In April of 2020, with all nonessential businesses closed, unemployment in southern Nevada stood at just over 31 percent; in northern Nevada it was more than 18 percent. By December 2020 Las Vegas had dropped to 12.2 percent and Reno to 5.8. Put simply, that is the effect of diversifying the economy, a process that Nevada’s development authorities have built on experience from previous economic downturns.
In 2011, Nevada was still recovering from the recession when Governor Sandoval formed GOED, the Governor’s Office of Economic Development. GOED’s goal was to bring city, county and regional economic development groups together under one umbrella.
The Vision: To create a vibrant, innovative, sustainable economy.
The Mission: To attract and grow high-skill, high-wage jobs.
The Objectives: To establish a cohesive economic development system; increase opportunities within the state economy through education and workforce development; prioritize innovation in core and emerging industries such as advanced manufacturing, technology, clean energy, logistics and distribution and venture capital; and foster entrepreneurial businesses.
GOED was formed during a really tough economic time, said Bob Potts, deputy director, GOED. Ten years later when the economic downturn from the pandemic drove unemployment rates to historic highs, Nevada’s economy began rebounding within months, but at different rates across regions within the state.
“That’s largely due to the fact of diversifying the economy,” said Potts. “But not just diversifying, but bringing in industries that compensate workers well and the subsequent employee spend and everything that goes with it. So you not only get the payroll spend by really focusing on good paying jobs, you also get the advantage from money that rolls back in and helps support all the existing industries and companies in the region. [That could be anything from] car dealerships to grocery stores or doctor’s offices, all those companies that depend on the economic activity of people that live there, not people who live outside the community.”
Under the administration of new Governor Lombardo, GOED policies and programs continue to expand. “The Governor is committed to economic diversification, and we’re pretty aggressive in that space, wanting to move forward,” said Tom Burns, executive director, GOED. “We want to give balance to our economy, so where tourism has been hit hard by economic downturns, [diversification] lightens that blow and provides great-paying jobs for our citizens as they move forward.”
Industries Regions and Boots
Economic development isn’t a one-time, one-size-fits-all endeavor. It needs to be flexible and dynamic. Ensuring diversification in the economy is consistent in both focus and efforts is important for growth.
When GOED formed, the economic development mission included nine target industries delineated in a study by Brookings Mountain West. Nine was later cut to seven, and eventually to four key industry sectors. For the last decade, Nevada has focused on;
- Advanced manufacturing and associated technology
- Information technology, including data centers
- Transportation and logistics, including warehousing
- Natural resources and technologies, including clean energy and mining
- Hospitality, tourism, and sports.
Not every region is perfect for every industry. In order to match industry with location, when economic development in Nevada was restructured, regional development authorities (RDAs) were created to translate economic development statewide into regional constructs.
“RDAs are grant-funded through our agency, and they’re the boots on the ground,” said Dr. Kris Sanchez, deputy director, GOED. Even though GOED receives calls from companies, they’re not set up to be a liaison between industry and local service agencies.
So RDAs perform that function. They field calls from out-of-state companies who want to kick the tires and see what’s offered, said Sanchez. Such contacts go directly to the business development teams at RDAs, which work with incoming companies to determine their needs and walk them through governmental processes.
Infrastructure
At the core of economic development is the ability to move people and goods. For southern Nevada, that means tourism and freight. For an area already impacted by traffic congestion, pandemic-increased movement of goods requires infrastructure on which to move it. Southern Nevada is trying to define the region’s value to the overall Southwest ecosystem, studying how freight moves between the ports in Long Beach and the Inland Port in Salt Lake City.
“We want to see if we can intercede, we want to see if we can do so productively as a region, and what type of infrastructure we should be building that will help support the entire ecosystem across the Southwest,” said Sanchez.
Transportation and infrastructure matter. Southern Nevada is uniquely situated next door to the fifth largest economy in the world–California. That opens up a tremendous market for companies manufacturing in Nevada and shipping into California.
Abatements
Tax abatements are a reduction of taxes granted by a government entity to a company for a specific period of time to encourage economic development.
