2009 Power Poll

As Nevadans continue to grapple with the affects of an economic
recession, the state’s business leaders expressed guarded optimism
about the strength of the economy in 2009 when they responded to Nevada
Business’ seventh annual Power Poll survey. In contrast to the strong
growth rates of just a few years ago, the majority of re­spondents
reported they expect their bottom lines as well as the Nevada economy
to be the same or only slightly better this year as compared with last.
With no magic bullet in sight, the economic turnaround is expected to
take anywhere from 12 to 18 months, ac­cording to most survey
participants. On a more upbeat note, however, most poll takers said
they have no problems attracting and re­taining qualified staff and
that they still be­lieve that Nevada is a business-friendly state, in
spite of the fragile economy.

Those responding to the survey, which were administered via e-mail in
January, was as an almost even split between busi­ness owners and
executives in both southern and northern areas of the state. Almost 90%
of those taking part in the poll have been in business in Nevada for at
least ten years and more than half have been here more than 20 years. A
sampling of these participants was interviewed to learn more about
their concerns for the state of the economy, how it got to where it is
and possible remedies that might turn things around. Below are
numeri­cal results of the survey along with insights from some of the
most seasoned business people in the state.

Profitability

Based upon their specific business sit­uations, respondents expressed
varying expectations about their bottom lines for the next 12 months.
Forecasting that his vacancy rates will fall from 9% in Janu­ary to 5%
this summer, Doug Roberts, project principal of Panattoni Develop­ment
in Las Vegas, is optimistic that his commercial development business
will improve this year. “I think we have six months or more of
additional pain, but I don’t expect it to get worse after six months,”
he said. Although the lack of new construction is a negative for the
building industry, it can be a positive for Roberts who is busy filling
existing inventory. “It’s all about keeping ten­ants satisfied,” he
explained.

Citing the opening of CityCenter, Galit Rozen, broker/owner of RE/MAX
Commercial Professionals, Inc. in Las Vegas, expects her business to be
much improved by next year. “It will look much more positive. This is
my first downswing. I believe there will be a lot more activity next
January,” she said. More cautious than Rozen, Kyle Nagy, director of
CommCap Advisors, expressed concern over the continued slowdown in real
estate. “Commercial real estate is very slow and credit mar­kets are
still very tight. Twelve months from now we should feel some of the
benefits of some of the {stimulus} pack­ages,” he said. In the meantime
his busi­ness, like most in the financial industry, is experiencing
challenges. “We’re do­ing enough transactions to stay alive, but we’re
not growing the business,” he explained.

The key to staying in the black is the ability to control costs,
according to many survey respondents. Despite hav­ing trimmed sails
last year in response to the slowdown, businesses find it es­sential to
continue to look for innova­tive and productive cost saving mea­sures
to stay afloat. This has resulted in increased business for companies
like Payroll Solutions Group in Las Vegas that specialize in business
effi­ciency, according to company founder and CEO, Howard Winters. “I
answered {the profitability question} “somewhat better” because
everyone is looking for ways to cut costs and that’s what we do,” he
explained.

State Economy

Although business leaders are in­creasingly thinking outside the box to
improve their bottom lines, they find it difficult to be bullish about
the im­mediate future of the state’s economy. Darcy Neighbors, founder
and CEO of Las Vegas-based Consultants in Mar­keting, Inc., expects
Nevada’s economy to get worse with time. “I don’t think we’ve gone to
the depths yet. We’ll go into a deeper place this year,” she said.
Winters believes it could remain the same or even become somewhat
worse. “The economy depends on dis­cretionary spending and the consumer
is scared out of their mind right now,” he explained. John Guedry,
executive vice president and director of Nevada operations for City
National Bank, agrees that it will probably be some­what worse this
year, saying that the first half will be more challenging and that
improvements will be seen by 2010. “Northern Nevada will recover a
little faster because they are more diverse,” he explained. Roberts
sees a somewhat rosier picture saying that it will be somewhat better.
“Everybody’s outlook will be improved by the third quarter,” he said.

While speculation abounds as to when the magic turnaround will occur,
conjecture is also diverse as to what could spark it. “The trigger will
be a lot of the stimulus that should spark spending and credit
markets,” Guedry said. According to Nagy, the uptick will occur when
the housing market has bottomed out. “All it takes is somebody saying
we’ve hit the bottom and people will come here again. People won’t be
so afraid of spending,” he said. Saying that the future is not going to
be a sud­den rebound, Winters lays responsibil­ity on government. “The
turnaround will happen when state and local gov­ernment realizes you
can’t tax your way into prosperity,” he explained.

Gaming Contributions

With more than 70% of respondents agreeing that gaming pays its fair
share of taxes (up from 59% in last year’s Power Poll), it is clear
that most Nevada business leaders would prob­ably not favor targeting
that industry with increased taxes. “We’ve relied on this industry for
a long time. It is time we figure out methods other than personal
income tax. We need to shift the burden away from gaming,” said Jim
DeVolld, president of Reno-based First Independent Bank. Sharon
Pow­ers, president and CEO of the North Las Vegas Chamber of Commerce,
said she worries about gaming because it’s the goose that lays the
golden egg. “We have a problem with targeting a single industry,” she
explained. On the other hand, Tom Haynie, CFO of Man­power Inc. of
Southern Nevada, said he has mixed feelings because gaming still enjoys
good profits. “I think they could do more because they’re the en­gine
that drives the state,” he said.

