Third Annual Power Poll: Nevada’s Business Leaders Share Their Opinions

What issues are uppermost in the minds of Nevada’s business leaders? No matter what segment of the economy they fit into, business owners and high-level executives across the board have more in common than might be expected. Concerns about growth, staffing, insurance costs and the drought keep CEOs burning the midnight oil from all areas of the state, in companies large and small.

Nevada Business Journal sent out over 300 Power Poll survey forms in December, asking for opinions on political and economic questions. The surveys were sent only to business owners or chief executives of Nevada companies; they were not sent to government officials or to rank-and-file employees. Respondents were almost equally divided between owners and CEOs, and represent many industries throughout Southern Nevada, Northern Nevada and rural communities. While most ballots were returned anonymously – making it easier for people to express frank opinions – a few brave souls volunteered to be interviewed for this article, and their comments appear below.

Views on Yucca Mountain

For the third consecutive year, business people responding to our poll indicated that Nevada should negotiate with the federal government for compensation, when and if the nuclear waste depository is established at Yucca Mountain. Interestingly, this compromise choice is becoming less popular with each passing year, indicating that Nevadans’ opinions – whether pro or con – are becoming more polarized.

“I don’t think we can stop the Yucca Mountain project,” said Tom Craig, co-owner of Opulence Photo Studios in Las Vegas. “If we are going to assume the risks involved in transporting hazardous wastes through the state and storing them in a place that might be compromised by an earthquake, then the federal government should compensate us. One idea would be to give money to NDOT (Nevada Department of Transportation) to fund roads throughout the state, which would benefit everyone.”

MaryKaye Cashman, CEO and owner of Cashman Equipment, marked both “Do whatever is necessary to stop it” and also “negotiate for compensation.” She said, “Yucca Mountain would solve no problems, because waste remains at the site of origin for five years while it’s cooling, and then it becomes a mobile terrorist target [while it’s being transported for permanent storage].”

Business-Friendly State?

More than 62 percent of business owners and executives “strongly agreed” that Nevada is a business-friendly state. Chris Howard, CEO of Reno-based North Star Investors, Inc., said, “Nevada has obvious advantages because of its tax system, but once you get beyond that, the real reason we have a good climate for business is that so many of our legislators are only part-time politicians, and the rest of the time they are in the business world. That sensitizes them to the needs of the business community.”

Rick Smith, president and CEO of RDS Associates, a real estate development company, indicated he “agreed somewhat” that Nevada is business-friendly. “In the past, we have been friendly to business interests, but I don’t like the trend I’m seeing now,” he remarked. “Look at what the Sierra Club has been able to do to the I-95 widening project [in Las Vegas]. This is part of a larger movement by environmental groups and others to slow or stop development. During the last legislative session, we saw the beginning of a trend to shift the tax burden from gaming to other businesses with the establishment of the payroll tax. Now that the door has been cracked, it will open wider and wider and we’ll see more business taxation in the future, especially since mergers and consolidation of the large gaming companies will give them even more lobbying power.”

Taxation: Fair or Not?

The majority of people responding to our survey agreed that Nevada’s system of taxing businesses is fair and equitable. Frank Martin, president of Martin-Harris Construction, said the current system is acceptable because “it spreads taxes evenly across the board.” Through the AGC (Associated General Contractors), Martin-Harris supported efforts during the last legislative session to promote the payroll tax, which eventually passed. “It’s important to make sure taxes get spread across all businesses,” Martin pointed out. “Although the present system isn’t perfect, I was strongly opposed to the gross receipts tax, and will fight it again if it is re-introduced.”

Understandably, bankers were one group that disagreed about the fairness of the tax system, after they were hit during the last legislative session with two new taxes targeted specifically at financial institutions. “The general business community wasn’t lobbying for banks to be singled out,” said Mark Daigle, president and CEO of the Nevada region of Colonial Bank. “I think people in other industries realize if we can be hit with a special tax, they might be next, and who knows how many different tax rates we could end up with? It sets a dangerous precedent.” Daigle noted banks now pay a 2 percent payroll tax instead of the 0.65 percent paid by other employers, a situation he called “clearly disproportionate.” In addition, banks now pay a $7,000 tax per year for each branch. “This is the equivalent of a special property tax on bank branches,” Daigle noted. “A bank branch doesn’t place a burden on community resources to justify a special tax. What’s next – a tax on every grocery store or fast-food location?”

We Love Growth, Warts and All

Despite traffic gridlock, high land prices and infrastructure shortages in our fast-growing state, a resounding zero percent of respondents thought the net effects of growth were harmful. Attitudes varied considerably depending on location; for example, all the rural respondents saw growth as an unmitigated good for their communities, except for one person who answered sadly, “Growth would be good, but we have no growth.” Northern Nevada residents seemed to focus slightly more on the negatives than Southern Nevadans, perhaps because so many of them moved there to enjoy the region’s highly-touted “quality of life.”

Lucinda Stanley, executive vice president of Shea Commercial, which develops office parks, mentioned three main challenges: infrastructure, especially roads, are not keeping up with growth; increasing population makes the water shortage more acute; and government entities in Southern Nevada have allowed too many changes to their master plans. “Governments have been persuaded by special interests to re-zone properties, and to move away from mixed communities in which people can live, work and play. The result is that people have to commute long distances to work, which adds to traffic and air quality problems. They have also allowed residential developers to build communities with little or no apartments or other affordable housing. Now people working in service industries can’t find an affordable place to live. Cities need to stick with their master plans,” she said.

