Rise of Reno: Northern Nevada is booming. What can we learn from its growth?

By Ryan Frank

Sunday, Sept. 28, 2014 | 2:01 a.m.

Reno had a problem in 1998. Lots of problems, in fact.

“The Biggest Little City in the World” long had been surpassed by Las Vegas and Atlantic City as a gaming destination, and tribal casinos had taken over Reno’s monopoly on northern California gamblers.

Lance Gilman, a music promoter-turned-real estate mogul, had a solution. While others focused on the warts of boarded up casinos, Gilman saw Reno’s potential as a hub for warehouses, manufacturers and data centers. And he had the cash to make a big bet on the region’s future.

Gilman and his partner bought a parcel of land east of town that was so big it covered more ground than the city of Las Vegas does today. On it, they planned to build what they described as the world’s biggest industrial park.

Sixteen years later, Gilman has the world’s attention.

Tesla Motors announced this month it would build an electric car battery plant in Gilman’s industrial park, the Tahoe-Reno Industrial Center. It’s expected to be one of the biggest buildings in the world and, if all goes as planned, deliver up to 22,000 jobs, $100 billion in economic impact and a new industry to help power Nevada’s economy.

Gov. Brian Sandoval said the deal “changed the trajectory of Nevada forever.” State lawmakers agreed, approving four Tesla bills, 240-0, including more than $1 billion in tax breaks and incentives.

Southern Nevadans may wonder why Tesla landed in tiny Storey County when Clark County has 30 times more land mass and 500 times more people. The lesson for Las Vegas is that the Reno region won because it had the right mix of strategy, location, geography and people.

Northern Nevada’s civic leaders accepted the reality that tourism wasn’t coming back and embraced Reno’s new identity as a remote suburb of San Francisco, rich with wealth, talent and tech. Fortune 500 companies such as Amazon, Wal-Mart and Barnes & Noble picked the region so their trucks could reach every major market in the West with one-day shipping.

“The Reno-Sparks region has been prepared for this type of investment and growth for 25 years,” said Tom Skancke, president of the Las Vegas Global Economic Alliance.

Tesla, an iconic name in the tech and manufacturing industries, provides the best kind of advertising for the Reno region seeking to lure more industrial companies, startups and entrepreneurs. Civic leaders expect Tesla’s move will spark a new wave of employers and employees to pick Reno.

Mastodons, jetliners and Californians

Northern Nevada has provided a path for travelers and freight since the Ice Age.

“What appears to be in the middle of nowhere is one of the major crossroads of the American West,” said Gary Koy, manager of the California Trail Interpretive Center in Elko.

The exact route has varied over the centuries as travelers shifted from mastodons to Native American tribes to fur trappers. But it generally tracked the route of Interstate 80 across Northern Nevada from Wendover, Utah, to Reno.

Travelers typically held close to the banks of the Humboldt, Truckee or Carson rivers to stay close to water to drink, grass to feed livestock and beavers to trap.

In 1841, the Bidwell-Bartleson party used this same route when it emigrated from Missouri to California. It was the first group to travel what became known as the California Trail, a pathway that carried more than 250,000 people West.

Engineers later used the route for the Transcontinental Railroad in 1869 and Interstate 80 in 1976 linking San Francisco to the New York City area. “It’s still a corridor traveled by jetliners,” Koy said.

The California Trail works in reverse today. It originally carried emigrants west from Missouri to California. Now, it’s carrying Californians east over the Sierras into Nevada,

For businesses looking to grow or cut costs, the Silver State has a lot to offer companies from the Golden State.

Nevada is a business-friendly state with virtually no corporate taxes and no personal income taxes. Land is relatively easy to find and cheap to buy. Green power is plentiful. It’s a right-to-work state, which forbids labor contracts at private companies from requiring employees to pay union dues.

In California, cities grew so fast in the 20th century that it’s hard to find big parcels of land. Companies face growing land and environmental regulations from overlapping government agencies. Then there are the earthquakes, wildfires and mudslides that all carry risk for companies with big buildings and expensive equipment.

In Nevada, companies also find it much easier to earn the attention of top lawmakers. California’s Legislature closed out its session in August without approving tax incentives for Tesla. In Nevada, U.S. Sen. Harry Reid fawned over Tesla CEO Elon Musk, and Sandoval got the biggest tax break in Nevada history approved in just seven days.

“We’ve made a living for the past 30 years helping companies move out of California,” said John Boyd, a New Jersey consultant who helps corporations pick new office locations. “That’s the advantage for Nevada. You’re there to take advantage of the woes of California.”

From San Diego to Storey County

The path that led Tesla to Reno, and the reason the region is poised to land more companies, starts with Gilman.

Dozens of people played a role in luring Tesla, but few did it with more flair. “Lance is the magic that makes it happen out in the industrial park,” said Pat Whitten, Storey County manager.

Gilman, a restless entrepreneur who put himself through college playing in a rock band, is everywhere in Northern Nevada.

