Relatively speaking, Nevada’s economy is in its infancy. And despite success in gaming, tourism and entertainment, the Silver State’s economic development faces numerous challenges. Recently, economic specialists met at a roundtable sponsored by City National Bank and held in Las Vegas to discuss the current and future economy of Nevada including its lack of funding, a missing workforce, water scarcity and success in attracting professional sports teams.
Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly roundtables bring together different industries to discuss issues and solutions.
What Steps Is Nevada Taking to Develop Its Economy?
Tina Quigley: We are not a state that talks about where we need to be [economically] or strategizes [for the future]. We are a state and a community that has been prosperous almost in spite of ourselves, not because of ourselves. For a long time we were the only state that had gaming. As a result of that, hospitality and entertainment [became core industries in Nevada] and we grew. [Our growth is] not because we were out there trying to sell and pitch [Nevada] and create a community that is a place [for businesses] to grow and diversify.
Andrew Woods: [When we forecast the economy] it doesn’t look like there is going to be enough economic diversification in the next 18 years. What happens if we make huge investments in some of these areas that have a lot of spin-offs [such as] manufacturing and healthcare? Those are the two that have a lot of spin-offs in terms of jobs being produced. If we did that seriously and we still let leisure and hospitality grow the way it is supposed to even with automation, AI, technology and sports, we can move the needle significantly.
John Restrepo: Northern Nevada is better off than we are here in southern Nevada at this point. We are still competing with a lot of other states and that is a challenge for us. It is not that California is, necessarily, getting easier to do business in, it is not. But we are competing with Arizona, Texas and Utah and everyone else.
Tom Burns: If you look back at other industrial cities [like] Chicago and Pittsburgh, there was a generational time when those people reinvested in their city. It is the next generation that does it. [Las Vegas] is so young that we do not have the next generation [yet].
Frederick Steinmann: Nevada has the challenge of [not having] multiple generations of the same family, unlike Utah and Arizona. Nevada has always had a very transient population and, historically, there has never been a consistent long term multi-generational investment in critical infrastructure and institutions that support various other community and economic development efforts. Part of that is the state’s history. There has never been anything that has really unified Nevada as a state economy.
Quigley: Truthfully, we are not a state that has ever historically prioritized economic development.
Burns: We did come out with a strategy [for economic development] early this year and one of the pillars was to electrify Nevada. [Our goal is to] bring in clean energy producers, battery manufacturers and lithium processing. Those [industries that] do not use a lot of water and that are a good part of alternative energy for the future. There are also conversations around hydrogen that we are pursuing [and] advanced manufacturing.
Jared Smith: Every municipality has their own unique identity. We can still work together and advertise what makes us unique. It is the uniqueness that our communities have that makes us so strong. Different parts of southern Nevada are attractive to different types of companies [and] different industries. That is a good thing.
Jared Luke: These regional ideas and collaboration [statewide for Nevada’s economic development] is relatively new. There is going to be some consternation about jumping into bed with everybody and making it a regional approach. But I think if it is thoughtful and it is purposeful, then we can identify areas that are prone for specific types of growth for the industries that make sense for Nevada.
Is Nevada Still Struggling to Maintain a Workforce?
Steinmann: A consistent thing that we hear across the state is [challenges with] workforce. [From] new companies coming to the state [to] existing businesses that want to expand their operations, there are not enough bodies to fill open and vacant positions.
Smith: Workforce is always [a challenge] whenever we talk to companies. [The question is always,] “What does my pipeline for workers for the next five years look like?” [But] we have to take [the workforce issue] a step deeper. It is not [enough] to say that we need to focus on workforce. We have to define what that means. And what that means is [focusing on] things like training and then [identifying] what sectors we are going to be training people in.
Burns: If you look at [Arizona, Utah and Texas], their workforce is predefined and their education on the secondary level is more robust. I do think that we do a good job in funding and training people in other skills. You can go to high school and get hired in an advanced manufacturing scenario and we provide funding and training for that. And that training really elevates the value of those people that go through [it]. Those skills transfer to other companies.
