NEVADA BUSINESS MAGAZINE: Welcome to Nevada: Tax Changes Looming

October 1, 2014
By Chris Sieroty

Nevada is well known as a corporate tax haven, one reason is that Nevada law provides strong protections against holding corporation’s owners.Nevada is well known as a corporate tax haven. Many large companies are incorporated in Nevada, particularly those whose headquarters are located in California, Arizona or Utah. There are several reasons for this. One is that Nevada law provides strong protections against holding corporation’s owners responsible for the actions of a corporation.

Another reason has to do with the state’s tax structure which is favorable for businesses in Nevada. The state also has no corporate income tax or personal income tax. In fact, it’s clear that the state has made it a priority to keep the cost of doing business in Nevada as low as possible.

However, there are some fees businesses must pay in Nevada. One is an annual $200 “Business License Fee,” which is paid to the Secretary of State’s Office at the time of formation or renewal of the corporation. Nevada also applies a 1.17 percent tax on gross wages to most businesses with a payroll over $85,000. The quarterly tax, however, does allow employers to deduct health care expenses. If an employer has less than $85,000 of taxable wages in a quarter, it still must file a return with $0 balance due, according to the state Department of Taxation.

Financial institutions in Nevada also pay 2 percent of wages paid to employees during a calendar quarter. However, Nevada and Texas are the only two states that do not have information sharing agreements with the Internal Revenue Service.

For many businesses this means that Nevada is an ideal location. Liz Malm, an economist with the Center for State Fiscal Policy with the Tax Foundation in Washington, D.C., said the state does really well as a whole where it currently stands.

“Each year, we rank state business tax climates in our State Business Tax Climate Index,” Malm said. “Nevada ranks third, meaning that it has the third best tax climate in the country. This is in part due to its lack of income taxes.”

Malm cautioned that Nevada does have a high state-level sales tax rate and high average local rates, but property taxes are in the middle-of-the-pack. She added Nevada does have an interesting state-level payroll tax, and uses severance taxes on mineral extraction, as well. A severance tax is incurred when non-renewable natural resources are extracted within a taxing jurisdiction.

“Tax revenues associated with tourism, such as sales taxes and hotel accommodation taxes, are also important for the state,” Malm said.

Nevada’s budget is also reliant on taxes levied on the mining industry. The state has a minerals extraction tax and oil and conservation tax, known as the Net Proceeds of Mines Tax. The tax’s rate was 3.65 percent before being raised in 1989 to its current 5 percent.
November Election

The state’s tax structure could change on November 4th of this year, when Nevada voters will decide on two tax proposals that the Tax Foundation says will have a dramatic impact on the state.

The Nevada Mining Tax Cap Amendment, also known as SJR 15, is on the ballot as a legislatively-referred constitutional amendment. If approved by voters, the repeal would allow the 2015 Legislature to consider raising the 5 percent tax on net proceeds of gold and other minerals mined in Nevada.

The cap is currently in the state constitution and needs voter approval to be removed. A similar measure failed to make the 2012 ballot.

The campaign surrounding the attempted removal of the 5 percent tax cap on mining in Nevada, although controversial, has been overshadowed by another ballot issue, Question 3, also known as The Nevada Margin Tax for Public Schools Initiative. If approved by voters, the initiative would institute a 2 percent margin tax on businesses operating in Nevada. Tax revenue raised from the increase would be kept in the State Distributive School Account to be allocated to public schools, from kindergarten through high school. However, its possible regular funding will be pulled so there’s no guarantee that education funding will increase.

The 2 percent tax could be determined using two different methods: Taxation of 70 percent of total revenue of the business or taxation of a business’ total revenue minus compensation to owners and employers related to good sold. A business would choose whether to subtract compensation or cost of goods, but not both.

The measure would also temporarily increase the 2 percent Modified Business Tax on financial institutions to 2.29 percent in January and with another temporary increase to 2.42 percent set for July of next year. The increased tax revenue would be used to pay for the administration of the margins tax and would return back to 2 percent in July of 2016.

If approved by voters, the tax would start to accrue on January 1, 2015.

