- Nevada Development Authority urges Chicago business owners to move (3-1-2011)
- Somer Hollingsworth doesn't get what Nevada needs (2-25-2011)
- Tone of Nevada's marketing for new businesses is changing (2-17-2011)
- NDA now has prime spot to recruit business to move to Southern Nevada (6-18-2010)
- Nevada Development Authority to recruit companies at convention center (6-9-2010)
- Q&A: Somer Hollingsworth (10-23-2009)
- Campaign seeks to lure Calif. businesses to Vegas (8-6-2009)
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At a lunchtime meeting at Panevino restaurant late last year, Somer Hollingsworth outlined his latest plans to market the Las Vegas Valley, particularly to Southern Californians. With a staff of eight and a tiny $2.2 million annual budget, his nonprofit Nevada Development Authority has limited resources, and Hollingsworth, its CEO, thought another round of offbeat commercials was an effective way to lure new businesses here or would at the very least generate a fresh buzz around the region’s business climate. Luncheon guests remembered television and radio spots featuring an attractive blonde newscaster turned pig and a digitized talking chimp that mocked California’s tax climate while touting the low-tax, limited regulatory structure of Nevada. The latter, now a YouTube classic, generated plenty of national attention via cable news channels and online.
Nevada Cancer Institute CEO John Ruckdeschel rose to speak. The oncologist and businessman argued that the chimp and pork spots cast this region in an embarrassing light, one that made it difficult to take us seriously as a contender in the competitive world of economic diversification. He worried that such messages drew businesses that were more concerned with lower taxes and wages than becoming good corporate citizens that contribute to the economic and social vitality of our community. He spoke of the need to lure much-desired 21st century industries that will help bring us out of the three-year recession—medical research and treatment, green energy and life sciences. All have been targeted by Utah, Arizona and other Sun Belt states, and Ruckdeschel recommended the NDA become more strategic and dignified in its approach. Several in the room nodded in agreement. It may have been a defining moment in the history of the NDA and the region’s economic development and diversification efforts.
“We’re edgy at best when we use that type of advertising, and it doesn’t make us look so serious when an Intel looks at Las Vegas,” contractor Steve Hill, a key player in the state’s diversification and taxation debates, later said of the commercials. “I think it plays into the image of ‘what happens in Vegas stays in Vegas.’ I don’t know that they see a serious business community in Las Vegas, and I think that’s an image change we have to make at this point, and I think the NDA would agree with that.”
For nearly two decades Southern Nevadans seemed to care little about economic development and diversification. The first Las Vegas Mayor Goodman touted it for the renewal of downtown. Political leaders pushed it in Henderson and North Las Vegas, but the region’s top three employers remained gaming, construction and government. The valley’s population doubled. Hundreds of thousands of jobs were created. Economic development and diversification were for losers, and we were winners, or so the thinking went. “There really wasn’t much emphasis on economic development. There were times the gaming industry said ‘why do we even need it?’ recalls Glenn Christenson, a former Station Casinos chief financial officer who serves as the NDA’s chairman of the board.
Then the economy collapsed. Businesses shut down. Hundreds of thousands of Las Vegans lost their jobs, homes, savings and sense of hope. People wanted answers. Hollingsworth and the NDA became a focus as state lawmakers and business executives sought alternatives to the region’s narrow economy, which generates half of its activity from real estate, gaming, food, lodging and drink—a formula for success in boom times and failure in bad times. They wondered why Hollingsworth, who earned a salary of $204,520 in 2009, hadn’t done more.
His critics argue that the NDA is a passive, old-style organization that needs to be revamped, if not broken up and replaced by a more effective regional group that brings together economic development agencies and corporate and public sector interests throughout Southern Nevada. “I like Somer, but they’ve got the wrong program, and Somer’s been there too long. It needs to be restructured and blown up,” says a one-time player in the NDA. “All the states do it better than we do. One of the reasons companies don’t move here is the crummy education, crummy health care and crummy infrastructure. Taxes are way down the list. But Somer will tell you that taxes and loose regulations top the list. If that’s true why have so many Fortune 500 companies located in Minneapolis? They have high taxes, tough regulations and a quality education system with strong public services and a high quality of life. That’s what the most desirable companies want, and that’s what we should seek. Somer doesn’t get that.”
