Q+A: Steve Hill:
State’s czar of economic diversification on where we were, where we’re going and how we’ll get there
30 July 2012
One of the cornerstones of Gov. Brian Sandoval’s election campaign was to revamp the state’s economic development program to diversify Nevada’s economy, which was decimated by the effects of the Great Recession.
The Nevada Legislature approved Assembly Bill 449, which placed economic development under a cabinet-level director appointed by the governor. Many considered the legislation to be the most important approved during the 2011 session.
Sandoval chose Steve Hill, founder of Silver State Materials, a Las Vegas concrete, sand and gravel supplier, to be the state’s first executive director of the Governor’s Office of Economic Development.
Hill served as chairman of the Las Vegas Chamber of Commerce State Policy Task Force and chaired the chamber’s Board of Trustees. He also was elected chairman of Service 1st Bank of Nevada.
Hill recently sat down with VEGAS INC to update the state’s economic development efforts and reflect on the nine months he has spent in his job.
What were the biggest mistakes in past economic development efforts?
One was that the economic development efforts of the past have largely been focused on simply recruiting businesses from out of state to move to Nevada. A real economic development effort includes that, but there are several other parts of the economic development job description that we weren’t paying attention to: helping businesses who were already here to stay in business and grow, commercializing technology out of the university systems, helping companies start up and looking more globally.
We export a lot out of Nevada, but that’s largely due to being a center for mining, and the gaming industry is really an export industry because it provides services and brings money into the state. Outside of that, we have anecdotal exporting, but things like announcing that the governor is going to go to China and Korea in September is something that hasn’t been done in decades. What we’re finding when we do things like that is that opportunities start to appear, and we think that broader effort in economic development is important.
We weren’t, at times, in alignment. What we were doing in work force development and education didn’t necessarily match up with what the real opportunities are in the economy. It’s easy to forget that a large reason for that is that we didn’t need it. I moved here 25 years ago and for the first 20 years I was here, it was pretty hard not to make money and have a good job. We didn’t need to do these things and therefore, we didn’t. That period of time was terrific, but it’s gone. If we’re going to have a vibrant economy going forward, we’re going to have to think about it differently.
What part of the labor force does Nevada need to address or improve?
One of the big situations that we have is that about 12.5 percent of our workforce when we were at peak economy was in the construction industry. The national average was about 5 percent. We’re back to that 5 percent, so 7.5 percent of our unemployment is because of that boom in construction and the bust. Many who lost their jobs in the construction industry are going to have to look for different fields of work because we’re not going to get back to 12.5 percent of our work force being in construction.
We see real opportunities in health care. There’s about a 45,000-job gap between the number of health-care jobs in Nevada and the national average on a per-capita basis. Our health care specialists are working on a couple of programs with the university system and with DETR (the Department of Employment, Training and Rehabilitation) to help train people for those jobs. Because those jobs are available, the health sector continues to grow in spite of the economy.
From a short-term standpoint, we think there are opportunities in manufacturing and logistics. The mines are doing really well and are struggling to find employees. The situation in northeastern Nevada is markedly different from the rest of the state. There are housing shortages, so folks in the construction industry know there are construction jobs there. School districts across the state are showing vast improvements. There are more graduates from the university system. As we continue to improve the work force, that also attracts companies.
The situation we have right now is that we have a lot of really great people that don’t have a job. That’s attractive to companies. As those people get back to work and our unemployment continues to fall, increasing the capacity of the work force is going to be an important thing.
What’s the biggest quality of life issue raised when companies say they don’t want to move to Nevada?
What we hear when that comes up is an image issue. Obviously, the gaming and tourism industry have done a terrific job growing that industry and recovering from the recession. But the “What happens in Vegas, stays in Vegas” image, to some extent, eliminates some companies from looking at the Las Vegas market.
And then, there’s the concern about education.
What we find across the state is if we can get the companies to come with their families and see what we really have to offer instead of the perspective they have from out of state, that tends to change a lot of minds. Some companies are unwilling to do that. But if we can get those companies here, they see a different community than the perception. We have some terrific schools that their kids can attend, and there are all kinds of opportunities in Las Vegas for quality of life.
Zappos CEO Tony Hsieh also is helping to broaden the image of Nevada. Downtown Las Vegas is becoming a cool place for the tech sector and the arts crowd. Having a vibrant downtown matters.
Are we investing enough in education to make a difference in perceptions about the state?