Clifford Beadle, a partner with Beadle, McBride, Evans & Reese CPAs, reported he has lived in Southern Nevada for nearly 30 years and served on a citizens’ advisory board on traffic in 1989. “While growth has created more business,” he said, “during the entire time I’ve lived here, infrastructure, especially the road system, has never been able to catch up with growth.”

Do Elected Officials Make the Grade?

If Nevada’s elected officials were being graded from A to F, they would receive a C-plus or B-minus. “Most of the people in high political positions are worthy of being listened to and deserve our support,” said Gail Kaster-Inman of McCarthy Kaster CPAs. “However, it’s hard to give elected officials overall an unqualified vote of confidence when it seems like every week there’s a new scandal about somebody accepting bribes or misusing their influence.”

M. Scott Polley, president of Las Vegas-based Allied North America Insurance Brokerage, pointed out that politics in Southern Nevada at the city and county level are often controlled by what he termed “political and religious cliques.” Polley remarked, “If you don’t fit into one of the established groups, your voice won’t be heard. However, things are changing as more new people move here. If we embrace inclusion of these new people and their ideas, we have a chance to improve as we grow into a more mature community.”

Ranking the Challenges

Despite the wet winter Nevada experienced, availability of water was cited by the majority of respondents as the state’s No. 1 concern. Following closely was quality of education. “Nevada should be concerned about bringing in higher-paying jobs,” said Leo Falkensammer, CFO and vice president of Prestige Travel. “Companies won’t be willing to relocate to Nevada unless they can find qualified, trained employees. The higher the quality of our educational system, the better chance we have to bring non-gaming companies here and diversify the economy.”

Bill Hoover, president of the Nevada division of Pageantry Communities, chose “problems caused by growth” as his greatest area of concern. “We are having tremendous challenges with the utility companies and also the county,” the homebuilder reported. “They’re really trying, but they don’t have enough staff to keep up, and we have had to rethink our construction schedules. It takes about eight weeks to finish a house after the electrical panel is put in place, but it often takes 16 weeks to get the power connected and the house inspected by the county – double the time it used to take – so the house sits for eight weeks unable to be sold.”

Kathleen Farrell of the Tahoe Douglas Chamber of Commerce cited “availability and cost of healthcare” as her No. 1 concern, and noted that her group health insurance premiums had increased more than 75 percent since the previous year.

Staffing Concerns

During the monthly Industry Outlook roundtables sponsored by Nevada Business Journal, a common complaint of executives in business segments from healthcare and construction to banking has been the difficulty finding and retaining qualified employees. Over 50 percent of our respondents reported having “a few” problems with staffing, and 17.3 percent cited “serious” problems.

W. Michael Beardslee, president of IT Strategies International, said his company has been looking out-of-state to find IT consultants. “Our clients may request people with specific skill sets and experience, and they aren’t easy to find,” said Beardslee, who currently has a staff of 40. “Consultants need a good technical education, but business skills are also important so they can relate to clients and understand their real-world needs.”

Because of Nevada’s high growth rate, employers in construction-related industries have been scrambling to find employees. “It’s an ongoing challenge to identify local people who are not only qualified, but will also fit into our culture,” said Brad Schnepf, president of Marnell Properties, a Southern Nevada commercial developer. “With demand being what it is, everybody’s already working somewhere, so it’s difficult for a growing organization like ours to increase our staffing levels.”

Health Insurance Costs Soaring

More than 90 percent of those responding to the Power Poll said their company provided at least part of the costs for workers’ health insurance, and 88 percent of those providing insurance reported their premiums had increased in 2004 over 2003. Jason Neiberger, president of Skybridge Wireless, Inc., said his company recently switched from using independent contractors to having full-time employees. “We have been watching the prices for health insurance rise every year, so we knew we would have to absorb significant costs when we decided to provide insurance for our workers and their families,” he said. “In fact, insurance premiums are now 75 percent more than they were when we started tracking them in 2001. However, offering health insurance gives us a competitive edge in recruiting and retaining qualified people, especially from states where health insurance premiums are high, so we feel it’s a good investment.”

Anne Cory, president of United Way of Northern Nevada and the Sierra, said her organization’s premiums had increased less than 25 percent since last year, but only because coverage was reduced, an option many other companies have been forced to consider in order to keep offering insurance. Another type of insurance causing ongoing problems for companies in the medical field is malpractice insurance. Although health insurance costs for Desert Radiologists increased 10 percent, the firm’s CEO, James Kilber, said costs for medical professionals’ liability coverage doubled.

The 2005 Outlook

Now that the economy, both nationally and in Nevada, seems to be rebounding from the slump that began in 2001, owners and executives throughout the Silver State are busy taking advantage of the upswing in the business cycle to “make hay while the sun shines.” Although they are facing challenges like keeping up with growth and making sure health insurance costs don’t eat up profits, most are optimistic about the future. They will also be watching the 2005 Legislature to make sure their interests are being considered when budgets and taxation are debated.