Hollingsworth doesn’t say it outright, but it’s clear in private conversations with his associates that the 67-year-old feels battered. He’s become an easy target in a state that lacks a broad vision and significant financial tools when it comes to economic diversification. He’s at times skittish in interviews—Christenson is at his side when he meets with reporters. A probing question is irritably greeted with the phrase “You guys...” Then Hollingsworth catches himself in mid-sentence, possibly realizing that what he says next could appear in print. “Diversification would come up when we thought we had a shortage in taxes from gaming,” he says. “Our biggest fear now is we’re going to have a recovery and all this enthusiasm for diversification is going to go away. Nobody paid attention to the state, nobody paid attention to the NDA.”
Hollingsworth and his team seemingly grasp the lingo of economic diversification. An NDA handout titled, “Actions to Attract and Retain Client Companies,” offers a list of target industries: Technology, life sciences/research and development through manufacturing, green/renewable energy and solar manufacturing, medical tourism and the financial services industry. It speaks of identifying business “clusters,” a popular buzzword in the economic development crowd. And the handout notes that we must “specify current development goals.” But the question remains: Does Hollingsworth—or anyone who works within the state’s economic development sector—have the tools necessary to compete with Utah, Arizona or any state?
If Hollingsworth thought he faced an uphill battle working with a $2.2 million budget before, his task could be exacerbated by the possible reduction of the NDA’s annual $1 million state grant, as state officials rework the funding structure for economic development agencies.
To that end, a new state panel will be infused with $15 million to prime the development and diversification pump. The nine-member board includes the governor, lieutenant governor, Democratic and Republican legislative leaders and their appointees who will use the money to seed the effort. An additional $10 million request was rejected. It would have expanded the development and diversification roles of the state’s colleges and universities. While Utah, Texas and other states invest significantly in higher education for economic reasons, Nevadans were reluctant to allocate even as much money as a high roller will lose in a weekend at the baccarat tables of a Strip megaresort. “Resources are tight in this state, but we realize it’s a priority,” Sandoval Chief of Staff Heidi Gansert says of the diversification push.
Although some in the Las Vegas Valley would prefer to hold Hollingsworth largely responsible for Nevada’s failure to diversify, key players in our business and economic development communities say it’s more accurate to point out our state’s lack of vision, financial resources, sheer will and broad expertise needed to boost our economy.
“If you look at the NDA, they have comparatively limited resources compared to other jurisdictions, and it was hard for them to ask for money considering the rate of growth we were experiencing,” Nevada Secretary of State Ross Miller says. “You can always look back and be critical of people. I just don’t think that’s meritorious, and I don’t think there’s much benefit of doing that. You do need to give the NDA some credit for the growth we had over the past 20 years, but now it’s a different era. What’s clear in hindsight is we probably could have used more coordination.”
The tool bag of economic developers varies from state to state, and some are fuller than others. Alabama, Georgia and Tennessee have spent a great deal of money, time and effort since the 1950s recruiting companies from the Northeast. They offered grant money and low-interest loans, and forgave property taxes to lure companies. Ohio has a $150 million fund to invest in venture capital firms that finance business startups there. North Carolina has spent billions of dollars to transform its once-troubled public schools, colleges and universities into what’s become the foundation for the state’s high-tech Research Triangle.
The conservative, anti-tax haven of Texas is one of the stars of the economic development community. Counties throughout the Lone Star State are permitted to levy an ongoing quarter- to half-cent sales tax that’s used for economic development. Counties also offer cash gifts and low-interest loans to spark business relocation and investment. One rural county invested in a company in the Dakotas and moved it to Texas. The state levies significant taxes on its oil and mineral sectors, generating revenue that has helped transform the state’s colleges and universities into nationally respected centers of medical and industrial research.
Those in Nevada’s economic development community envy the resources of others. The state’s development and diversification attitudes are a reflection of a deeply held anti-government mind-set and a faith that the inevitable boom follows the dreaded bust, all of which have shaped our strategic approach. “Nevada has historically thought about economic diversification in terms of relocating businesses here. Most studies tell you job growth in a state comes from business innovation and expansion. Less than ten percent comes from relocating jobs from elsewhere in the country,” says Hill, a construction company owner who has spent much of the past five years immersing himself in the statewide debate over taxation and development policies. “We need to shift our focus and I think we’re in the process of doing that.”
