Last year was a year of change in many ways, especially in the Silver State. With mid-term elections coming up in November and a changing of the guard in the Governor’s office, this year will shake up the status quo even more. As Nevadans look at the economic progress made since the downturn, executives on both ends of the state are hopeful.
“I’ve been doing this for a long time,” said Darcy Neighbors, founder and CEO of CIM Marketing Partners, who started her business 22 years ago. “I’ve been on the highs and I’ve been on the lows. I can’t tell you the last time I’ve felt this positive about growth and opportunity and, it’s not just for myself and for my team, but for all of our clients. It’s really exciting.”
As Nevada moves further away from the worst recession the state has ever seen, business owners are taking the lessons learned in the tough times and applying them to an improved economy and outlook. It’s been a perspective shift for the entire state; hopes, and expectations, are high.
“We see a lot of activity,” said Greg DeSart, president of GES Nevada, a geotechnical and environmental services firm based in Southern Nevada. “Infrastructure development should be strong. They’re going to start spending some of that money from the Fuel Revenue Indexing that was approved in 2016. There are some big projects, like the Raider’s stadium and the Las Vegas Convention Center expansion. All market sectors appear to be firing on all cylinders. I’m expecting a really strong 2018.”
In what has become an annual tradition for the past 16 years running, executives across the state were sent the “Power Poll” survey at the end of last year. Asked questions ranging from their outlook for the year to their thoughts on elected officials, a fairly even mix of executives and business owners showed increasing confidence in their business’ and Nevada’s future. Many of the executives that responded to the poll represent businesses that have been working in Nevada for 10 years or more with only 16 percent speaking on behalf of a new business.
Poll responses came in from both ends of the state, with the majority of respondents hailing from Southern Nevada (72 percent), a fair representation of the population breakdown of the state. Although, that number may shift as the Northern Nevada economy continues to experience growth due to the large companies that have moved to the area and the diversification of the region.
“It’s on a strong track,” said Season Lopiccolo, co-founder and COO of Noble Studios, a digital marketing agency that was founded in Reno in 2003. She added that Nevada’s economy is, “no longer dependent on the success of one industry. We have a lot more diversity and a variety of companies that are coming here. I feel like it will be a healthier place continuously over the next five to 10 years.”
Lopiccolo isn’t alone in her confidence. An overwhelming 95 percent of respondents felt that Nevada is a business-friendly state. That number has steadily increased over the last few years, gaining 5 percent from the previous couple of years.
Growth Economy
The business-friendliness of Nevada is reflected in executive’s thoughts on the direction of the state. For the second year in a row, Power Poll respondents show growing confidence in where their business, and the state, is headed. Nearly 90 percent of respondents said they felt that their company would be doing either “somewhat” or “much” better a year from now, with 84 percent saying the same of the state’s economy.
“I think it was better than the previous year,” Myron Martin, president of The Smith Center in Southern Nevada said of Nevada’s economy. “We have some really good people at the city, county and state level who are working on achieving our goals. I’m happy with where our state is heading.”
“In general, the economy has been pretty good, we’re finally starting to see some real growth from the last recession” said Jeff Barr, a partner with law firm Ashcraft Barr.
Barr, however, is cautious, remembering the hard lessons from the downturn. He added, “There used to be this belief that, Southern Nevada in particular, was recession-proof. The 2008 to 2009 recession shattered that illusion. I worry that, if there’s another economic slowdown, Nevada will be hit with that. The economy looks like it’s going to be doing well but I don’t think we need to hide behind the illusion that Nevada is going to continue to be recession-proof.”
When asked how the previous year was for business, executives indicated the state showed more progress in 2017 than individual business did. Still, 73 percent of respondents said their bottom line grew over the past year.
“We’ve gone way beyond our goals,” said Martin. “The last year has probably been our best year yet.”
“I would say our business is doing pretty well,” added Lopiccolo. “We’re excited. We’re expanding our services. Also, this last year, we opened up a Bristol office in the United Kingdom.” The firm is also looking to open an office in Southern Nevada by the end of this year.