The initiative was filed in February 2013 by the Nevada AFL-CIO, led by Executive Secretary Treasurer Danny Thompson, and the Nevada State Education Association (NSEA). However, on May 2, 2013, the AFL-CIO passed a resolution to officially oppose the measure. It is still being supported by the Nevada State Education Association. Supporters refer to the measure as The Education Initiative (TEI) while opponents have dubbed it The Margin Tax Initiative.

“In terms of how it will impact business, experience from Texas – the tax that the Nevada proposal mimics – shows us that this is not a business-friendly tax,” Malm said. “It’s complicated and cumbersome to calculate and comply with; it will hit small and low margin businesses even though these aren’t its direct targets.”

Malm expects it would be costly for Nevada to administer and is confusing and hard to understand.

“It’s also not neutral, hitting different industries with different effective tax rates,” Malm said, “Overall, it’s a poorly designed tax.”

In 2006, Texas implemented a margin tax, which supporters of the Nevada tax have used as a model in crafting the tax which is on the November ballot. The tax in Texas went into effect in 2008, despite much resistance from small business owners.

Texas officials anticipated the tax would raise $5.9 billion per year. However, in recent years the tax fell short, raising only $3.9 billion.

Texas’ tax levies 1 percent on most companies that make at least $1 million in annual revenue and 0.5 percent on wholesalers. This isn’t a new tax for Texas, simply a revised tax. Previously, businesses weren’t required to pay the original tax if they were incorporated in another state. In 2013, several Texas legislators tried, but failed the repeal the tax.
Nevada’s Margin Tax

Nevada’s proposed margin tax – the state’s first such broad-based business tax – would impose 2 percent on all businesses making more than $1 million in annual revenue, whether or not the company is profitable. Supporters say the tax is designed to raise almost $800 million a year for public schools.

Dan Hart, campaign manager for The Education Initiative, was unavailable for comment. However, on the organization’s website he said the margin tax is needed to offset some $700 million in cuts to education since 2009.

Supporters of the tax also point to Nevada being ranked 49th in the U.S. in per pupil spending, the state having the lowest corporate taxes in the country, and contend that 87 percent of Nevada businesses would be unaffected by TEI.

“It’s a deeply flawed tax,” said Karen Griffin, a spokeswoman for the Coalition to Defeat the Margin Tax Initiative. “It will hurt small and mid-sized businesses and will increase employer costs. As a result, we are opposed to the measure.”

Griffin said the tax ultimately does nothing to fund education and doesn’t guarantee the money raised will be used to fund education in Nevada. She predicted a large number of lawsuits would be filed if voters approved the margin tax.

In fact, opponents of the tax have speculated that the primary reason the NSEA did not include language in its petition earmarking the tax for public education is it would have been questioned by Nevada courts. In recent years, initiative petitions have been challenged for breaking the “single subject rule.” In other words, by Nevada law, the initiative cannot call for the imposition of the tax and then also prescribe how the money will be spent.

Griffin said in 2008 voters in Washoe and Clark counties approved a 3-percentage point increase in room taxes for education, including increasing teacher salaries and improving school performance. After approval in Washoe and Clark counties, the 2009 Legislature increased the room tax.

However, instead of using the tax profits to increase education funding, state lawmakers used the revenue to plug its budget shortfalls in its general fund. That tax increase raised some $230 million in its first two years.

Referring to the margin tax, Griffin reiterated that “it’s a 2 percent across the board tax. There are no tax exemptions for Medicare, so it would tax those payments and providers. We think when people understand it doesn’t do what the initiative claims, ultimately they will vote no.”
Griffin added that the margin tax “would kill thousands of jobs” in Nevada.
Taxes into 2015

Meanwhile, the 2015 legislative session may still be five months away, but a list of bill draft requests has been released and it offers a glimpse into some of the tax measures state lawmakers want to consider during their 120 days in Carson City.

Both of the tax-related draft requests are causing voters to sit up and take notice. Sen. Tick Segerblom, D-Las Vegas, has requested drafting a resolution asking voters in 2018 to repeal the two-thirds requirement in the Legislature to raise taxes.

And, at the close of the 2013 session, Sen. Mo Dennis, D-Las Vegas, asked the next session to draft a resolution that would create a Nevada Commerce Tax. Specific details on what that tax would look like haven’t yet been released.