Smith: I think about workforce development as infrastructure, and [there is no] better narrative for incentives than investing in our people for a company.
Woods: Education was one of the biggest factors [people considered] when they left California, and they were choosing [where to live] during the pandemic. If they needed a skilled workforce, they were not choosing [Nevada]. We were in the bottom ten of states for college educated workers after the pandemic.
Smith: When companies are talking to us about education, they are asking more questions about workforce development related education, such as continuing education. They are generally asking for people outside of K-12.
Luke: The Clark County School District (CCSD) has done a fantastic job in creating a workforce for our main industry (hospitality). That is what they were asked to do. They were established based off of what was in southern Nevada [at the time] and [directed] to create a workforce to support X. Now we are asking CCSD to support Y, and that is going to take some time.
Steinmann: The workforce issues are symptomatic of other issues. [There is] not enough housing to support the population coming into the area, the quality of education and childcare services to recruit people to the state [is lacking], and [the limited] availability of healthcare services [all contribute to the problem]. Those three seem to be the primary barriers to bringing in a larger workforce to the state.
How Has the Water Shortage Affected Economic Development?
Smith: Water is a strain [on economic development in Nevada]. I would zoom that out though and say that managing our natural resources [is a challenge] because it is more than just water.
Restrepo: The water issue is a big one and is very difficult to deal with. We can deal with it if we do not get distracted like we do sometimes in southern Nevada by the latest shiny object such as another resort casino or something like that.
Burns: The conversation we are having now around water is a lot more responsible one. It is more responsible than a lot of our peers on the Colorado [River].
Quigley: Eventually we are going to become the national headline as leaders [in water conservation]. We are open for business because of our infrastructure.
Burns: [Nevada’s] ability to recapture [water] is internationally recognized. And when we promise somebody a gallon of water in five years, we can keep that promise.
Quigley: In Phoenix when you use water, it is all wasted water. It is all gone because it is not recaptured. We are the only region that draws from the Colorado and puts water right back into the Colorado, and we get that as credits. In theory, if we were not losing water to pools and lawns, evaps and septic systems, we would be entirely a closed loop system with less than 1 percent shrinkage or loss as part of that recapture. We could live forever on [our water] allotment.
What Effect Has the Massive Influx of Sports Teams Had on Economic Development in Nevada?
Restrepo: If you look at the data and the research, professional sports do not diversify economies. They do not provide any impetus to economic development. Just because you have a pro sports team does not mean Microsoft is going to move to your community. In southern Nevada, [and] in Nevada [as a whole], it has been a great enhancement to the tourism experience.
Steinmann: There was a time where tourism and hospitality in the state provided the general population with meaningful opportunities for advancement and upward mobility. Tourism and hospitality and by extension, sports, is [approximately] 60 percent of the state economy in terms of total state GDP (gross domestic product). The problem with sports manufacturing, equipment manufacturing and sports medicine [industries] is [they are] relatively low pay and low skill positions, which makes homeownership out of the question.
Restrepo: Sports should be looked at as performing arts centers and as part of the entertainment industry. The question [therefore] becomes, if we want pro sports to be an economic development engine or a driver, what do we need to do? There are other components beyond getting tourists here to do that. Can UNLV or UNR become centers for sports medicine? That makes a qualitative difference. Can we attract the manufacturers of sporting equipment here? That makes a qualitative difference. But pro sports in and of themselves, whether the NFL, NHL or soccer, are a great enhancement and a great amenity to the tourism industry. However, they do not change the rest of the economy dramatically.
Luke: Sports has proven that there can be a high level of diversification that can still remain complementary to our main industry, which is gaming and hospitality.
