Reid, Sandoval square off on taxes, state budget, economic diversification

By Richard N. Velotta

Friday, Oct. 15, 2010 | 3 a.m.

Editor's note: This week we discuss the major candidates for governor and lieutenant governor. In next week’s In Business Las Vegas, the major candidates for the U.S. Senate will be featured.

When Southern Nevadans go to the polls to pick a new governor next month, they’ll choose from two major candidates with similar views on taxes — neither says he’ll raise them — and on the diversification of Nevada’s economy.

But both Republican Brian Sandoval and Democrat Rory Reid are quick to point out that their opponent either has no plan or has a plan doomed to failure for the state to climb out of an anticipated $3 billion budget hole.

Early voting begins Oct. 16 for the midterm election that includes the state’s top office as well as the race for lieutenant governor, the office that oversees the Economic Development and Tourism commissions. In that race, incumbent Republican Brian Krolicki is being challenged by Democrat Jessica Sferrazza, a three-term member of the Reno City Council.

In a statewide televised debate last week, Reid’s only deviation from Sandoval on the question of whether he would consider raising taxes was Reid’s statement that he would consider the implementation of a state lottery — a process with multiple layers of voter approvals and only for the benefit of education in the state.

Otherwise, Reid and Sandoval rejected even considering additional sales taxes on services, mining tax, cigarette or alcohol tax, fuel tax or room tax in their first four years in office — music to the ears of Nevada businesspeople.

How would Reid fill the $3 billion budget deficit without raising taxes?

In an interview with In Business Las Vegas, Reid said he would remove inefficiencies in state government administration by consolidating offices. He says the 26 departments could be whittled to 16. Reid also said new revenue would be generated by economic diversification, including a push to exploit renewable energy. He added that the state’s universities can become revenue generators by encouraging technology transfers from the schools to private enterprise.

“One of the things I’ve done is find ways to keep the important services we need and deliver services in more efficient ways,” Reid said. “We can use reforms that have been successful in other states to eliminate waste, fraud and abuse.”

Reid hit the ground early in the campaign, issuing a 30-page plan on diversification developed with the help of business and community leaders and academicians.

“It’s obvious to just about everybody that we have relied for too long on the gaming and tourism industries,” Reid said.

In the plan, he lays out a proposal to attract clean energy manufacturing companies, require government to lead by example by building energy-efficient buildings and facilities and expand net-metering and sales tax exemptions on new commercial and industrial solar and geothermal energy products.

Reid said the biggest problem facing the business community is the uncertainty of what the future holds. His willingness to lay out a plan online is designed to restore confidence.

“People are concerned about which way the economy is headed,” he said. “To move our state forward, we have to restore confidence in investing. I think Brian Sandoval has said less than any candidate for higher office in Nevada, period.”

He considers the state’s regulatory environment for gaming to be the best in the world and the only tweak he would suggest is placing more scrutiny on proposed consolidations.

He thinks Nevada should work toward developing a regulatory regime for online gaming. Acknowledging that it would first take federal legislation for Internet gambling to be allowed, Reid said, “it’s going on now, it’s very lucrative and we’re not participating.”

Asked why he would be better for the job than his opponent to the average businessperson, Reid said he is the only one who has experience managing a budget as large as the state’s (as a Clark County commissioner) and “I’ve done it for eight years.”

“I’m the only one with an economic plan to diversify the economy, create jobs and encourage entrepreneurs and venture capitalists to come and invest here,” Reid said. “Brian Sandoval doesn’t have the experience and has no plan.”

Sandoval, of course, disagrees.

He calls the estimated $615 million that Reid says could be generated with some of his economic diversification plans “fantasy money.”

“I’ve taken a firm position that raising taxes now is the worst thing we can do with 15 percent unemployment,” Sandoval said. “In addition to bringing new business to Nevada, the No. 1 focus has to be on what we have to spend.”

Sandoval said instead of taking a fantasy approach, he prefers to be brutally honest and that tough decisions would have to be made across the board in the budget process.

Even if the state’s shareholders came to him with a plan to raise taxes, Sandoval said he would be firm in his resolve.

“I respect the opinion from everybody, but I’m firm in my conviction that now would be a bad time to raise taxes,” he said.