“I don’t have a crystal ball about what will happen in the next legislative session. I wish I did,” said Carole Vilardo, president of the Nevada Taxpayers Association. “I believe whether or not the margin tax passes … substantial changes could be made to better reflect the way business is done.”

Vilardo highlighted the proposed Nevada Commerce Tax, which she said had been “discussed as an income tax.” But in a six-page section titled 2015 Session: The Crystal Ball, Vilardo said the extent of the discussion on revenue issues will largely be determined by increases in expenditures in the current biennium that were not covered by the revenue estimates from the Economic Forum in May 2013 and used by the Legislature in closing the budgets for fiscal years 2014 and 2015.
Nevada Sunsets, Not Those Ones…

Vilardo also pointed to increases in state expenditures, or Sunsets, the taxes or fees that are due to expire, and the state of the economy.

“We’ll find out two weeks before the start of the session if Governor Brian Sandoval extends the Sunsets,” Vilardo said.

The Sunsets that are set to expire are: the Modified Business Tax that will revert from 1.17 percent to 0.63 percent; the sales tax (Local School Support Portion) was increased 0.30 percent to 2.60 percent; the room tax, what is known as the 3 percent initiative portion of the tax collected only in Clark and Washoe counties and is currently deposited into the general fund; the Motor Vehicle Registration Tax, which was increased 10 percent each year of the depreciation schedule and the Net Proceeds of Minerals Tax, or advanced payment of the tax.

The Modified Business Tax, sales tax and room tax are scheduled to sunset on June 30, 2015. The 10 percent increase in the Motor Vehicle Registration Tax has been deposited into the general fund, but on July 1, 2015 the revenue from the increase will be deposited into the Nevada Highway Trust Fund.

And the Net Proceeds of Minerals Tax will revert to tax payment based on actual receipts on July 1, 2015.

Other potential revenue issues to be considered by the state Legislature includes the so-called “Main Street Fairness Act.” The measure would call for the collection of sales taxes by remote sellers from purchases made over the Internet.

Vilardo noted that the tax would probably be patterned after New York State’s Internet tax collection law. New York has a 4 percent statewide sales tax, and local jurisdictions impose additional levies. In New York City, the total tax rate is 8.875 percent.

Nevada already has an agreement with Amazon, the world’s largest online retailer, to collect tax. Under existing law, Nevadans who order and receive merchandise from remote sellers, where sales tax has not been charged, are liable for paying the sales tax. In reality, most don’t.

Vilardo said a service tax could be considered or even a transaction tax, which is an alternative to expanding the sales tax base to include services. Lawmakers could consider increasing the property tax cap of $3.64 per $100 of assessed value, but any changes would have to be approved by the voters.

Vilardo said whatever happens during the session, she urged lawmakers to consider the worst case scenario when approving any new taxes or fees. For example, she cited a property tax abatement approved by the 2005 Legislature to deal with sky rocketing property taxes during the housing boom.

The law installed a 3 percent cap on property tax rates on single family homes and 8 percent for all other property.
“It did what it was supposed to do,” Vilardo said. “But, nobody considered the worst case scenario. Nobody expected the recession. We now have a whole series of unintended consequences.”

Vilardo said from 2005 to present the cap has left Clark County with $3.8 billion less to spend than if nothing had been done. She said sometimes, “the cure is worse than the disease,” but added that there would have been problems either way brought on by the recession.

LAS VEGAS REVIEW-JOURNAL: More Las Vegas companies are paying their workers with plastic

It’s payday: Will that be paper or plastic?

More companies in Las Vegas are offering their employees the option of being paid with plastic instead of traditional direct deposit or paper checks. Those payroll debit cards are automatically loaded with money each pay period.

Employees of Starbucks, Wendy’s and Chipotle can opt for payroll debit cards. The cards also are available to workers at Darden restaurants and MGM Resorts International.

“There are three ways our employees can be paid,” said Rich Jeffers, a spokesman for Orlando, Fla.-based Darden. “They can receive a paper check, deposit to a payroll card or direct deposit.”

Jeffers said 48 percent of the company’s 200,000 employees use payroll cards, while 50 percent have direct deposit with their bank and 2 percent receive a paper check. Darden, which operates Yard House, Red Lobster, Olive Garden and The Capital Grille, employs some 1,300 workers at 13 restaurants in Las Vegas.

