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January 27, 2015

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

Politicians pretend to know how to best draw them here


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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  1. Still a bit shocked, that in light of these hard-hitting financial times, that the school district is still going forward with its June 23-24 Equitity and Diversity Trainings over at Texas Station. There is no doubt in my mind that the subject warrants training and dialog, but here we are, cutting staff and teachers, and instead of pulling the plug on some of these trainings, its is still "business as usual." As a citizen taxpayer, it makes me wonder how much more is being spent like there is NO TOMORROW during a time when many teachers are buying paper out of their own funds to again supply their students in classes.

    Perhaps some of these trainings can be facilitated on video to access at will for employees. We do have the technology.

    This April 1st, will be one day when staff meetings and pink slips are issued and great wailing will be wrought. If you believe prayer changes things and people, then NOW is the time to pray for a gigantic intervention in the State of Nevada of epic stature. Make no mistake, the poor and middle class are being whipped to the point of bleeding, with the silent (and mostly immigrant)masses watching in despair. A very sad time in Nevada's and the USA's history.

  2. Eighty Thousand of the unemployed are construction workers. The construction work is not going to be coming back to Nevada any time soon.

    What are the construction workers doing for their selves? Are they going to sit and milk the state dry of all social services or are they going to move on to states that have work?

    Construction work has always been migrant work.
    Now those in the industry seem to think the work is going to return. It is not for awhile, it is time they move on. You can not keep 80,000 people on social services knowing there will be no work for them.

    If you are in construction it is time to move on or learn a new trade.

  3. Interesting article, but I see way, way too much political posturing trying to come up with reasons why businesses are not setting up in Nevada.

    If the politicians in power right now did more talking to try to get businesses enthusiastic enough to move here, we might get somewhere.

    But I really, really see nothing but efforts to come up with excuses of why it's not happening so they can go after the middle class here more.

    One thing that gets me is why do they spend all that effort trying to get out of State established businesses to move here? When they should be promoting home grown businesses within Nevada to take root and blossom?

    I just think there's too much finger pointing for political purposes going on. Much more than any action.

    Every State has its good and bad advantages. Can't control that. But we can control the other stuff. I say we promote growth from within the State, and not spend inordinate amounts of time trying to get Bank of America to move its world headquarters here or something stupid like that.

  4. It is not a bad thing to give incentives to companies to move to a city or state, but the government officials need to make smart deals. I have seen deals where it was pretty clear that the entity was giving away too much to get a company to move. But it will probably take something to get the ball rolling. They talk about educating more engineers, for instance, but without companies in the valley to hire them, they will just leave to get work. It is hard to imagine many of them staying and working other jobs waiting for someone to build a new facility to hire them. So, you need to get someone to move jobs here with the expectation of a growing business and more positions. Once you reach a critical mass of certain types of jobs, others would see the area as a resource to tap if they moved to the area.

    From the outside, one thing I had always heard was that some people did not see the state as particularly conducive to a stable family life and that turned businesses off. The idea was that members of a stable family make better employees and that the gambling, prostitution and other things seen as prevalent in the state would tend to cause issues in the employees lives and that hurts the company in ways. In recent years, the acceptance of gambling in other parts of the country has hopefully eroded some of that thinking at least with respect to that vice. But executives that I have known in places always loved to visit Las Vegas but looked at it with a more jaundiced eye when considering a site in the area. There again, getting some companies to relocate into the area would help create an environment that would encourage more to consider it.


  6. Is Birdie off his meds again???

  7. Birdie, don't be afraid to make the next one decaf!

  8. Did NPRI get its information from its sugar daddies? Or are these going to be more talking points from national right-wing organizations?

  9. Nevada already has low taxes, it has not worked in attracting jobs in the best of all economies. Maybe, you would think the politicians would try something else. The definition of stupidity is doing the same thing over and over and expecting different results. Would an educated population really be That Scary to them? Why is there No Major Medical School and Research Hospital in Southern Nevada?

  10. All states go through transitions. Some adapt and succeed (San Diego, Austin, Seattle), some get lucky and have the original industry revive (Houston), and some simply die a slow death because the politicians and populace don't have the backbone to make needed changes (Detroit, Pittsburgh). Which is Vegas?