Sandoval said that the state needs to invest more in economic development and would support revisiting the thresholds set by regulation for offering tax breaks to companies willing to invest in the state. He also wants to give the Economic Development Commission the resources it needs to tell Nevada’s story for being a good place to do business.

“A lot of people on that commission are people I’m talking with myself. We all want to bring the high-tech and renewable energy companies here,” Sandoval said. “I think Southern Nevada has some great opportunities by clustering medical care facilities, data centers and places like the Switch (Communications Group) facility.”

Sandoval said he plans to become personally involved in recruiting businesses, making it part of his early campaign to visit 100 businesses.

“Give me a call list of our top 100 prospects. We’ve got a ready-made workforce and a supply of trained workers,” he said.

As a former chairman of the Nevada Gaming Commission, Sandoval agreed with Reid that Nevada should be on the forefront of regulating Internet gambling.

“If the federal government approves it, Nevada needs to be first in regulation,” he said. “But this has been an issue since I was on the commission. I think we should encourage the development of technology in gaming,” but added that he doesn’t know of any pressing need for additional industry regulation.

Sandoval said he has different kinds of experience that would make him more qualified than Reid. He said serving as a state legislator, Gaming Commission chairman, a federal judge and attorney general have given him valuable perspective.

“I think it’s also important to note that business is going to be a priority for me,” Sandoval said. “I’ve been very accessible and close to the business community, the Las Vegas Chamber, the Henderson Chamber and the Reno-Sparks Chamber. I recognize that businesses are struggling, and the worst thing I could do would be to impose a new tax.”

Although Krolicki is running on his track record of four years as lieutenant governor, Sferrazza says the lieutenant governor has been invisible on policy matters relating to the office — economic development and tourism.

Sferrazza said she would use her experience as a Reno councilwoman to jump-start renewable energy projects in Nevada to bring about economic diversification.

“Renewable energy has to be a priority for the state,” Sferrazza said. “It’s a win-win for taxpayers and the economy. We’re creating jobs by putting people back to work, we’ve committed to reducing energy consumption by 17 percent and we’re allowing for the private sector to partner with governments.”

Sferrazza said Krolicki’s formation of the New Nevada Task Force to develop an economic diversification plan was a political stunt on the eve of the primary.

“It’s like he said, ‘Gosh, we’ve got to do something.’ Nothing that has come out of the task force is new. I respect all the members of the group, but we don’t need another study to sit on a shelf. We need action now.”

She’s not convinced any of Krolicki’s trips to China have helped Nevada.

“He’s been in China quite a bit, but I would question whether that has resulted in any jobs for Nevadans,” she said. “While he was in China, I was out helping people stay in their homes.”

Krolicki counters that his China trips — all of which have been paid for by him or by trip sponsors — have put Nevada ahead of other states for future trade and tourism business. The steady work by him and his predecessor, former Lt. Gov. Lorraine Hunt, have been important because Chinese cultural protocol values face-to-face meetings with high-level leaders.

Krolicki would like to see more money invested in economic development, but he’s also realistic about the state’s budget deficit. He also knows that constitutional restrictions prevent the state from offering greater incentives to companies seeking to move to Nevada and that often helps the state’s competitors.

“Offering more money to come here is not a constitutional capability, so I answer that question with unless we change the constitution, we’re not going to have that tool in our box like New Mexico and Michigan and a lot of other states,” Krolicki said. “We’ve got to sell what we’ve got, which is a great tax environment, a very fair regulatory environment and unbelievable proximity to the markets of the western United States.

“We’ve got to get through this tourniquet phase in the budget,” he said. “It’s going to be extraordinary and there are going to be amputations and things aren’t going to be pretty, but we can’t lose sight of the things we need for the next five, 10 or 20 years when we do get out of this extraordinary short-term budget exercise.”

Krolicki said the Tourism Commission has “done a great job with very little” despite a 41 percent operational budget cut and 23 percent reduction in personnel.

“When you have a sick child or a hungry senior citizen, that dollar for tourism — even though it gets $31 in return for every dollar invested — you’re going to lose that dollar to the sick child or hungry senior,” he said. “I get that. The whole room tax revenue structure will be part of the debate going forward.”