Tax abatements are discounts on taxes, not exemptions. They’re regulated by statutes that set qualification criteria companies must meet. Criteria includes wages, job and capital investment requirements, employee benefit requirements and an export component requiring more than 50 percent of goods and/or services to be sold outside the region. Nevada prioritizes companies in industries that drive competitive advantage, innovation, entrepreneurship, productivity and wage gains, and helps diversify the economy.
“Far and away, the abatement most used is our standard,” said Potts. “There’s six [types of] abatements, but 84 percent of all companies we’ve abated have been the standard abatement. They don’t have nearly as high a bar as the others, and they’re not specific.”
The two that are specific are the aviation and data center abatements. Data center abatements are different because they require a huge investment in equipment that is replaced frequently because of how fast the technology ages out. Data centers create a large investment in the Nevada economy, but relatively low number of jobs.
Standard abatements include
- Sales and Use Tax Abatement on qualified capital equipment purchases.
- Modified Business Tax Abatement of 1.378% on quarterly wages exceeding $50,000.
- Personal Property Tax Abatement.
- Real Property Tax Abatement for recycling.
- Special abatements include
- Data centers.
- Aviation companies.
- $1 billion investments in Nevada.
- $3.5 billion investments in Nevada.
Since 2012, 266 companies have received abatements. Most aren’t huge—80 percent had fewer than 100 employees; 52 percent fewer than 50.
GOED doesn’t pick and choose winners or losers in an abatement lottery. If companies are qualified and meet requirements, they get the abatement. “We don’t write them a check. It’s not an exemption from taxes. It’s a discount on taxes that gets companies in the door,” said Potts. “We get them here and go through this robust process of looking at return on investment.” That return on investment works out to $2.50 for every $1 abated during the abatement period.
Tesla’s abatement for Gigafactory 1 in northern Nevada ends July 2024. At that point, Tesla will begin paying annual minimum taxes of $53 million. That’s how it works.
“The reality is, if it wasn’t for the work that we do, the abatements we offer and their incentive, if not for the intentional focus that we have, we would not have Apple, we would not have Tesla, we would not have Redwood, we would not have Google,” said Potts. “We would not have a whole host of other companies that have just been game changers for the future of our economy and have really put the state on solid footing going forward.”
A Matter of Balance
Northern Nevada successfully diversified its economy, attracting target industries like advanced manufacturing and technology, bringing in companies from Tesla to Google, and growing companies like Redwood Materials.
“It’s been a long road, starting in 2011,” said Mike Kazmierski, executive director, Economic Development Authority of Western Nevada (EDAWN). “We developed the strategic plan that focused our attraction primarily on advanced manufacturing with some logistics and distribution, because we have a strength in this region in logistics and distribution.”
The success of that plan was significant. In the first four years, northern Nevada attracted 40 manufacturing companies, then landed Tesla. “That changed a lot of people’s view of the region from one just starting to grow in manufacturing to one that’s a real manufacturing hub,” said Kazmierski.
Since then another 60-plus manufacturing companies have located in northern Nevada, the most significant being Tesla, and Tesla spin off, Redwood Materials. EDAWN worked with the state for some time to land both, and both located in Tahoe-Reno Industrial Center (TRIC) on I-80 east of Reno. TRIC is a 107,000-acre industrial park. Industrial zoning began in 1999, and 95 percent of the projects that settled there arrived through EDAWN. Today TRIC has largely played out the 30,000-acres of buildable land. There’s still space available, just not as much as 10 years ago.
EDAWN has also been actively pursuing clean tech, biotech and fintech companies. Eight years ago there were no data centers in the area. Today Apple, Switch and Google call the region home.
“A lot of people talk about incentives,” said Kazmierski. “Our incentives are mostly abatements and mostly tax on manufacturing equipment. Part of that is when we set up our tax laws, we had no manufacturing in the state, so we just taxed it like all other equipment. Right now we’re one of only eight states that still does that. We still tax manufacturing equipment. We would have no manufacturing in the state if we didn’t abate that tax for a period of time.”
