Rory Reid’s policy platform faces obstacle in state Constitution

By David McGrath Schwartz

Saturday, Oct. 17, 2009 | 2 a.m.

A centerpiece of Rory Reid’s campaign platform is a proposal for the state to lend money to small businesses, start-up companies and renewable energy projects to help get them off the ground.

Yet that proposal from the Democratic candidate for governor faces significant questions about its constitutionality — questions that Reid declined to answer Friday.

Nevada’s Constitution appears clear on the issue of the state lending money to private interests. “The State shall not donate or loan money, or its credit ... except (to) corporations formed for educational or charitable purposes,” according to Article 8, section 9.

Reid said he is working on a mechanism that would allow the state to make such loans.

“These are legal issues, and there are legal arguments to be made,” he said following an address to the Reno-Sparks Chamber of Commerce. When asked what those arguments were, he demurred. “I’m developing it. I want to make sure the arguments are good before I share it with the world.”

Reid acknowledged that he defied political convention by releasing a 30-page policy platform upon officially announcing his bid for governor.

“The political convention is, when you’re running for something, especially early, don’t say anything,” he told the chamber audience. “You can’t argue with nothing.”

But, he said, he wanted to “start the conversation” about the future of Nevada even though the plan would be “picked apart and criticized.”

The strategy behind the plan appears to be an effort to stake out the policy high ground from which Reid can argue that, perfect or not, he has a plan while his opponents do not.

“If they don’t say anything, I’ll take it that they agree with me,” he said.

The downside, as Reid acknowledged, is that the policy paper provides fodder to the media and opposing campaigns.

Many parts of the plan — dubbed “The Virtual Crossroads: Rory Reid’s Vision for the Future of Nevada” — appear to rely on the state lending money to businesses. Among the proposals:

• “Boosting access to capital for struggling small businesses and new start-ups by providing capital and loan guarantees for banks.”

• Creating a “Nevada Capital Investment Corporation to invest in venture capital projects agreeing to establish a presence in Nevada.”

• Encouraging “micro-lending” to businesses with fewer than five employees that have been rejected by traditional banks.

The paper states that a future economic plan will spell out details of these proposals.

Economic development advocates in the state have complained that the constitutional restriction on the state giving directly to companies has hamstrung them in the race to attract new businesses. States such as New Mexico and Michigan offer cash incentives.

Reid’s campaign pointed to past efforts by the Legislature to create similar pots of money as proof that there are mechanisms that allow the state to lend money, even if indirectly.

In 2007 Lt. Gov. Brian Krolicki proposed taking $5 million a year from unclaimed property, bonding it and using a pool of $70 million to attract high-tech industries. That bill died in the Assembly.

This past session, legislation to create a $20 million fund to be lent through banks to minority-owned and small businesses passed but was vetoed by Gov. Jim Gibbons.

Reid said Friday he had spent a lot of time, talking to a lot of people, about his plan.

“I want to marry people with good ideas with venture capital. We need more venture capitalists in Nevada,” he said. “Most of these plans are revenue-neutral and they incubate businesses. Why wouldn’t you do it?”