“Yes, there’s a cost savings for the company,” Jeffers said. “But not everyone has a bank account. There are a lot of unbanked people in the U.S. There are also folks that choose to access their money differently.”

In 2012, employers loaded more than $34.1 billion in wages onto 4.6 million payroll cards, and that number is expected to grow to 7.1 million cards and $51.5 billion next year, according to Aite Group, a business-research firm.

Jeffers said the use of payroll debit cards at Darden was “generational.”

“A majority of our employees are millennials,” Jeffers said. The Millennial Generation, also known as Generation Y, have birth dates from the early 1980s to the early 2000s.

MGM Resorts began offering payroll debit cards in 2005. Today, 5 percent of the company’s 62,000 employees use them, while 89 percent use direct deposit and 6 percent receive a paper check.

“The typical reason we get for employees choosing payroll cards is they want to supplement their children who are in college,” said Diane Gonzales, vice president of Finance Share Service Center at MGM Resorts. “They want to monitor their spending.”

Gonzales said other employees use the cards to send money home, while others are simply not eligible for bank accounts but want the convenience of direct deposit.

She said payroll cards are simply an option and are not mandatory.

The use of these cards makes sense as businesses move away from paper paychecks.

Jeffers said with paper checks the company had to mail them to each restaurant “safely and securely,” and employees would have to come in every Friday to pick up their paychecks even if it was an off day.

“Now their paycheck hits the card by 6 a.m. on Friday,” Jeffers said. “It frees up our managers, who used to have two hours of administrative payroll work a week.”

The debit cards can make purchases at a point of sale and be used at ATMs to withdraw funds loaded on them. Some payroll debit card companies even offer check writing services.

At the Association of Financial Planner’s Annual Conference on Tuesday, Skylight Financial, Global Cash Card, Comdata, and Brinks shared convention space with Wells Fargo, Barclay’s and other traditional financial institutions. Brinks, better known for its armored trucks, released Brinks Money in January, its own branded Master Card.

The card offers a number of free services, including enrollment and initial pay card, no monthly fee for current employees, over-the-counter cash withdrawals at member banks, and cash back at retailers.

“We make our money through interchange fees,” said Jonathan Ginsberg, an account executive with Brinks Money. “Brinks gets a very small part of each interchange fee from every transaction.” Interchange fees describes a fee paid between banks for the acceptance of card-based transactions.

The Brinks payroll card is also FDIC insured. Ginsberg said the card is a secure alternative for employees who have “difficulty getting a bank account.”

Ginsberg said the Brinks card isn’t available yet in Las Vegas, but will be next year as the company continues moving into the payroll solutions business.

Global Cash Card doesn’t charge the employee or employer. It also generates revenue by receiving a portion of the interchange fees. Global Cash also offers an electronic checkbook and free bill pay.

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.

LAS VEGAS REVIEW-JOURNAL: English Premier League debut draws big business for British pubs

Updated August 21, 2013 – 9:32am

From Arsenal’s disappointing 3-1 loss to Aston Villa, to Manchester United’s dominant 4-1 win over Swansea City, soccer fans last weekend enjoyed the games with pints of beer, Full Monty’s or Scotch eggs.

Soccer bars in Las Vegas have benefited for years from tourists and locals turning out, but on opening day, the Crown & Anchor pub welcomed about 100 customers to celebrate the launch of the 2014 Premiership season.

“It was an OK turnout for the first week of games,” said Beth Steele, a bartender with Crown & Anchor. “I expect the crowds to get even bigger as the season progresses.”

Steele said the difference between fans of the Premier League and fans of the National Football League is that soccer fans follow the game a little more closely and like to “talk smack” but still respect one another after the game.

“Soccer fans hug and sing. NFL fans are not quite the same singers,” she said.

Crown & Anchor, on East Tropicana at Maryland Parkway, is one of the top soccer bars in Las Vegas, and fans have made it their headquarters since 1995.

To be among the top soccer bars requires a few key ingredients, including more than 30 beers on tap and an extensive menu of British favorites. But the most important is the fans who show up at 7 a.m. on a Saturday .