The industrial park makes Gilman, 69, the owner of about two-thirds of Storey County’s land. He’s also one of three people who run the county’s Board of Commissioners, a seat he won in 2012. And he’s the owner of the Mustang Ranch, Nevada’s first licensed brothel, that sits near Interstate 80 between the industrial park and Reno.

Gilman made his first fortune in boat sales, commercial real estate and luxury housing developments in San Diego County. That’s also where he met his business partner, Roger Norman.

Gilman moved to Reno in the 1980s, pairing with Norman on a 2,500-acre development just south of Reno. The two sold out that project in 1998, then went looking for their next big deal.

A growing number of logistics businesses had built warehouses in Reno or Sparks, but the region was running out of big parcels of land needed for warehouses. Soon, those companies would demand a new supply of land and Gilman hoped to supply it.

“We knew they were out of land,” Gilman said. “We knew it was only a matter of time.”

Gilman learned about a huge parcel east of Reno owned by a Canadian oil and gas company. The CEO planned to build a hunting lodge, but that plan fell through and the company decided to sell, according to a history of the land produced by the University of Nevada’s Center for Regional Studies.

Gilman and Norman paid $20 million in cash to the Canadian company for 102,000 acres.

Their next task: How to get the roads, power and water needed to support a new city of industry.

Reno’s next bet

While Gilman had a plan, Reno didn’t.

The town struggled to figure out how to counter the 20-year decline of gaming and tourism. Civic leaders were split over whether to double down on tourism to compete with Las Vegas or search for new industries to take over.

“Reno is terribly dependent on its tourism base for its economic lifeblood,” Bill Eadington, a gaming expert at UNR, told The Los Angeles Times in a 1998 story.

But for anyone who still clung to gaming as the future, the 2007-2009 Great Recession ended that thought.

“That was it. That’s when the cards started falling,” said Brian Bonnenfant, project manager at the Center for Regional Studies at UNR.

The city’s population growth and home prices, once far outpacing national averages, fell back in line. In 2012, a 35-story resort, opened in 1995 as a symbol of Reno’s push to revive tourism, filed for Chapter 11 bankruptcy protection.

In response, a new generation of political and business rebranded Reno. Signs promoting casinos and brothels came down at the airport and on taxis. Signs promoting the pro-business culture went up.

With Reno’s location and proximity to California, the world’s eighth-largest economy, civic leaders decided in 2012 to recruit businesses in high-tech manufacturing, transportation and e-commerce.

That plan happened to fit nicely with the Tahoe-Reno Industrial Center, where Gilman had a plan to get the park built.

The key: A unique partnership with Storey County.

Storey County had big ambitions to attract new industrial employers. But the county couldn’t afford the growth Gilman proposed.

So under their deal, Gilman and Norman agreed to pay millions upfront to build roads, a fire station and other public services. Gilman said the developers have invested $100 million to prime the industrial park for development.

In what became a 500-page document, Storey County agreed to write special rules to make it easier and faster to build super-sized warehouses and manufacturing plants in the industrial park.

The county also agreed to pay back the developers for the public services they built. Through June 2012, the county owes the developers $47 million, according to an outside audit. It will take the county years to pay back those bills, without interest, through property taxes and fees generated by the industrial park.

When Tesla went looking for sites, Gilman’s industrial park fit the key requirements. It’s just a five-hour drive from Tesla’s Fremont, Calif., plant. It’s near lithium mines. It offers relatively cheap land and privacy.

Storey County also offered a government that moves at the pace of private industry. Musk, the Tesla CEO, said of Nevada: “It’s a real get-things-done state.”

Whitten, the county manager, is a former banker and small-business owner who runs the Storey County government much like an entrepreneur. He views the county staff as practically an extension of Gilman’s development team. “As the industrial park succeeds, the county succeeds,” Whitten said.

Dean Haymore, Storey County’s community development director, has been known to sleep at the Tahoe-Reno Industrial Park to accommodate late-night concrete pours. Whitten, Haymore and the county fire chief even drove to California once to recruit a small gas company to Gilman’s park.

Haymore captured the county’s unique culture in a July interview with the Reno Gazette-Journal. (He has declined interview requests since the Tesla deal was announced.): “I’m the first one to tell you I don’t like government. I don’t like taxes. I don’t like bureaucracy. We run as a business.”

Gilman’s vision, Reno’s economic strategy and Storey County’s pro-business culture combined to help Nevada beat out bigger, wealthier states for Tesla’s factory. Sandoval says Tesla will change the state forever, but it’s also possible it becomes just the next step in Reno’s quest to become a little bit bigger place in the world.

Gilman said Tesla was already serving as the new anchor at the industrial park. The company’s move is attracting a new wave of companies who want to move in next door.

The park built 14 million square feet of buildings in its first 16 years. In the last quarter of this year, Gilman said, the park will start construction on another 10 million square feet.

And it seems likely that more are coming. Gilman’s phone won’t stop ringing.

“It’s almost unimaginable,” he said. “This morning, I’ve probably had six phone calls. Unprecedented in my 40-year history in the development game.”

— Researcher Rebecca Clifford-Cruz contributed to this report.