Business Friendly

In spite of the economic recession and fears of increased taxation,
more than 95% of survey participants still believe that Nevada has the
welcome mat out for business. Describing how she got into business 14
years ago, Neighbors said she strongly agrees that the state maintains
its business-friend­ly status. “I’ve been able to start my business out
of my home and grow it,” she said. “Las Vegas is still the land of
opportunity.” Assuming that nothing drastic changes the business
climate, Dallas Haun, president and CEO of Ne­vada State Bank, said he
also believes the state is still business-friendly. “The ability for
business owners to be heard, the basic taxes and fees cause Nevada to
be ranked near the top in the country even in this current economy,” he
said. Guedry believes that relative to other states, Nevada still
offers a business-friendly market. “There’s a percep­tion in the West
that we’re still “can do” minded,” he explained. Haynie expressed
concerns, however, that changes in the tax structure in coming months
could change the welcoming environment.

Employee Recruitment

With more than 83% of survey partici­pants reporting no problems
finding and retaining qualified staff, the worsening economic situation
has caused almost a complete turnaround from last year’s poll which
showed only 17% having no prob­lems finding staff. “This has changed
pret­ty dramatically with our unemployment rate of 9%. It’s not a
problem recruiting with our brand. The economy has helped all
employers,” Haun explained. Winters concurs that from an employer’s
view­point, the employee situation is one of the bright spots in a grim
economic land­scape. “There’s a large labor pool which is an employer’s
market. You can pick and choose,” he explained. Considering the dearth
of available positions, business leaders advise those who are employed
to hold on to their jobs.

Education

As in last year’s Power Poll, around 90% of participants ranked
Nevada’s education­al system as average or below. Expressing concerns
about performance, accountabil­ity, national rankings and funding,
respon­dents said they worried about what the overall low quality means
for the state’s work force and ultimate future. Although many poll
takers have children in private schools, they are still very mindful of
the critical role that public and higher educa­tion plays in the
overall quality of life.

“The quality of education is a huge concern. We need a qualified work
force which means putting money into it, but it needs to be
accountable,” Powers said. She expressed frustration, however, with the
lack of skills that many employees demonstrate. “They {employees}
severely lack in writing and other basic skills. I see it everyday.
This is taking it down to the elementary level,” she said. Guedry
be­lieves it’s unfortunate that national rank­ings in education always
show Nevada to be low. “Reports show us near the bottom in all of
categories,” he said. Although some respondents said money isn’t
every­thing, others acknowledged that it is part of the problem. “It
would be interesting to see how much better they could do with more
resources,” Haun explained. Win­ters suggested that more creative
thinking could improve the quality and efficiency of the educational
process. “They aren’t looking at other ways to educate, such as using
technology and the Internet,” he explained. Regarding higher education,
Nagy said casino and construction jobs will always skim off a certain
number of potential students because they can make a decent wage right
away. “It’s hard to attract people into higher education because they
don’t consider lifetime earnings,” he said.

Economic Turnaround

While 83% of survey takers last year said they expected the
economic slow­down to continue for 12 to 18 months, this figure dropped
to almost 62% in this year’s poll with around 23% believing 24 months
or more compared to only 9% in 2008. Considering a year has passed
since the last poll, obviously the economic situ­ation is worse and has
lasted much longer than people predicted last year. The few optimists
appear to be those who are in business roles that can either profit
from the slowdown or who are not hit as hard as many others.

Haun looks to unemployment figures for a sense of what’s to come. “I
think throughout ‘09 we’ll see more softening and job loss. I don’t
think we’ll see job in­creases until early ’10,” he said. Winters
believes that the uptick will take longer than 24 months. “I don’t
think the eco­nomic stimulus package is going to have the desired
effect,” he said. “We’re tak­ing a step in another direction toward big
government and it’s not going to stimulate business.” DeVolld
emphasized the im­portance of public confidence. “Trust is something
you have to earn. People need time to rebuild it,” he said. Haynie is
con­cerned that the proliferation of negative news may actually affect
the length of the downturn. “If all we hear is the bad news, like
prices falling and foreclosures, we’re going to prolong this
recession,” he said.

Politicians

Most survey participants were unwill­ing to single out individual
politicians for comment, even though they had rated them on the poll.
General remarks ranged from acknowledging the challenges our elected
officials face to expressing dis­satisfaction with the job they are
doing. Guedry seems to give them the benefit of the doubt. “We have a
group of people that are trying in challenging times,” he said. On the
other hand, Winters is less forgiving. “Overall I’m not very happy with
our representatives on the federal level. I think Washington is
completely dysfunctional,” he said.

State Income Tax

With more than 89% voting “no,” it’s clear that the large majority of
poll par­ticipants are opposed to a state income tax largely because it
would discourage growth and be negative for business. “I think it would
be a huge mistake to have it because not having it is one of the things
that’s attracted people here,” Rozen said. Only a few mentioned they
could support it under certain circumstances and as a last resort.
“When things are lean, you need to cut expenses,” Roberts explained.

Clearly, the concern over state bud­get shortfalls is uppermost in the
minds of most business executives, followed in order by quality of
education, availability of water, transportation issues and
health­care.

While the poll results are indicative of the current levels of anxiety
felt in the marketplace, our state’s business elite re­main committed
to resilience. Most do not believe things are going to get
sub­stantially worst, gaming is still generally perceived to pay their
fair share of taxes, Nevada is still solidly considered
busi­ness-friendly and employment woes are most certainly a thing of
the past. It all seems to boil down to some very simple logic, things
are bad currently and they are likely to stay bad for a while longer,
then the confidence will come back and commerce will ignite.