Chelsea, Everton, Arsenal, Liverpool and Manchester United were among the most popular teams last weekend, and for about 40 weeks, fans will make the weekly pilgrimage to the pub .

“I’ve been an Arsenal fan for 10 years,” said Roxanne Provence, who turned up Saturday wearing her Thomas Vermaelen jersey. “I liked the way they played. I started watching it and found Arsenal.”

Provence got hooked on the game at the Globe in Chicago but found Crown & Anchor online when she moved to Las Vegas a few weeks ago. She doesn’t mind the time change, because soccer to her is about a “sense of community.”

Jesmond Parke found Crown & Anchor online while planning a trip to Las Vegas.

“Every time I go away, I have to find a place to watch the game,” said Parke, a Toronto resident and Manchester United fan. “It’s nice to be around people who know the game and can have a conversation about the game.”

Parke said it’s better than watching the game in a hotel room.

With the crowd Saturday came a steady stream of pints of beer, as well as dozens of orders of chip butty, Scotch egg, and Full Monty’s, which at $9.95 is one of the most popular items at Crown & Anchor.

The Full Monty is a traditional English breakfast with two eggs, English bacon, a banger, grilled tomato, English Heinz baked beans and toast. A chip butty is a large portion of French fries, or chips, on a buttered roll.

A $4.95 Scotch egg, a hard-boiled egg wrapped in spiced sausage, and a $5.50 sausage roll, or spiced sausage wrapped in a crust, are also popular.

Steele said that how well the pub does can be determined by what teams are playing. On Saturday, the crowd doubled when Manchester United kicked off against Swansea City, she said.

Watching a Premier League game at home or in a Las Vegas sports book isn’t the same for most soccer fans.

“It’s not about getting up at 5 a.m.,” said Sunny Patria, an Everton fan from Victoria, British Columbia. “It’s about passion and following your club.”

Eric Schauwecker urged Las Vegans to pick a Premier League team and get into the world’s most popular sport.

“Find a team or even a player you can relate to. For me it was Steven Gerrard of Liverpool. I always wanted to play soccer like Steven Gerrard.”

Schauwecker cautioned new soccer fans that once you find your club, “you don’t change teams.” He said it’s not like rooting for the Dallas Cowboys for half a season, and then switching your allegiance to the San Diego Chargers.

“In the Premier League, it is about staying up and surviving,” he said.

Contact reporter Chris Sieroty at csieroty@review journal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.

KNPR – Wynn Resorts Wins Massachusetts Gaming License

Steve Wynn, chairman of Wynn Resorts Ltd, in Las Vegas will oversee his company’s plans for a new casino in Everett, Mass.
Credit Wynn Resorts

Updated: Sept. 16, 2:30 p.m.

The Massachusetts Gaming Commission has approved Wynn Resorts proposal to build a $1.6 billion resort-casino in Everett, a city just north of Boston.

The commission voted 3-to-1 Tuesday to award the license to the Las Vegas-gaming company. Wynn Resorts already operates Wynn Las Vegas and Encore on the Strip, Wynn Macau, and is building a $4 billion resort on the Cotai Strip in Macau.

“We’d like to thank the commission for the thoughtful and exhaustive energy that they have put forward into the process and we look forward to successfully navigating the program as it goes forward,” Steve Wynn, chairman and CEO of Wynn Resorts, said in a statement.

Wynn said he believed that a great deal of the resistance that his company experienced in some surrounding communities was “directly related to the fact that this was a competition.”

In his statement, Wynn specifically mentioned Boston as a community resistant to the company’s plans to redevelop 30-acres along the Mystic River.

“We expect that now that a decision has been made, everybody will find it much easier to relate to one another, get on with the job of creating jobs and a better life for the citizens of Everett and surrounding communities in the greater Boston area.”

Elaine Driscoll, director of communications for the MGC, said Wynn Resorts “must now accept a list of conditions by tomorrow (morning) and (the) commission will then take a final vote.”

Wynn Resorts beat out Connecticut-based Mohegan Sun for the license. Mohegan Sun had proposed to build a $1.1 billion casino in Revere, at the Suffolk Downs racetrack. The city of Revere is also located just north of Boston.