Business executives, political players and regional economic development officials say there’s a role for the NDA or a similar entity in helping out-of-state businesses determine whether a Las Vegas move would suit them. The NDA has been particularly effective luring $20- to $26-an-hour jobs to the valley, according to ten years of internal records. From July 1, 2000, to June 30, 2009, NDA records show that it played a role in the relocation or expansion of 526 companies that created 37,842 jobs with a first-year economic impact of $3.657 billion. Many of the jobs were in manufacturing, warehouse distribution, back-of-the-office call centers, telecommunications, high technology and the establishment of headquarters. “They’re our clients. We found them. Our clients are our clients,” Hollingsworth says, “but the NDA has never won a client by itself. We get as many people involved with them as we can.”
Las Vegas, North Las Vegas and Henderson each has an economic development agency. The cities have traditionally played to their strengths. Las Vegas focuses on downtown redevelopment. North Las Vegas targets industrial and warehouse operations. Henderson recruits private colleges, including Touro University, to seed medical and high-tech businesses. All relied heavily upon housing construction during the boom. Clark County government, which could be a major player in coordinating the overall approach, has no economic development department. “We never put many resources into it because that’s the role of the Nevada Development Authority,” Clark County spokesman Erik Pappa says.
A key economic development official in the valley says the county has failed to embrace the vital role of coordinating a broader strategy, one in which it could help identify key growth sectors, align resources and help coordinate a broader investment effort. “From a professional perspective, it’s worrisome. When you look at most counties this size, they have an economic development team,” says the official, who requested anonymity because he didn’t want to anger county officials. “The Strip is in the county. The Strip does well, so the thinking goes, ‘why would you need one?’ Then you go back to everything we say, you need to diversify, diversify. From a nonpolitical viewpoint, why wouldn’t you have an economic development group?”
Outside the Las Vegas Valley, targets of economic development recruiters break into two camps—unhappy business operators who want to relocate because they’re tired of crime, traffic, taxes, government regulation or other challenges that plague their locations. Then there are those who love the settings of their corporate headquarters and want to expand, often out of state. The process can be clandestine with companies using pseudonyms to avoid tipping off competitors, even keeping NDA officials in the dark during the initial round of contacts.
Clients want to know the education level of a community’s workforce; the cost of housing, office and warehouse space; the quality of a region’s schools, colleges and universities; the availability of good health care. The NDA collaborates with economic development officials in Las Vegas, North Las Vegas and Henderson, works with local chambers of commerce, real estate brokers, financial experts. “We don’t have the inside info on what they can and cannot do, so we work together,” Hollingsworth says. The process can take a year or longer. There are starts and stops, challenges posed by cities in competing markets—Phoenix, Tucson, Albuquerque, Salt Lake City and others.
Utahns are well ahead of Nevadans when it comes to an integrated development and diversification strategy. One of the most politically conservative states in the country, Utah has invested more than $80 million from the general fund since 2006 to build an entrepreneurial partnership between business and higher education. The Utah Science Technology and Research Initiative, or USTAR, is a five-year-old program that helps the state’s research universities develop technology-based startups, leading to better paying jobs and an expansion of the state’s economy. While then-Nevada Governor Jim Gibbons was debating whether to accept $77 million in federal stimulus funding for unemployment insurance recipients, Utah used $33 million from the stimulus to boost USTAR. (Gibbons eventually accepted the money.)
The results through 2010, according to a USTAR report: The program’s researchers created six new companies; brought in more than $44 million in out-of-state research funding to Utah and accounted for $103 million in new funding, all leveraging initial investment dollars; and filed 87 invention disclosures, a prelude to filing for patent protection. There’s nothing like it in Nevada. “If you think of our state as a fairly conservative state with a conservative Legislature, you’d ask, ‘Why are they investing in this type of program?’” USTAR Executive Director Ted McAleer says. “Really, it was the industry community that got behind this deal and sold Governor Jon Huntsman on it when he came into office.” A 46-year-old West Point graduate and former Army captain, McAleer has a master’s degree in engineering from the University of Virginia and an MBA from Harvard Business School.
