that businesses love our tax climate, but hate our schools.

Yet Gov. Brian Sandoval declared that no business had ever cited schools as a reason not to move to Nevada. “It’s because other states are able to throw incentives at them,” he said Tuesday.

Economic diversification is being sold as the panacea to our economic problems — unemployment, foreclosures — and the future health of the state. But amid that clamor, little agreement has emerged over what stands in the way of achieving it.

So why isn’t Nevada getting any love from out-of-state businesses?

The theories are put forward as if the state Legislature is conducting an honest debate of ideas on their merits. But sometimes “attracting jobs” is just political cover in a political game waged on behalf of provincial interests. And although many are offering reasons, getting them to support them with hard facts is difficult.

Conservatives, starting with former Gov. Jim Gibbons, have said the prospect of tax increases by the Legislature, which is controlled by Democrats, has scared off businesses. The traditionally business-friendly state is under siege by the pro-tax forces, causing business leaders to leapfrog Nevada for kinder climes, such as Utah and Arizona, or remain in California, where at least they have beaches.

Business groups, including the Reno and Las Vegas chambers of commerce, and conservative groups have been unable to produce any of these businesses.

(The Nevada Policy Research Institute will release a study today listing the complaints of current Nevada businesses about government and regulation, but it doesn’t keep a list of those who have been scared off and why.)

The Nevada Development Authority, the nonprofit agency that receives $1.1 million in state funding to diversify the economy, said it could not provide names of businesses that had shown interest but did not move here. Such discussions are confidential, officials said.

Democrats and those inclined to support taxes say businesses shun Nevada because of its underfunded K-12 and higher education systems. Nevada has:

• Uneducated and unqualified workers who are unable to meet the demands of private businesses.

• And a subpar public school system that employers don’t want to subject their children or their employees’ children to.

Supporters of this theory do offer examples. Ikea, the furniture company, and EarthLink, an Internet service provider, told a Las Vegas developer that they were considering moving here, but elected not to because the area’s educational attainment lags national averages.

Ensign pointed to Intuit, a Reno company, which had cited concerns about the state’s education system as an obstacle to expansion.

(It should be noted that although Ensign agrees that the state’s schools are a hindrance to economic growth, he parts ways with many who make this argument on the solution. It’s not for lack of money, he says, rather it is because we haven’t adopted reforms such as eliminating teacher tenure.)

Economic development officials say that generally no one thing tips a business’s decision. A number of factors are weighed and then executives go with the best option.

Getting them to choose Nevada has been a priority for Sandoval, said Heidi Gansert, the governor’s chief of staff.

Many businesses are having problems raising capital. To that end, Sandoval is working with legislative leadership to remake the state’s economic development agencies and create a “catalyst fund” with $10 million to attract businesses.

An announcement of businesses moving here could happen in a couple of weeks, Gansert said.

Asked about the effect a debate on raising taxes would have, Gansert said, “There are some businesses waiting until the end of the session to see what happens.”

Lt. Gov. Brian Krolicki, a Republican whose primary responsibility is economic development, said diversification “is about a wide variety of issues” — workforce, education, proximity to customers, taxes and regulation. Generally, he said, “Businesses worry more about taxes than education. Not all industries need a highly educated workforce.”

But some say Nevada may be overthinking its plight.

Storey County (where prostitution is legal) announced this week that three distribution centers will be moving in, creating 200 to 500 jobs.

The collapse of the construction industry and dip in the hospitality industry might be hiding some of the state’s successes. (Nevada has 180,000 unemployed looking for work. About 80,000 jobs in construction have been lost since the peak.)

“We’re holding our own,” Krolicki said. “I think we’re doing pretty well.”

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