Commissioners Gayle Cameron, Enrique Zuniga, and Bruce Stebbins voted for the proposal. Commissioner James F. McHugh, who chaired the hearing, was the lone dissenter, the Boston Globe reported. Commission chairman Stephen Crosby had recused himself due to the possibility of conflicts of interest — he was seen attending an event at Suffolk Downs racetrack, which has a partnership with Mohegan Sun .

The commission moved forward with approving the project, despite a ballot measure in November that would repeal the state’s gaming law. In 2011, Massachusetts voters approved a law that authorized three casinos and a slot machine parlor in the state.

NEVADA BUSINESS MAGAZINE: Executive Education: New Pathways to Success

August 1, 2014
By Chris Sieroty

When UNR Extended Studies program held a series of leadership sessions for Barrick Gold, the event embodied new trends in executive education in Nevada.When the University of Nevada, Reno (UNR) Extended Studies program held a series of leadership sessions for Barrick Gold, the event embodied new trends in executive education in Nevada.

The 15 courses held over two months were shorter than the training once offered by business schools and colleges. Instead of theoretical discussions of leadership, the program covered specific issues requested by Barrick Gold, which had wanted to design a customized leadership development program.

In contrast to the way most companies traditionally conduct executive education, Barrick Gold worked with the college to develop a needs assessment and sought input from every level of the company to see if it was what they needed. Jodi Herzik, executive director of Professional Development Programs at UNR, said her staff then worked with Barrick Gold to design specific curriculum that met the mining company’s identified needs.

“These programs allow businesses to build the staff they need to be more productive and successful,” Herzik said. “These contract training programs also allow us to provide more specific training.”

In Barrick Gold’s case, Herzik said the result was a series of 15 courses held during a two month period covering topics such as developing a business plan, building high performance teams and the legal environment of business. UNR’s Extended Studies program held the courses in Elko, which meant less impact logistically for Barrick Gold employees.

“It’s a much different business than before the recession,” said Emmanuel Sarris, director of continuing education at the University of Nevada, Las Vegas (UNLV). “We do have some corporate clients, but our continuing and executive education programs offer 25 to 40 different types of courses.”

Herzik said UNR has three or four employees meeting with corporate clients to create the courses they need.

“Adult learning is so different from K-12 or college,” Herzik said. “We listen to the client and develop the curriculum. It needs to apply to their lives and they need to take it back to their job the next day and use it.”

Business of Education

Executive education is a business that is on the upswing, especially after the recession in 2008 when companies cut training budgets. The timing of that growth has been fortuitous. As the economic recovery continues in Nevada, more and more students are now being assisted by employers to pay off tuition.

While both UNR and UNLV officials declined to disclose their revenues, customized executive programs may be lucrative for the schools.

For example, a UNLV Public Relations Certificate costs between $150 and $320 per class. With six required courses, including crisis communications, media relations and writing for public relations, the cost of that certificate in public relations can run as high as $1,920.

“Most people who take these courses move into the workforce pretty quickly,” Sarris said “They are priced very differently than a course at UNLV. We look at what the expenses are and how many students we have. That’s how we price it.”

Sarris cautioned that certificate and executive courses aren’t eligible for federal grants. “Even the GI Bill for veterans doesn’t cover our program,” he said.

That doesn’t mean there is no financial assistance for those who need it. There are grants and other funding, including Sallie Mae loans.

Certificate Program Offerings

A certificate course takes the form of individual classes, a series of classes or even customized course work. Herzik said they are designed for executives and employees who want to keep up with current business trends or update their skills. She said she has noticed a growing working population taking certificate courses to change careers or move into a different position within their current career.

UNR’s Extended Studies offers certificate programs from project management essentials to human resources management and from gaming management services to project management. Herzik added that these courses, designated to enhance someone’s ability to manage projects and lead employees, are in demand.

“Our project management program is booming,” Herzik said. “It gives people the skills on how to build a team, manage a small or large scale project and create timelines. The lessons learned can be used in any industry. Right now this course is heavily used in the construction industry to train their employees to run operations.”

Certificate and executive education programs have become a crucial tool for universities to extend their reach into the business community locally and in communities beyond Las Vegas.