“If you compare Nevada with what the University of Utah is doing, roughly $400 million of research, neither of your universities are doing that,” McAleer says. “Nationally there a lot of people who are beginning to pick up the fact that you have to have a strong educational system. I think if the University of Utah continues to flourish and Utah State gets stronger, that’s going to be a competitive advantage over Nevada, and certainly the national rankings show they’re currently stronger than the ones you have in Nevada.”
McAleer is working with UNLV sociology professor Robert Lang to develop a USTAR-style initiative in Nevada. Lang, who moved to Las Vegas a little more than a year ago to serve as co-director of Brookings Mountain West, possesses a national perspective that’s often missing in the local discussion. A specialist in urban and state policy who has taught at Virginia Tech and George Mason University, Lang has become a go-to guy for legislative Democrats in the state and last year was chairman of a two-dozen-member panel designed to develop a plan for the state’s economic future. Now he’s spearheading an inventory of Nevada’s economic development efforts and the resources available to adopt a more comprehensive strategy.
Lang looks to the international expansion of the casino industry and the rise of the Macau and Singapore gaming markets, which generate gross gaming revenue that far surpasses that of the Strip. Rather than bemoan the new reality, Lang sees opportunity. Just as Houston is the domestic hub of the oil and chemical industries, Lang thinks Las Vegas can remain the global center of gaming, particularly with its expected expansion online—that is, once a reluctant Capitol Hill establishment reverses itself and embraces the reality of online gaming in a broadband world. “We’re really a developing country in this global economy,” Lang says. “I’m more worried that we lack the skill to access the export economy.”
Lang also bemoans a state requirement that Nevada’s colleges and universities send tuition money directly to the Nevada System of Higher Education rather than retaining it on campuses that collected it. Universities in other states retain their tuition money, and that money is often reinvested in those campuses.
So far as Lang is concerned, Nevada’s greatest education asset is UNLV’s William F. Harrah College of Hotel Administration. “The reason is the Strip is unique. This is what they do. They bring in people from all over the country, and you know what they do? They all pay out-of-state tuition,” Lang says. “I bet if I ran the numbers, the hotel school is a profit center for the state. If the school were allowed to keep the out-of-state tuition, it would have had a war chest, and how do I know that? I was at Virginia Tech in the architecture school. We had so much out-of-state revenue, we bought a villa in Italy. It became a European study center, a center that aligned the academic and business interests of the university and state with those of Europe. We’re milking it here, putting that money into the state higher education budget. Who knows where it goes? We’re shooting ourselves in the foot. It’s self-defeating in that you want to encourage the entrepreneurial role of the hotel school. Unfortunately, this is the way it works here. We’re alone in that regard. All roads lead to Carson City. At Virginia Tech, the architecture school kept its money and ran its affairs.”
No matter the machinations of state government, Lang is adamant about the greatest economic challenge this region faces. It’s one that he says hampers our diversification efforts and will continue to do so unless we invest in our greatest potential asset: The education of our people. The Clark County School District ranked last among states in high school graduation rates in 2008, according to a recently released Education Week report. Less than 20 percent of Nevadans hold college degrees as opposed to 40 percent of Utahns, Lang says. “It’s the biggest hindrance to the emergence of Las Vegas as a world-class city,” he says.
When you look across the country and then turn to our state, it’s clear that Nevada’s development and diversification tool bag is limited. Nevada’s public schools and universities are hurting. Our public agencies lack the resources to prime the investment pump. Political debates here are stymied by a decades-old narrative that finds us unwilling or unable to adequately invest in public entities that could become the foundation for a significant economic transformation. We must look to cities, counties and states and glean from them the best practices that foster innovation, lift economies, create jobs and usher in a new era of wealth. We must get beyond the default mode of many Nevadans, the one that reads that government is the problem rather than the solution. Utah, Arizona, Texas and North Carolina—states with conservative political reputations—have done so, adopting bold economic initiatives.
If we fail to pull together as a community and invest in our future with clarity, vision and civility, our region’s tourism and construction economy will invariably rebound only to falter with the next collapse in consumer fortunes. And the failure to have transformed the Las Vegas economy will be ours—not a single person’s. Not even the NDA’s.