  11. For real wealth, there has be manufacturing. But manufacturing is being outsourced to foreign countries. And manufacturing would need cheap transportation of raw materials to factories and cheap transportation of finished goods to markets. Raw materials and markets are far away in the Las Vegas desert, so the transportation links are weak and expensive.

    Then the factories need ample electric power and water. But the push is towards solar "flea power" and wind "flea power," and Lake Mead is drying up. So there is not enough power and water to run the factories here.

    Then the factories that emit pollutants have to be environmentally clean or they will have to pay carbon credits and employ expensive pollution controls.

    So, even if manufacturing were possible, its manufacturing cost will make it uncompetitive.

    The gambling industry only redistributes the wealth, just like the government. It creates no real wealth. Hence it will not provide economic benefits needed for a real economic recovery.

    These cumulative factors discourage manufacturers from coming to Las Vegas. Investing in plant and equipment will be foolhardy and the factory builders and investors are too smart to come here for the reasons given above.

    What is the solution?

    Well, there are at least 65 ghost towns in Nevada. All Pollyanna remedies aside, a hard look needs to be taken to face the final reality.

    Will the final economic equilibrium be the condition of BACK TO BEFORE BUGSY SIEGEL?

    Will the people who stick their heads in the sand be forced to face this final reality?

  12. All I hear from public employee and teacher unions is our schools are under funded, the last in all performance measures and the employees are lining up for food stamps.

    The public message about our state must change. We are creating an image of failure that does nobody any good. Who would want to move to a place where all the news is negative...Apparently nobody!
    In an effort to increase public funding, too many people are willing to speak badly about our home. THAT IS DUMB !!

    Success creates success !!

  13. Schools are not underfunded, they are under educating. They are doing this on purpose, by direction. Tax structure is inhibitory and government regulations change with the wind and who is interpreting them. Not to mention they are more numerous than the rocks in the desert. The number of illegal immigrants is too high and crime follows them. In short there are better places to set up a business. Try and set up a manufacturing business and you will have more regulations than you can follow.

  14. Politicians of both strips always fall back on Schools and taxes as if there is nothing else to talk about in attracting businesses to the State or any State.

    The issue is more complex and include:

    Logistics and shipping costs: which included fuel, rail, air cargo, and cargo ships.

    Quality of life for the business executives including what do they do after hours, entertainment (not everyone things of giant casinos as the thing to do every night) spacious years, outdoor activities, natural beauty, landscaped cities.

    Master planned and managed growth: Nevada seems to have no master planning and take a okay to build at any costs view point where developers routinely get to do things that are not in the best interests of the city or state.

    Foundations of support companies: There has to be infrastructure in place for companies to draw on, not just education but all the support and side businesses that are required to support the core business interests.

    Reputation of Location: There is a reason many companies retain a NY, Beverly Hills or San Francisco address even if they don't operate there. Nevada has a reputation outside the state of being a haven for scam artists, junk companies, telemarketing, sin and sex. It is at odds with the advertising the State and city do to attract tourists while doing little to educate the business class about why they should come here detached from the many negative reputations we have.

    Business climate from Government: Las Vegas and Clark COunty have a wide and deep reputation for dishonesty, graft, greed, red tape, government meddling, over management, impossible permitting that often requires bribes, cliquish and unfair rulings, catering to old wealth families, infighting among local businesses and interests, an inability to get things done (like high speed rail). A long history of starting and failing, allowing shark like dishonest and mean spirited business activities like (i.e. Fontainebleau hostile and immoral maneuvering and out right dishonest business dealings) all create a hostile and negative environment.

    Lack of cheap water and power compared to many midwestern states.

    Until we overcome these situations and reputations, and until local government can streamline and simplify and most importantly locals as well as out of state businesses have to believe Nevada has really changed interests will continue to be low.

    Education and taxes will mean nothing if we can't fix these foundational issues.