EDAWN has spent the last 11 years growing one of the best entrepreneurial ecosystems in the country, because person plus great idea plus seed capital equals organic growth.
Lithium
According to a white paper prepared by the UNLV Center for Business and Economic Research (CBER), the global lithium-ion battery market is expected to increase fivefold through 2030. Nevada already employs 60 percent of the U.S. battery manufacturing workforce.
Now with Lithium Nevada Corp. working with mineral processing at Thacker Pass lithium mine in Humboldt County, Nevada can complete the lithium loop.
There are Nevada companies to handle every stage of lithium.
- Exploration, extraction, and processing;
- Refined chemical manufacturing;
- Cell components;
- Battery cells;
- Battery packs;
- EV application;
- Recycling.
Lithium Nevada Corp. will invest $514.3 million in the project, create 113 high-paying jobs in the first two years of operation, and generate more than 2,800 construction jobs.
The abatement for Tesla’s new project kept it in the state. Without it, Austin might have claimed it. “If we didn’t have them in the state, we wouldn’t have been able to finish up the whole value chain and supply chain in the critical mineral space,” said Potts.
Rural Nevada
“Northern Nevada has successfully diversified its economy, and what it looks like now compared to 10 years ago is phenomenal,” said Sheldon Mudd, executive director, Northeastern Nevada Regional Development Authority (NNRDA). “Those successes have definitely opened up more opportunities for the rest of us, because people around the nation and around the world are now considering Nevada as a place to do business where they weren’t before.”
That said, the same diversification hasn’t yet been realized in rural Nevada. NNRDA isn’t struggling, but the region is still dependent on one industry sector—mining, with its potential boom and bust cycles.
Many rural areas need infrastructure upgrades in order to attract companies to locate or expand there.
Northeastern Nevada is located dead center of the intermountain west and served by I-80 and Union Pacific rail. Warehousing and distribution are a natural fit, but the region needs more rail parks to haul value-added products that leave the area as raw commodities like hemp and alfalfa.
The region also needs power. “We get a lot of companies who are interested in the area but who have very high power demands,” said Mudd. “Unfortunately, out here in rural Nevada we’re at the end of the line with power resources.” The area is served by Mount Wheeler Power and Wells Rural Electric; neither has the capacity of NV Energy.
Northern Nevada Development Authority (NNDA) covers both rural and urban centers, including Carson City and four counties, and a share of TRIC in Storey County. Between 2010 and 2022, the region saw its biggest gains in employment within manufacturing, natural resources, logistics and healthcare sectors.
“In 2010, the manufacturing industry had 6,806 jobs in the region,” said Jeff Sutich, executive director, NNDA. That increased to 20,208 by 2022, a 197 percent increase. The natural resources sector that includes agriculture and green energy grew from 4,675 to 17,663 jobs.
Industry Shares
“The greater Las Vegas area correctly ranks the lowest in terms of diversification,” said Tina Quigley, president and CEO, Las Vegas Global Economic Alliance (LVGEA).
The Hachman Index of Economic Diversity measures each region and each state’s level of diversity. “We rank the lowest of all metropolitan areas in the United States,” said Quigley.
“Southern Nevada is a little different,” said Sanchez. “We have not completely diversified the economy down here and we probably, to some extent, won’t.”
And that’s not a bad thing. “It means we have one really strong, healthy industry, and that is hospitality and gaming,” said Quigley. “When an industry is that big and that successful in a region, it’s really hard to move the needle as it relates to measuring diversity. Even if we were to have triple-fold the amount of diversity in the next year it wouldn’t move the needle that significantly, because gaming is just that big.”
“There’s a huge growth in the manufacturing sector in northern Nevada. There are four times as many jobs in southern Nevada than northern Nevada and there are more manufacturing jobs in northern Nevada than southern Nevada,” said Potts. “We need more of that type of industry, especially given our proximity to the Port of Long Beach, Los Angeles, and what that industry means for making our economy resilient.”
Recent economic downturns proved the single-industry economy is vulnerable. Recessions stop drive-to traffic from driving in for entertainment. The pandemic shut down all entertainment venues. Southern Nevada’s unemployment rate only dropped to 5.7 percent in March 2023.
