Nevada Beckons State’s Businesses But Faces Challenges of Its Own
By SHERRI CRUZ
Nevada’s siren song to California businesses has gotten louder.
The state’s $600,000 campaign to woo California companies has gained media attention from the Orange County Register to USA Today and the CBS Evening News with Dan Rather.
“It’s absolutely beyond our wildest dreams,” said Somer Hollingsworth, president of the Nevada Development Authority.
The bid to lure California businesses also has gotten the attention of some Orange County executives who are enticed by Nevada’s low workers’ compensation premiums, no income tax and cheaper housing and energy costs.
According to Nevada’s Commission on Economic Development, 24 of the state’s 78 new companies came from California in the 12 months ended June 2002, the most recent figures available.
Two were from OC: Aleks International, a five-person maker of industrial pumps formerly of Newport Beach and now in Reno, and Nutek Inc., a holding company that moved from Brea to Henderson outside Las Vegas, where it employs 150 workers.
Nutek said it moved for the cost savings. It still runs a bilingual call center in Brea with 50 to 75 people.
Others have looked and passed.
Raj Bhathal, chief executive of Tustin-based swimwear maker Raj Manufacturing Inc., said he has considered moving operations over the state line. Bhathal said he owns real estate in Nevada.
But Bhathal said he’s decided against Nevada because he would have to compete for workers with casinos.
“I won’t have enough labor,” he said.
For now, Bhathal said he plans to give Gov.-elect Arnold Schwarzenegger a chance to fix some of California’s problems (see related story, page 1). But he said he’d consider Utah or Arizona for manufacturing and keep design and administration in OC.
Bhathal’s decision to pass on Nevada hits at the state’s challenge in recruiting California businesses. Sure, Nevada is cheaper. And, yes, California has its problems. But so does the Silver State.
From education to divorce, Nevada leads the nation in several social woes, which impacts the state’s quality of life and workforce. Some say the state’s problems stem from its economic base,gambling.
Others blame rapid growth. Southern Nevada’s population of 1.5 million has been growing by 6% yearly for the past decade. The largest county, Clark County, which includes Las Vegas, makes up 70% of Nevada’s population.
“It is a city with vastly more than its share of social problems,” said David Littlejohn, editor of the book “The Real Las Vegas: Beyond the Strip.”
Nevada, with a population of 2.2 million people, counts higher rates of high school dropouts, crime, teen pregnancy, bankruptcy and divorce than California and most other states.
“We do have problems,” said Keith Schwer, director for the Center for Business and Economic Research at the University of Nevada, Las Vegas. “The other side of that is we have lots of people moving in.”
Littlejohn has another take. He and other writers describe the saturation of gambling culture and its influence on residents.
With a large number of people coming and going,for every two people that move to Southern Nevada, one leaves, according to state figures,there’s little in the way of art, theater and music, he said. Many locals look to the Strip not only for jobs but recreation and culture.
Of course, Nevada has it selling points. New housing developments north of Las Vegas tout South County-style living at about half the cost.
“In housing, people think they died and woke up in Mecca,” said Tom Cargill, a finance professor at the University of Reno.
But gaming is everything in Nevada, both politically and economically, Cargill said. That’s led to the state’s push to lure new businesses.
Nevada also has to contend with new gambling competition, particularly from California’s Indian casinos.
The goal: attract more high paying technology jobs, like those found in OC and elsewhere in California.
A drawback is the state’s relatively weak education system. So far, state officials have resisted big attempts to improve education quality because the gambling industry doesn’t need it, Cargill said.
“The last thing the gaming industry wants is a diversified economy and an educated workforce,” he said.
Educated workers demand more in the way of pay, benefits and advancement, according to Cargill.
If businesses are looking for a skilled labor pool, they’re better off in OC, said Stan Oftelie, chief executive of the Orange County Business Council, an economic development group.
One in three adults in OC has a college degree, according to Oftelie. But if cheap, unskilled labor is what you’re after, then it’s easy to move across the state line, he said.
But which state line? Las Vegas also has Arizona to contend with.
Arizona is second only to Nevada in population growth in the past 10 years. And while Las Vegas is gaining low-skilled jobs, Phoenix is getting more tech employers.
Arizona has a different recruiting strategy. It’s been relatively low-key in its California poaching efforts.
For tech jobs, Arizona competes with states such as Oregon, which has a strong higher education system.
Still, there are business owners who are thrilled to be in Las Vegas.
Vito Longo moved his test equipment supply company, Equipment Management Technology Inc., from San Francisco to Las Vegas last year. The first year he said he saved $1 million. He moved 10 people and hired seven in Las Vegas.
Longo’s company is building a 122,000-square-foot building and plans to hire another 15 people.
With grown children, Longo said he doesn’t have to worry about the school system. His only complaint: the heat.