More People
All that economic growth necessarily means hiring more people. Over the past 12 months nearly 60 percent of respondents said they have increased staff. In addition, nearly 70 percent indicated they would be hiring for 2018.
“We were two lawyers five years ago and now there are seven or eight of us,” said Barr. “We’ll probably end up hiring at least one, maybe upwards of three, [employees].”
Neighbors agreed. “By the end of the year, we’ll have added another two if not three employees,” she said.
In a state with record unemployment, hiring has been no easy feat with many business owners looking at ways to “home-grow” an employee base. When asked about workforce development and its importance to Nevada, a whopping 97 percent of respondents indicated it would be a vital issue moving forward.
“It’s a critical factor in our state’s success,” said Martin. “I know that there are really smart people working on solutions and I look forward to seeing how that evolves. I absolutely believe that workforce development is a critical element of Nevada reaching our biggest goals.”
“I think, yes, that is critical,” said DeSart of workforce development. “Companies themselves could, and should, be doing some sort of workforce development. In conjunction, I think [government agencies] should be developing our workforce also. It’s both a private and a government responsibility to make sure we’re building our own workforce.”
“If we’re going to walk the walk as leaders in job creation, we need to put more focus on workforce development and a home-grown workforce,” added Lopiccolo. “We can’t always be looking outside the state. We’re continuously growing so there’s opportunity here, if we can manage it.”
Hot Buttons
Beyond workforce development, many agree that minimum wage will remain a hot topic in Nevada but disagree as to how the issue should be resolved. Executives are split with just over 50 percent unsupportive of an increase in minimum wage. Some feel the issue is better left to private business and not in need of government intervention.
“I believe market forces do a good job,” said DeSart. “Most of the people we hire here, even very entry-level positions, are making 20 to 30 percent above minimum wage because that’s what the market needs. That’s what we need to pay in order to attract talent for the positions we have. I think there’s a place for people making minimum wage, they are good starter jobs.”
The question of how to handle minimum wage increases will continue to be debated leading into next year’s legislative session.
“That’s a touchy topic but I see the importance of it,” said Lopiccolo. “I would say it is probably better to let the market dictate [wages]. We’ve seen recent news stories of companies raising their minimum wages to above $15 an hour without state or federal intervention, that’s how the free market should work.”
Another touchy topic in Nevada is unions, which have a long history in the right-to-work state. When asked about unions, nearly 70 percent of poll respondents felt they were not necessary to Nevada’s workforce.
“Unions may have had their place 80 years ago, but their time has passed,” said Barr. “There’s a robust, statutory scheme that protects workers that really make unions kind of superfluous.”
DeSart added that, “they served a really good purpose when they started. I’m sure there’s a time and a place for a union, but I don’t think they’re as useful as they used to be.”
Death And …
Taxes are a constant challenge for Nevada’s legislature. Finding a balance between a working budget and remaining attractive to business is a difficult task for the state’s leadership. When asked if Nevada companies have too much of a tax burden, 58 percent agreed that they do. However, that number is down 10 percent from last year and is the lowest it’s been in several years.
“It’s a better business climate than most states,” said Neighbors. “That’s what we get into as entrepreneurs, when we start a business, we understand there will be taxes. I don’t want to see any additional taxes being put on businesses. Our main goal, as entrepreneurs, is to provide jobs for people and support them and their family. I would say this is one of the best business climates, from a tax standpoint, in the country.”
“Nevada has done a pretty good job of balancing the need for public funds with the need to create jobs and let companies keep more of their revenue,” added Barr.
Most executives agree that two of the state’s largest industries contribute a fair share of taxes. Nearly 70 percent felt that gaming paid a fair amount of taxes with 57 percent saying the same of mining.
When asked about gaming and mining DeSart said, “I don’t feel they’re paying too much. If we continue to look at diversifying our tax base, that’s a good thing. I don’t think we need to be piling onto those guys.”
The Commerce Tax, a gross receipts tax passed by the 2015 Legislature, put more of a burden on businesses. In the signature-gathering phase now, a veto referendum is in the works to add to the 2018 ballot in an effort to repeal portions of the Commerce Tax. When asked if the tax should be repealed, nearly 70 percent of respondents agreed, with 35 percent of those strongly agreeing that a repeal is needed.