“We had a group from South Korea come in last year to learn various management skills and some parts of the gaming and hospitality industries,” Sarris said. “We did everything for them from hosting lectures in the morning to taking them to various Strip hotels for onsite classes.”

Sarris said those management seminars included leadership, staff development, gaming and hospitality. Participants would then spend the afternoon with a hotel executive talking about leadership to get a hands on feel for the business to take back to South Korea, he said.

One primary driver of these programs is that careers are becoming longer and longer. Even if employees or managers are particularly talented, they may need to add new skills to renew their knowledge of a specific industry.

“We offer training programs to make people better,” Sarris said. “Whether it’s getting them into a classroom to train them for a new career or update their skills to continue in their role or work.”

UNLV’s Continuing Education also offers non-credit classes and customized education programs. Sarris said classes for business executives are available in the areas of communications, entrepreneurship and finance. These classes, which last anywhere from one session to five sessions, change throughout the year.

As for certificate programs, UNLV offers courses in fashion design, human resources management, Internet design and technology, public relations and the UNLV Grant Academy.

The UNLV Grant Academy is one of the school’s new courses and was designed to train employees in the art of applying for grants, which is lacking in Las Vegas.

“We’ve had pretty good success with our course offerings,” Sarris said. “If we don’t have a curriculum already prepared, we will develop one if notified far enough in advance. There is a pretty extensive need for these courses. We don’t go into it blind. If something isn’t working, we’ll put it on the shelf and do more research.”

Sarris said one of the more successful certificate programs is the Sommelier Academy. He describes it as a 30-week, hands-on, interactive learning program where students learn the complexities and nuances of wine.

The program offers two classes. The introductory program, Vine to Wine, teaches wine enthusiasts, wine collectors or early-career beverage professionals to make informed purchase decisions and recommend wines to customers.

According to UNLV, the Advanced Sommelier Program targets wine professionals seeking to advance their careers, gain more knowledge and a larger exposure to the business of wine.

“We built this certificate program from scratch,” Sarris said. “We thought there would be interest from the local hospitality industry in these offerings. We are a year and a half in and have had tremendous success.”

Sarris said there were 76 people enrolled in the program, with nine in their final classes.

Stick to the Basics

While UNLV and UNR have been successful with their executive and certificate programs, Nevada State College is still considering launching a program on the Henderson campus.

Nevada State College is a four-year degree granting institution that has considered offering accelerated courses, and also making a move into executive and continuing education. However, the college, which has seen its budgets adversely affected by the recession, has put off offering these courses for the time being.

“We’ve talked about it,” said Spencer Stewart, vice president of college relations with Nevada State College. “It is in our future plans, but we are focusing on undergraduate students.”

Stewart said the continuing education market is certainly a demand that needs to be satisfied. He said the demand for these course offerings are being met by the College of Southern Nevada and UNLV.

“It’s a growing market,” Stewart said. “At the appropriate time Nevada State College will try to meet the needs of that market. The college is going through a period of strategic planning. It really is up to the planning committee to determine what we’ll offer.”

Nevada State College already offers degrees in Biology, business administration, criminal justice, history, nursing and secondary education.

“We have to consider what we want our brand to be,” Stewart said. “There are new audiences and new populations to serve and it’s a delicate balance to have the sufficient resources. Continuing education programs for the most part are self-funded.”

Stewart said with the economy starting to come back there is more demand than ever for these continuing and executive programs. He added that Nevada State College is also looking into ventures with corporate clients, but the college will do a demand assessment first.

“A demand assessment of what the employers need,” Stewart said. “Define what the skill sets are and, in some cases, project future skill sets to align them with the region or state as a whole. We are looking at this comprehensively.”

Alternative Options

While colleges and universities offer these programs, VegasPBS, which is known as the Las Vegas home of “Masterpiece Theater” and the “New Hour”, offers a wide-range of continuing education courses through its GOAL, or Global Online Advance Learning, program. The difference is they are only offered online.

“We don’t compete with UNLV and UNR,” said Debra Solt, director of workforce training and economic development at VegasPBS. “Our program was spawned to help deal with the highest unemployment rate in the nation.”

According to Solt, six years ago there was a massive need to retrain people for new jobs. That need still remains, she added.