The answer may be to court companies with at least one degree of separation from hospitality and gaming so when a downturn hits, it doesn’t hit as hard. LVGEA is looking at supply chain and support companies related to hospitality.
“Clearly we’re identifying industries we consider a good fit for our region, those that will benefit from the type of workforce we have or the type of workforce we can train, and of course those that can operate within our resource portfolio, and that’s code for ‘water’,” Quigley said. LVGEA wants low consumptive water users where water doesn’t go toward evaporation or landscaping.
Water technology is a unique opportunity for southern Nevada. Southern Nevada Water Authority is a world leaders in water reuse and recycling. One company, WaterStart, a GOED Knowledge Fund nonprofit, operates globally, searching out water technologies worldwide to match with private industry in Nevada.
LVGEA target industries include healthcare, technology, advanced manufacturing, and the fintech arenas. Fintech is currently a small cohort but seeing growth and naturally attracting more of the same kinds of companies. Manufacturing is also growing in the region—of the 83 projects in LVGEA’s pipeline, 50 percent are related to manufacturing. Nevada-grown Boxabl is building a second factory in North Las Vegas and looking for land for a third facility.
Sports technology is another industry related to entertainment already in the area. In the past six years, southern Nevada has seen exponential growth in sports entertainment from Vegas Golden Knights, Las Vegas Raiders, Aces, and Las Vegas Desert Dogs, along with supply chain companies to support those industries.
“If you look at the pandemic and the recession, you’ll see that Nevada was hit particularly hard, harder than any other state in the country through both the Great Recession and through the pandemic,” said Burns. “That’s due to our reliance on tourism and hospitality as a whole. We’re not going to replace the success we’ve had with hospitality–-we’re not trying to do that—but provide some other forms of revenue for the state and other forms of employment for our citizens, so that when we hit difficult times, we’re not hit economically as hard as we have been.”
Nevada emerges as Leader in U.S. Energy and Security
Nevada is poised to be ground zero for the energy transition. The economic strategy developed by the Governor’s Office of Economic Development (GOED), Realizing Nevada’s Electric, Innovative, and Connected Future: 5-Year Comprehensive Economic Strategy, finds that the state’s quickly growing clean tech industry, innovations and investments have positioned Nevada to lead the U.S. in strengthening critical supply chains and securing energy independence.
Nevada’s natural resources, people, reasonable cost of living and doing business, and proximity to west coast tech-hubs have enabled innovation to flourish in the state. This new strategy will be critical to the continued growth of our economy.
GOED and SRI International assessed Nevada’s current economic landscape and developed strategies for a vibrant economy. The new report finds that despite vast economic and social losses from COVID, the state’s economy has been growing in competitive industries with high-paying jobs.
Key findings include:
Nevada has a high percentage of associate degree graduates with technology skills. To remain competitive, greater investments are needed to improve science, technology, engineering and mathematics (STEM) education overall.
Key metrics of innovation strength, including venture capital and patents, have increased rapidly in recent years.
Industries with the strongest growth potential and high-quality jobs are information technology, transportation and logistics, natural resources and technologies, hospitality, tourism, sports, creative industries and advanced manufacturing.
Within the broad industry of hospitality, tourism, sports, and creative sectors, employment and wages in sports and creative sectors grew faster over the past decade than gaming.
The report also pointed to barriers to economic growth, including water scarcity, affordable housing, accessible healthcare, quality education and connectivity.
Nevada is playing a key role in the energy independence and security of the United States. Governor Joe Lombardo’s administration is committed to growing Nevada’s global leadership with new investments in our workforce, infrastructure and education.
The new economic plan is a road map to guide these investments with strategies to prepare a workforce with technical skills at all levels, accelerate entrepreneurship and innovation, bolster mining and production of batteries and solar energy for new global markets, and increase broadband and utility infrastructure throughout the state. Nevada will make investments as necessary to convert its unique geographic locations in the north and the south into connected hubs for re-shored supply chains and digital networks.
Thomas J. Burns, Executive Director
Governor’s Office of Economic Development