“It had a bigger impact than a lot of businesses thought it was going to,” said DeSart. “I would be in favor of limiting its growth, or even reducing it a little bit. Having some sort of commerce tax, I can see how it would make sense, but I’m always afraid that, when you create a new tax, it has nowhere to go but up.”
When asked if a state income tax should be considered, 94 percent of respondents said it shouldn’t, a percentage that has grown from previous years. Many of the executives interviewed felt strongly that a state income tax would only be a detriment to growth for Nevada.
“Absolutely not,” said Neighbors of the tax. “That’s part of what attracts people to come to Nevada. It’s a differentiator for Nevada, that’s what helps us from a business standpoint.”
Martin agreed. “Not having a state income tax might be the single biggest competitive advantage our state offers. We should try to hang onto that great incentive that would encourage others to move here.”
The Never-Ending Story
Healthcare has been a, seemingly, never-ending struggle for businesses in recent years as costs go up and quality and access remain a concern in Nevada. Nearly 100 percent of business owners and executives responded that they were either “somewhat” or “very” concerned about the cost and quality of healthcare with only 2 percent saying otherwise.
“I’m extremely concerned,” said Neighbors. “I pay 100 percent of healthcare for employees, that is a huge expense line-item on my P&L.”
“As a non-profit, we take running The Smith Center as a business very seriously and healthcare costs continue to climb,” added Martin. “When you’re an institution that depends, not only on ticket sales, but on philanthropy, to sustain it, significant line items like healthcare costs can really become a challenge.”
In Nevada, and in addition to cost, access and quality are always a concern. “It’s something that we have to fix,” said Neighbors. “If you think about the aging population we’re going to have more and more issues of cost and quality of care. That’s probably one of my employee’s biggest concerns.”
“There are aspects of healthcare that are improving in our state, so that’s good,” said Martin. “I think we can do better, and having a UNLV medical school will certainly help, but quality is as an important component as cost.”
When asked which they were most concerned with, access, cost or quality, over half of respondents said cost was the biggest issue.
“I do think cost is an issue,” said Lopiccolo. “I hear it more regularly, it puts a real strain on the families that can’t afford it. Whether it’s through insurance costs, or just medical care in general, it’s a little bit inflated.”
Repairing Education
While healthcare has been top of mind for the past several years, education in the Silver State has been an issue for much longer. Consistently falling at the bottom of national rankings, the latest “Quality Counts” report from Education Week has Nevada 51st in the U.S. for the quality of public education. Unfortunately, that’s dead last. Nevada received a letter grade of “D” from the report.
Despite national rankings, Nevada executives have a more positive outlook on the state’s education system with the majority (41 percent) giving the state a grade of “C”. Even so, less than 10 percent of respondents gave the system anything higher than average. However, there is continued hope that the problems in the system are being addressed and it’s improving.
“We need more funding, more accountability, more parental involvement, more reform, more school choice and teacher’s salaries,” said Lopiccolo. “All of those things are needed; they all need to be brought up to speed.”
“I would give our state a grade of ‘B-’ at the moment, which isn’t a perfect grade, but it’s not as low as some national polls,” added Martin. “When you take what’s happening right now with countless groups that are coming out in support of public education, and you add a proper funding model, we’re going to be able to do something really great in Nevada.”
When asked what was needed most to fix education, responses were mixed. Accountability, with 32 percent, received the highest percentage of “Most Important” responses on the poll. A close second to that, with 26 percent of the “Most Important” votes, was funding.
“I think accountability is the most important,” said DeSart. “What they need is good leadership over at the school district. I think that will make the biggest difference.”
“My first five will probably be all funding,” said Martin. “We really are in a place where we need to put our state’s money where our mouth is when it comes to making a better educational environment for our kids.”
Some executives worry that, if not implemented hand-in-hand with accountability, funding will not be as effective as it should be.
“I’m not sure that more funding necessarily equates to better schools,” explained Barr. “I’d rather look at what that funding is going towards. Administrator salaries come to mind immediately, as opposed to teacher salaries. It’s not a direct correlation between funding and outcomes.”
