Business relocations to Nevada may hold steady

Grace Leong

Wednesday, April 23, 2003 | 11:16 a.m.

The Nevada Development Authority is hopeful the number of new companies relocating to Southern Nevada will remain steady for the fiscal year ending in June, despite the state's fiscal problems and uncertainty over its tax situation.

To date, the number of NDA-assisted companies that have relocated to Southern Nevada this fiscal year stands at 42. That number could climb to about 50 by fiscal 2003 because of a recent uptick in activity from California, said Somer Hollingsworth, the NDA's president and chief executive.

He spoke Tuesday at an event unveiling the annual Las Vegas Perspective fact book.

Fifty new businesses relocated to the state in fiscal 2002, down from 62 in fiscal 2001 due to the economic downturn and fallout from the 9-11 terrorist attacks.

But Hollingsworth is hopeful that more California businesses will move to Nevada because of soaring energy costs as well as increased costs arising from California workers' compensation insurance changes and recent passage of the California Paid Family Leave program.

"A year ago, 50 percent of the total inquiries we had from businesses came from California. Now, that number has jumped to 80 percent," Hollingsworth said.

The workers' compensation package signed into law by California Gov. Gray Davis last year and took effect Jan. 1, increases workers' compensation benefits by $2.4 billion as well as benefits of workers killed or injured on the job.

And workers, under the new California Paid Family Leave program to take effect July 1, 2004, will be entitled to take up to six weeks of paid leave off a year.

A continued aggressive focus on economic diversification away from Nevada's primary economic engines -- gaming and tourism -- is warranted, especially in light of the casino-related layoffs in the aftermath of 9-11 and ongoing difficulties in the airline industry, Hollingsworth said.

He said the NDA is targeting its recruitment efforts on businesses in telecommunications, computer software and hardware, solar and wind power technology, aerospace, pharmaceuticals, medical equipment and supplies, biotechnology, health services, animal sciences, medical devices and agricultural chemicals.

But the state's diversification efforts may be challenged by growing concerns about Nevada's education system, rising healthcare costs and water shortages, said Keith Schwer, director of the UNLV's Center for Business and Economic Research, who also spoke at Tuesday's event.

Meanwhile, Nevada's uncertain tax situation may cause some companies to hold off plans to move to the state. But Hollingsworth remains hopeful these companies, particularly those in California, will still move to Nevada because of the potential savings in energy costs and workers' compensation costs.

"If any tax proposals go through, we'll compare ourselves with which state we're recruiting businesses from, and we'll do an analysis of that state's tax structure and discuss the benefits of moving to Nevada," he said. "We've already helped one Californian manufacturing company that moved to Las Vegas to save about $250,000 in annual energy costs as well as workers' compensation costs.

"At worst, if new taxes are indeed imposed on Nevada businesses, we'll change our telephone hotline to 888-LOW TAXES from 888-4 NO TAXES," he said.