Obviously, the funding we put in education is a conversation we’re going to have again in the next legislative session. But I think what most people are saying – and I know the governor has said this publicly – is that we’d like to see more money go into education as our economy improves. I think the question out there for those who have to make this decision is if we raise taxes, is that going to hurt the economy, and ultimately hurt the amount of revenue we bring in and really not help the school system?
Why did the state insist on setting up a new layer of economic development authorities?
The focus on most of the development authorities has been almost solely on recruiting companies from out of state into Nevada, and if you look at a full spectrum of a job description of economic development, it’s going to include helping businesses that are here stay and grow, helping commercialize research done at the universities, helping make the business environment better and looking at global exports. All of those parts of the job needed to be added to what we’ve asked economic development to do in the past.
From a process standpoint, in the past, the major development authorities in the state have basically gotten a check from the general fund, and there hasn’t been a lot of accountability attached to that. They report, but the funding hasn’t really been tied to performance.
We issued a request for proposals and are contracting with the new development authorities to provide the services and measure the results. Each of the development authorities throughout the state will be measured in 11 standard areas. If they say they are going to do a certain initiative, we’ll measure that. I think it will be helpful for the whole effort and provide a level of confidence that the money being invested, which is taxpayer money, is well spent.
What is the status of the seven key industries the state wants to bring to the state?
One significant initiative that we’re undertaking in defense is seeking to be designated as one of the test sites for unmanned aerial vehicles. We think Nevada has a lot to offer. We’re the nerve center for unmanned aerial vehicles for the military and the defense industry, and we have a large corridor where people don’t live. We have the opportunity to fly unmanned aerial vehicles in an area that’s safe and doesn’t have privacy concerns, which is something that most areas in the country don’t have.
We’re also looking at the opportunities that may be a result of potential defense cuts in the national federal budget conversation. Because Nevada is a core component of the defense industry, if there’s consolidation, we think the state may be able to increase its missions, which would be a benefit all across the state at Fallon, Hawthorn, Nellis and Creech.
Isn’t there a process in place now to find a place to do the testing?
There is. The Federal Aviation Administration will issue a solicitation asking that we respond by September or October, and they are required to designate six areas by the end of the year. There are civilian applications as well as military. It’s for the entire spectrum of unmanned aerial vehicles.
One of the interesting things that happened as we announced the panel to develop our response is we started having companies in Nevada that already manufacture all different types of unmanned aerial vehicles call and say, “Hey, we’re in that industry. We’d like to help. Is there anything we can do?” And that goes from something about the size of a 1-foot-square box up to the Predators and Reapers.
How about business IT ecosystems?
We had a terrific announcement up north a few weeks ago when Apple chose Nevada for its next data center, which I think will be helpful across the state. When Apple chooses a state, it makes a difference because other companies look to follow, or at least consider, that a company like Apple has made that choice.
In Southern Nevada, the two areas that have gotten a lot of attention – and deservedly so – are around what Tony Hsieh is doing downtown and the growth that Zappos has had and the growth around it.
The second is with Switch Communications. Switch is a world-class data center that works with companies of all types in Southern Nevada. They have 4,000 people badged into the facility, 2,000 of whom live in Southern Nevada. It provides an opportunity to interact with a “who’s who” of the tech industry.
Switch has recently built what they call an innovation center. We’ll have an office at that center, the university system will, DETR will and I think the new regional development authority will. There also will be offices for the companies that use the Switch facility, so there will be that kind of interaction in one building. That kind of support we’re getting from Switch and from Hsieh downtown are real building blocks for the IT sector.
What’s new with clean energy?
We have some of the best resources for renewable energy in the world. What we have to do in order to capitalize on that are two big things: figure out how to provide the transmission for that power outside the state of Nevada and, two, determine how to work with neighboring states to best utilize that resource.
Energy typically has been regulated on a state-by-state basis. That doesn’t really account for the fact that we have such a renewable energy resource in Nevada. Right now, our energy demands aren’t growing. NV Energy has achieved its portion of the renewable portfolio standard. Gradually, that will rise over time. But that does not use all the energy that’s available.
We are working with the Nevada Office of Energy right now to put together a business case to determine how to best use the resources we have. That may mean Nevada exporting power to other states, or it may mean sharing power from other states during our peak periods. Obviously in Southern Nevada during the summer, we use a lot of energy and our rates go up accordingly. Figuring out how to best balance that, we think, will provide those best opportunities.