New Leadership
The 2016 election was historic in many ways and the past year has seen a multitude of changes at a national level with President Trump at the helm. Many recognize the benefits he has brought, and can continue to bring, business. However, there’s also major concern over some of President Trump’s policies and actions.
“If he could just not tweet, and keep his mouth shut, he could, overall, be doing an above average job,” said DeSart. “He shoots himself in the foot on a regular, almost daily, basis.”
Lopiccolo added, “His tax reform has been promising for Nevada businesses. But, his social and foreign policies are very, very concerning.”
Respondents gave President Trump a letter grade of “C-” which is slightly down from the “C+” grade that was expected of him in last year’s poll. Regardless, that’s a fairly middle-of-the-road grade for such a polarizing public figure. His grade may indicate that executives are reserving judgement to see what the administration can accomplish in the next few years.
While the last election provided a change-up in the White House, this November’s election will have Nevadans voting for a new governor. The race is already competitive amongst the candidates that have announced a bid for the Governor’s mansion. While those decisions are yet to be made, many agree that Governor Sandoval is leaving a positive legacy for the Silver State. He was given a grade of “B” for his last year in office.
“His experience has allowed him to reach across the aisle, to bring people together, to get big things done,” said Martin. “Sandoval has embodied the spirit of Nevada that says, ‘We need to do what’s right for our people.’ I admire him for that.”
DeSart added, “He’s done an excellent job. He’s gotten our budget in order. He’s attracted some diversification to our economy.”
Apart from Sandoval, the remaining politicians from the poll all received grades in the “average” range from executives this year. Mid-term elections will shake-up the roster at both the national and state level for Nevada and next year’s poll may boast some variety.
A Wary Eye
As executives look forward to a prosperous year, they do so with a close eye on the needed fixes in Nevada’s problem areas. Business owners and executives indicated that education and healthcare, respectively, remain most concerning for the state. Combined, the two accounted for nearly 70 percent of the “Very Concerned” responses when weighed against issues such as water, budget, taxes and transportation.
Transportation ranked last on the list of concerns, with 44 percent of respondents indicating they weren’t at all concerned about it when compared to the other issues.
“I do think, with the number of people I forsee coming to live here, we’re going to have some infrastructure issues from a transportation standpoint,” said Neighbors. However, she also felt the state’s transportation entities we’re working on the issue. “You don’t just solve these kinds of problems overnight. I’m sure they’ve got a bigger handle on it than how it’s been communicated,” she said.
Water is an issue that, in years past, has been a large concern in Southern Nevada. The focus on availability of water has since shifted to the northern end of the state.
“I’m a little nervous about the population growth,” said Lopiccolo. “I’ve been to a few of the county meetings where they’re talking about new developments and water continues to still come up and whether or not we can support the amount of growth that we’re seeing.”
Shortfalls in the state budget ranked in the middle of the concerns for executives, possibly because many believe the issue has already been addressed.
“I’m interested in seeing how the legalization of marijuana can help bridge some of that, if there’s no federal intervention to impede the progress,” said Lopiccolo.
Barr, whose firm specializes in cannabis-related issues, said, “In full maturity, I think the marijuana industry will be the third or fourth largest industry, behind gaming, and maybe mining, in the state. It will be that popular.
DeSart added that economic diversification is most needed for the state. “If you think about it, we have gaming, construction and mining. Those are our three big industries. Mining and gaming are great but they are subject to boom-and-bust. Construction is not a very stable industry to have as one of your primary industries.”
That diversification is well under way as more companies make the Silver State their home. If this year’s “Power Poll” is any indication, executives are looking at a very positive 2018 and their hopeful outlook is contagious as out-of-state companies take note of all that Nevada has to offer.
“There’s so much to be thankful for and to be happy about,” said Martin of Nevada’s economy. “We have a world-class performing arts center now. We have a professional hockey team now. We have soccer and, before you know it, we’re going to have the Raiders. Those are all really positive things. I’m equally as enthused about getting Tesla and Apple and these other companies building major facilities in our state. It’s a really good sign for our future in Nevada.”