Steinmann: Even though tourism, hospitality and sports are a critical part of the state economy, they are no longer a driver of actual economic growth. It is a continuation of an industry and a form of employment for the lower end of the population in terms of wages and skill. That may sooner or later start to impede the state’s competitiveness to bringing in the manufacturers and the medical side because you do not have the workforce within the state that Nike can pirate from to build their manufacturing facility.
Restrepo: The question becomes, does sports make the economy more resilient? Let’s focus on that economic resiliency question. There is a qualitative difference between economic diversification and economic development.
What Challenges Is Nevada Experiencing With Funding for Economic Development?
Steinmann: The pandemic exposed our overdependence on sales tax. The fact that we depreciate real property down to a quarter of its starting assessed value over 50 years means that every single neighborhood continues to age and pays less property tax revenue to the cities, the counties, the school district and the state every single year. Yet those are the neighborhoods that are going to need the most in infrastructure improvements.
Luke: Our biggest challenges valley-wide on a regional level for economic development is finding that happy marriage between place-based and people-based investment and then figuring out what we need to do to get Nevada to bump up a couple notches in its grant dollars. If we had more grant dollars as a whole, we would not freak out every time the EDA (Economic Development Administration) put out a little teaser.
Steinmann: We have a fiscal system that was designed in the 19th century, and I do not know anyone who is happy with it. Cities and counties do not have the dollars to invest in the infrastructure that is aging. Any fool can build a road; the real cost is how you maintain that road for the next 200 years [when] you have to pay for that road every single year.
Restrepo: The [challenge] is growing [economic] resilience by providing higher wage and higher skilled jobs. And the issue of economic development is critical. It speaks to the quality of growth, not to a broader set of growth with low wage workers. It is the wage issue and the cost-of-living issue that we need to deal with. And the only way we [can] do that is by investing in economic development.
Smith: We can do more with more. When we think about [funding] from a city budget, county budget, regional budget and state budget [perspective], wouldn’t it be great if we could have more money to do more things in economic development?
Burns: There is a perception that we give money away to rich people, [but] as a state, we do not give money away. We forgive future taxes, [but] there is no incentive money. That is not in our paradigm. And when you compare [our methods] to our sister cities or states, they are a lot more aggressive in that space. They do have the ability to write checks. You can get money to show up in Arizona or Utah or Texas versus forgiving a future obligation or portion of future obligation [like we offer in Nevada].
Steinmann: It is difficult for the legislature to think about how we fund statewide economic development efforts [in Nevada] because we really do not do statewide economic development efforts. We try to regionalize as best we can to fit local needs [in Nevada] where states like Utah and Arizona, because of multi-generational families, [have been able to] cultivate a statewide economy. It is easier from a state perspective to fund those efforts as opposed to duplicating and triplicating efforts in different parts of our state [due to a lack of a statewide economy].
Burns: We had asked for $24 million for workforce development [in the most recent legislative session] and we received $10 million. [The funds are for] education in Nevada, and we chose to back away from it, and that is remarkably frustrating. We are backing away from a demographic and a workforce that needs that attention the most.
Restrepo: Could you imagine if economic developments in Nevada were funded as well as the convention authority in Las Vegas was funded with, not a room tax, but something equivalent to that? What could we be doing right now with all those financial resources to diversify or promote economic development? At some point we are going to have to figure that out. How do we have a dedicated large-scale amount of money? That is what Texas does. The reason Texas does as well as it does, [is not only because it is a] bigger state with more skilled workers and [with better] quality of secondary education, but also [because of] how they fund economic development.
Burns: [Economic development] is a contact sport, and it is a pretty aggressive space. There are a lot of people that play in it. There are a lot of people that are very aggressive in it. [It is a challenge to] continue to make the case for the attributes of Nevada as a whole, when really our economic stimulus does not measure up to our competitors.
Steinmann: When it comes to improvements in education, K-12 or higher, and to critical infrastructure, until you solve the underlying fiscal problems of the state and bring the fiscal system into the 21st century, none of this gets fixed.