  15. It can't be about prostitution. Nevada has had the same policy for decades -- and economic growth occurred. It can't be about taxes. We've been low or no taxes for a long time -- and we've had growth in mining and "entertainment", some growth in warehousing, ups and downs in construction, but no real, substantial diversification into manufacturing. The service industries are still dependent on employment in the main sectors of mining and "entertainment."

    We do not have a labor pool skilled in computers, electronics, photonics, or any other modern discipline. We are also at the fringe of commerce. With rising diesel and gasoline prices, most businesses incur a cost penalty if they locate here. As the price of fuel rises, the cost penalty increases. And the continued rise in fuel prices will put a further crimp in our mainstay entertainment industry.

    We need to change things to grow and prosper, but we are so busy not raising taxes and worrying about unions and "socialism" that we are crippling ourselves instead.

    Nevada is a beautiful state with scenic beauty and mineral riches. It could become an economic powerhouse, but it lacks vision and the courage to move upward.

  16. I see education (or lack of, as the case may be) a major problem in this city. Why would any company want to relocate here and subject their employees children to such low education standards? On the other hand, a good education doesn't stop at the end of the school day. Parents need to get involved, help their kids with homework and school projects, and attend PTA meetings. It really is a double-edged sword.

  17. there are some great logical posts here! MMM, SCHONRVHEL are great examples. NV has to learn how to make lemonade out of lemons! The ghost towns were here long before the education and tax issues..

  18. I moved here in May of 2008 and I have since created 3 businesses employing collectively 23 people with pay ranges from 9.00 hr. to $110,000 a year.

    I moved here from SoCal simply because I loved Las Vegas and I was here at least one weekend a month anyway. After 5 or 6 years of dreaming about making the move I finally did, knowing I would have to start from scratch.

    I had read that Las Vegas and Nevada in general were a low tax and low regulation state. I was schocked when I realized the red tape and buraucracy was worse than California. While the licensng and fees are less in a few area's they are much higher in many others.

    The bottom line is the unnecessary regulation and endless red tape that turn away businesses. Combine those problems with bureaucrats who feel it's their jobs to find any small infraction of some worthless obscure law to try and fine you or shut you down.

    Example: Contractors Board threatened to fine and cite my construction company because we answered the phones without using the full legal name with the word incorporated at the end.

    Just last week the Nevada Dept. of Industrial Relations (whatever that is) threatened to close down my wife's taco shop (it's been open 2 months) if she didn't immediately produce a copy of our workers comp insurance. This was after not one but TWO ladies walked in unannounced with badges around their necks DEMANDING to see proof of workers comp. She didn't know where the form was or who those women were but she felt intmidated and told them we have the coverage she would have to find the form. The next day one of the women called and said she had 45 minutes to fax it over or that she would be there to close down the business!

    A month ago I went to the county to inquire about getting a beer license to sell beer in the taco shop. I had to get an appt. with a gaming and alcohol business license tech. who gave me a stack of forms 2" thick. He suggested I hire a lawyer to fill them out. I asked if approved would I be able to sell beer at a second taco shop if I decide to open another, he said no, I would have to apply for each location. Just to sell a Corona Beer in a taco shop. I gave up on trying to sell beer.

    These are just a few of my personal examples of the bureacracy businesses have to deal with in this state. If anybody ever asks me if Nevada is a business friendly state I tell them not a chance.

  19. @Tom: and this was different from California how?

  20. BINGO! Noindex hit the nail on the head. My G/F and I just started a janitorial and residential cleaning company. What a fiasco! Just getting the information of what you need and what to do and where you need to go is mind boggling. It is so confusing even the employees at the various government offices we had to visit didn't know what we needed to do.

    Not to mention with all the cuts to services, there are ridiculously long waits at many of the various offices to get anything done and the parking downtown is a nightmare. Also, there are no end to the fees involved. This is just trying to do it on your own. I'm sure we could have hired a lawyer and it would have gone smoother but at a much greater expense.

    I lost it for a minute at the business license office in LV and spouted off at the mouth with, "if this is the friendliest state to do business in, I wonder what it's like at the worst?" Frustration is an understatement.

    After going through this hell my G/F and I are in the process of writing a small book on how to do business in Las Vegas, NV for those brave souls crazy enough to try to do business in this community.