In the meantime, we have the SolarReserve Crescent Dunes project in Tonopah, which is a molten salt and solar facility under construction that is the first of its kind in the country. We have a wind project going up in eastern Nevada. We continue to work with ENN on its plans in the Laughlin area, which will be a huge boost for Laughlin and Southern Nevada if we can make that happen. And, we have geothermal assets up north, which is one of the best sources of renewable energy.
Health and medical services?
That’s probably the area that has the highest potential for job creation.
Medical tourism is a real opportunity for Southern Nevada. Obviously, we have the tourism side of medical tourism handled. It’s a very attractive place for people to come. As those in that industry have pointed out, do you really want to go to Cleveland or Rochester, Minn., or would you rather come here? I think most of the time people would rather come here. The other side is the medical side. The recognition of what we offer in the medical community, and making sure that as we promote that, the level of quality is maintained. That’s something the industry is working on right now. If that consistency and quality can be publicized around the country and around the world, we think there’s some real opportunity there.
Something different that hasn’t been talked about much is a program for medical health workers. It’s not something the state has focused on much in the past. This is a service that already is eligible to be reimbursed by the federal government. We think it is a real opportunity for people to quickly get back into the work force. If we can match workers in that area with those in need, it is a way to create jobs as well as better health. Our health care specialist is working with different stakeholders in that area and some of the community health providers, as well as the work force and university systems to train there.
Another is certificate programs. I don’t think most people in Nevada are very aware of these. If you can become a certified Cisco network professional, you have a very good chance of getting a six-figure job. You can get that certificate for $6,000 of education costs. The Millennium Scholarship can help pay for it, and there’s a real need.
What about logistics and operations?
I think people here understand the logistics side of logistics and operations. But the operations side may not be as clear. If you can bring in raw materials or subcontracted parts and do assemblage and ship from Nevada, that’s what we’re talking about on the operations side. There’s a manufacturing component. Whether that’s complete manufacturing or just assemblage, we think Nevada, particularly Las Vegas, is well situated.
One of the opportunities there is the foreign trade zone, which is something we haven’t capitalized on much. All of Clark County is eligible to be a foreign trade zone. It’s now set up so that individual companies can apply to have that foreign-trade-zone status. That allows them to reduce, or at least postpone, the payment of duties. It provides a really competitive advantage. We have a market that’s huge in Southern California and doing the work here and shipping to customers in Southern California is pretty attractive.
Mining and manufacturing?
There are probably 1,000 open jobs in northeast Nevada, maybe even more. There are a substantial number of construction projects that if the mines could find contractors that would come, those would be under way right now. They’re struggling finding contractors.
A big part of that is because there’s a housing shortage in the northeast. We just did a full-day seminar in Reno to make those opportunities known. We’re looking at potentially doing that in Las Vegas, as well.
There are no places for workers and contractors to stay when they go into that area. It’s gotten to the point that when they build a new hotel, the rooms are rented for six or 12 months in advance in order to house employees and their families who are moving to do permanent jobs. They’re living in hotel rooms until they can find housing.
The other thing that we would really like to do is look at the mining supply chain to see what makes sense to move to Nevada. That could be a number of different things, but obviously the mine’s purchase of a substantial amount of equipment, supplies and services helps the state. There’s also the downsteam side of that, where the minerals that they mine become a usable product. We really think the supply side has more opportunity than the refining side. But the mines have been very helpful in working with us, and we’re looking to put together a formal process to make that happen.
Finally, what’s the status of tourism, gaming and entertainment efforts?
In the past, tourism and gaming hasn’t been a part of economic development. But we don’t think it makes sense to have an economic development effort that is in any way counter to the biggest part of our economy and what has driven us for years. Certainly we want diversification, but we can diversify through the gaming industry, not in spite of the gaming industry.
There are several ways to do that. The most high profile at this point certainly is online gaming. We’re seeing that diversification already. We’ve had a couple of companies announce that they’re going to move their corporate headquarters here as a result of the efforts of the Gaming Commission. That can bring an enormous number of good tech jobs to Nevada.
The gaming industry attracts a wide variety of very good jobs. It’s a very high-tech industry. There are more technology workers in gaming than most people would ever dream, and there’s a big manufacturing component to gaming with companies like International Game Technology, Bally’s Technologies, Aristocrat and Shuffle Master. You can grow a manufacturing and IT cluster around the gaming industry.
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