LOS ANGELES — Faced with the nation’s highest foreclosure and unemployment rates, Nevada political leaders decided last year that they needed a plan to not only vault the state out of its current economic trough, but flatten out the peaks and valleys of its boom-and-bust economy.
With that in mind, the state Legislature approved Assembly Bill 499 last summer, creating the Governor’s Office of Economic Development. The new cabinet-level agency, established in September, released an economic development plan this year setting a goal of creating 50,000 jobs by 2015.
“It is one-half percent growth compounded annually by three years,” said Dave Berns, a spokesman for the GOED. “The state experienced 0.8% job growth last year, so 1.5% is an aggressive number, but we wanted a goal for people to focus on.”
The 63-page plan, “Moving Nevada Forward: A Plan for Excellence in Economic Development 2012-2014,” outlines methods for establishing a cohesive system of economic development. It uses the 181-page report produced by the Brookings Mountain West/SRI International in November as a jumping-off point.
“This is a boom-and-bust state in many ways. We are trying to get beyond that in Nevada by broadening the economy,” said Robert Lang, director of Brookings Mountain West at the University of Nevada, Las Vegas. “If you ask what the heart of the Brookings report is, it is how to take Nevada beyond that boom-and-bust mindset. That is the true energy of the report.”
Even if the 50,000-job goal is achieved, it won’t catapult the state out of double-digit unemployment. Nevada had a 12.6% unemployment rate in December, according to the most recent numbers from the national Bureau of Labor and Statistics.
The state, which reported $3.8 billion in long-term debt obligations in its 2011 comprehensive annual financial report, experienced a 55.8% drop in bond issuance in 2011 to $1.6 billion in 2011, according to Thomson Reuters.
Despite its economic malaise, the state has managed to maintain good credit ratings, helping issuers refund even as they take it easy on new bond-financed projects, according to John Swendseid, a bond attorney with Swendseid & Stern, the Nevada arm of Sherman & Howard LLC
Nevada carries ratings of AA-plus from Fitch Ratings, AA from Standard & Poor’s and Aa2 from Moody’s Investors Service. All three assign stable outlooks.
“By targeting development and expansion of key sectors throughout our state, we will draw greater investment and opportunity here,” Nevada Gov. Brian Sandoval said in a video teleconference announcing the plan. “We have one of the most attractive business climates in the country. It is up to us to capitalize on that fact.”
One of the new agency’s aims is to help the state to do a better job at encouraging growth in industries that are a natural jump-off from its existing industries — something Lang and the Brookings report contend Nevada has done a dismal job of in the past.
“Las Vegas has a pretty robust technology sector related to gaming, and it also has the main switch on the Internet,” Lang said. “But the state has paid very little attention to expanding business in that area.”
The state also has missed out on many opportunities to capitalize on resources at its universities or grow programs there. Several years ago, Caesar Hotels offered to give UNLV $25,000 to expand its hotel management program if the state would match the funds, Lang said.
The state turned the offer down and missed the opportunity to build a brand new building in place of the dilapidated one that currently houses the program, he said.
The proximity to the Las Vegas Strip offers a natural draw to students wanting to study hotel management because of the wealth of internship opportunities, but the state has done nothing to help fund a program in which it has a natural competitive edge, according to Lang.
The hotel program tends to draw out-of-state students, who pay higher tuition rates. But UNLV doesn’t benefit from that additional income, because it goes back into a state fund for universities.
The Brookings report recommends that such money stay with the program it originates with to help boost successful programs.
“UNLV is funded at a rate similar to Long Beach Community College,” Lang said. “It has paltry assets. I know there are people around the state that think the state universities are lavished on, but all the data points to the opposite.”
Nevada officials recognize that the loss of jobs in the gambling and construction industries means the state needs to focus more energy on its universities and education in general so it can boast the skilled workforce necessary to attract companies and diversify the economy, according to Berns of the GOED.
The Brookings report also suggests that the state needs to better capitalize on positives such as its business-friendly environment, low taxes, low costs and light regulation.
“Going forward, these advantages will continue to anchor Nevada’s value proposition for business investment and economic development as will the state’s extensive entertainment and recreation assets, proximity to West Coast population centers, and excellent airport infrastructure,” the report states.
But the report also has a long list of shortcomings including spotty economic planning and cooperation, a weak innovation and technology commercialization enterprise, and substantial shortfalls in workforce skills.
The Brookings report recommends that the state create three regional economic authorities: one serving the Reno-Sparks region of northern Nevada, another serving all of the southern Nevada cities that comprise the Las Vegas metropolitan region, and a third to represent the rural areas in between.
The governor’s legislation placed the regional development agencies under the umbrella of the statewide agency in hopes of uniting the hodgepodge of agencies serving the state government.
“There used to be very independent economic development efforts going on — and often not just uncoordinated, but competing and at odds,” said Richard Bartholet, research director for the bureau of economic research at the University of Nevada, Reno.
“In recognition of that, the governor decided to reorganize all economic development and have the funding flow through the state office,” he sid
The economic development plan includes incentives through requests for proposals to encourage collaboration between regional development agencies.
In addition, the plan will set aside a $50,000 fund to reward innovation in offering regional economic development services.
A second $25,000 fund will provide grants to regional agencies who submit the best collaborative economic development plans.
Grants from both programs will be awarded in June.
Bartholet said it is to soon to gauge how effective the state’s efforts will be.
The regional authorities have until May to submit proposals to the state. Berns said that the agency considers the document a living thing that it will tweak as it goes along.
“I think the biggest difference has less to do with the organization of economic development efforts and more to do with a sense of urgency throughout state,” Bartholet said.
In addition to having the highest unemployment rate and foreclosure rate, Nevada has the highest reliance of any state on a single industry.
As gambling expands elsewhere in the nation, it’s becoming less of a sure bet for the Silver State.
“Now that we no longer have a monopoly on that industry, people across the spectrum are coming to grips with the need to take this seriously and work together to get something done,” Bartholet said.