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State needs more economic development tools

Gov. Brian Sandoval is off on another victory lap. And, again, he deserves it.

His bold leadership and political acumen have moved Nevada into the major leagues as a possible location spot for top companies that have multiple options. In tech in particular, Nevada is suddenly a player on the main stage.

Worried about education of your employees’ kids? We’re on it.

Worried about finding an educated workforce? Western Governors University-Nevada is tuning up workers already.

Worried about those jokes that the best health care is at the airport? UNLV has a med school on the way and have you been to the Medical District?

Sandoval has built an impressive list of accomplishments but I’m wondering how history will judge all this in, say, 15 years, when all these tax incentives expire.

Investing in tech is a tricky proposition.

In the old world of manufacturing, automakers would retrofit assembly plants to accommodate new technology. Remember the Big 3 squeezing those flashy welding robots into aging plants that once rolled out the likes of the Edsel?

Tech is a little different. Architectures and processes change even faster and it often makes sense to walk away rather than retrofit a plant, even a $5 billion giga-plant. The accounting teams in tech are often driven by venture funding sensibilities. If the subsidy goes away, the game starts fresh. Will you give us new incentives to invest or should we shop elsewhere?

Tesla, Faraday Future and Hyperloops all sound like new age Intels, dangling economic hope yet knowing they’re signing one-time, closed-end deals. Sometimes it works. See Ireland. Sometimes it doesn’t, as dozens of jurisdictions have found out painfully.

If Nevada leverages all these starts into a game changing avalanche, we can thrown a parade on Sandoval Day in 2030. If it turns out we paid dearly for short-term gains, history may see it differently.

One of the issues is the reliance on tax incentives.

Nevada needs more tools in its economic development tool kit. Diversity of lures is good business and taxpayers deserve it. Because one of these days, a great deal will come along – one the size of Tesla – and the pot of tax incentive gold will be empty.

One place to look for ideas might be Connecticut Innovations, a quasi-public development agency that’s been armed with an array of tools – investments, loans, an angel tax credit, industrial revenue bonds, specialty financing, entrepreneurship support. The goal is to drive development and be self-sufficient.

It’s working. The state has built an impressive cluster of medical equipment and pharmaceutical research firms. An early home run of an investment has allowed CT Innovations to chase even bigger deals.

The key takeaway, of course, is self-sufficiency. When the next great deal presents itself, there will be money in the pot.

Now, Connecticut does a lot of things that undercut this good work – high taxes, heavy regulation and an anti-business bias.

Nevada doesn’t have those problems but an empty wallet will be just as much a deal killer downstream, long after Sandoval has moved on to whatever is next in his illustrious career.

Mark your calendar for late 2030 and let’s review the situation again.

 

 

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