    If you want to attract new business here, streamline the business formation process and I think more businesses would locate here.

  21. The racist teaparty, talk radio crowd is a bad demographic. They are under-educated people that won't spend money on infrastructure and education. (That's why the two "top" talk stations have ratings that are 22 and 23.) The teabags don't spend much money.

    Sandoval has promised jobs in exchange for "low taxes." He has not delivered and now should resign.

  22. Nevada politicians just need to look in the mirror if they want to know what the problem is, it's YOU!

    As for CA beaches, what a joke they are all polluted and disgusting.

  23. Seeing Las Vegas as a vacation destination has its limits. We dodged the recession bullet for years, thinking we were impervious to economic downturn. Now we are paying the price. Our colleges need to look beyond training casino managers and food and lodging executives. And we can't sustain a labor force that is programed to add to our oversupply of housing.
    I am not sure that there is a will to change. We seem lost in deep denial, waiting for a recovery so we can perpetuate the status quo, and keep doing the same old thing. Casinos with new themes perhaps?
    It would be wonderful to see some real economic diversity, and an educational system to support it. Until there is a real will to change, the only place Las Vegas is going is downhill.

  24. vegaslee made an excellent point

  25. If you are a business, (A) Reno offers: (1) Good road connections to Northern (1 driver day) and Southern California (1.5 driver days), (2) Two railroads (Union Pacific and BNSF) operating over the Union Pacific rails, (3) Two intermodal transfer points, so freight can move from rail to truck and from truck to rail, (4) great climate and scenery, (5) a somewhat diversified economy(6) a university; (B) Las Vegas offers: (2) Good road connections to Southern (1 driver day) and Northern California (1.5 - 2 driver days), One railroad (Union Pacific) with direct access to the Port of Los Angeles/Long Beach, (3) a great airport with excellent passenger and freight capacity to just about anywhere in the U.S., (4) a university, and (5) a business life dominated by "gaming".

  26. I don't know why but let me take a wild shot. How about our corrupt to the core judicial system where we elect our judges just like any other politician and expect them to be fair when adjudicating cases?

    What about the fact that no less than FOUR of our county officials have been convicted of official corruption in the last ten years?

    What about the fact that our county government pay structure is unsustainable to the point where anyone with simple math skills can figure out we can't pay retired firefighters a quarter million dollar a year pension for twenty years?

    What about the fact that our state spends about $700 million dollars a year of taxpayer money to feed, give benefits to, incarcerate and otherwise cater to illegal aliens?

    What about the fact that our state has two of the most reviled Senators in the entire nation (Reid and Ensign)? Reid's still trying to find Tommy (last name withheld to protect immigration status)

    What about the fact that the only master plan Las Vegas has when things go bad is to simultaneously dig up every major street in town?

    Just a little food for thought.

  27. Given the vicious attacks on educators in the state and efforts to destroy education here, this article really should come as absolutely no surprise.

  28. some of the main reasons are 115 degree days, and no water. It is as poor use of resources to make the desert bloom.

  29. Let's just elect the "usual suspects" for Mayor because 1. they raised more money.
    2. they've been in office, say they have great ideas, but never used them.
    3. we recognize their name and feel comfortable with that, and don't care what they will do. And the press has written the most words about numbers 1, 2, and 3.
    OR We can look for someone who has the best background for actually turning the City around. Someone who will not raise taxes, someone who will not use public funds like it's their own bank account. How about voting in someone with 30 years in business, finance and land development, who will actually know how to put packages together to assist CEO's to move their businesses here. I know how to talk their language, how to attract private capital from the USA and Europe. I will turn the red ink to surpluses, by creating new revenue sources. Help show residents how to ship worldwide with one computer in their living room. Attract new businesses here with packages so attractive, they will find it hard to resist. This is so much better than just dipping into public funds to create a few jobs for the short term. Marlene Rogoff, Candidate for Mayor of Las Vegas

  30. Harry,...stop the excuses,...Nevada may have problems attracting business but prostitution isn't one of the reasons,...its all in your head.

  31. It's a good thing Nevadans don't go by results, otherwise we'd vote the bums out.