“We are a media technology company whose roots are in education,” Solt said. “All our classes are offered online. Much of continuing education was time and place bound or brick-and-mortar. Now to get the training or education [people] need, it’s online. The trick is to make sure it does have the academic rigor of a traditional classroom.”

VegasPBS offers traditional continuing or executive education courses in executive leadership or management, accounting or writing programs. The organization offers some 5,000 online courses, with medical records, pharmacy and paralegal training among the most popular courses.

However, the public television station’s bread and butter is in using GOAL to provide a very basic education. Most of the basic learning from the program is directed towards English language learers.

“Life happens to these people,” Solt said. “So whether it’s in a classroom or online you will not get them to be successful unless you can offer these courses on their terms. Online is a little easier to accomplish [for them] because they can keep coming back in and doing the same lecture until they get it right.”

She said providing continuing education and licensing is also part of the job description. For example, VegasPBS manages the food handler card for the Southern Nevada Health District (SNHD).

“Cards expire every day,” Solt said. “We want to be in a position to provide our clients what they need. We manage everything that goes on with the SNHD card renewals.”

Solt added that online continuing or executive education is about access, ease and the ability to complete the course on your schedule.

“In a 24-hour economy, ours is a 24-hour learning platform,” she said. “There are drawbacks. Online learning isn’t for everyone and some may want to pursue executive or continuing education programs in a traditional setting. For others, an online education is their only option.”

LONG BEACH BUSINESS JOURNAL: Four Years After Passage, Just Barely Half Of Dodd-Frank Regulations Completed

By CHRIS SIEROTY
Contributing Writer
Six years after America’s financial industry had to be rescued by the federal government, which spent billions of dollars to stabilize the industry, the economy remains at risk of another downturn due to speculation and bailouts.
The Dodd-Frank Act of 2010 promised to overhaul the financial sector. But many of the law’s regulations on proprietary trading, derivatives and the financial wellbeing of the nation’s banks have been delayed or watered down by slow moving federal agencies, notably the Securities and
Exchange Commission and the Commodity Futures Trading Commission.
As of July 1, only 208 of the 398 rules required by Dodd-Frank were complete, according to the American Bankers Association. About 45 percent of rule-making deadlines have been missed.
“The number one thing Dodd-Frank did is change the tone,” said Wayne Abernathy, executive vice president for financial institutions policy with the American Bankers Association (ABA) in Washington, D.C. “The positive is [that] it has brought more attention to financial risks that involve how a bank operates.”
Abernathy said Dodd-Frank has had a negative impact on how banks offer new products to their retail customers. He said no bank wants to offer the new products because of new regulations. “In practice, there has been no new innovation in the last four years,” Abernathy said. He admitted that new technology, including remote check deposits or mobile loan applications, has been introduced in recent years. However, that’s a continuation of new technology that has already been in the pipeline.
Abernathy said new compliance rules have added some costs to banks, but the new rules have made the business of opening new consumer accounts a more difficult and lengthy process. He said opening a new account takes long in the post-recession world. Where it used to take 15 minutes, now that process is 30 minutes as the vetting of new customers has really slowed down the acquisition of new accounts. He said the evaluation of new accounts, even for anti-money laundering and credit worthiness, has made it all the more difficult for banks to bring in new customers.
“We are a small business bank,” said Mike Miller, president and CEO of Long Beach-based International City Bank (ICB). “We are just under $150 million in assets with two branches. Dodd-Frank does not affect us like it would a larger institution.”
Miller said the bank has no mortgages or retail customers. International City Bank strictly deals with Small Business Administration, commercial real estate, working capital and financing deals.
Miller said Dodd-Frank has forced the bank to spend more time and resources on additional compliance. But, he said, with more rules not coming into effect until 2015 and beyond, the costs are still reasonable.
“It’s difficult, but we are still able to meet our compliance obligations,” Miller said. “We can absorb the cost and [time] with the staff we have. Next year or the following year, we will have to add another person.”
In other moves related to Dodd-Frank, big banks have either ended traditional free checking accounts or have raised the average monthly balance needed to get free checking. Other changes directly affecting bank customers include increasing monthly fees, raising fees for overdrafts and out-of-network ATM withdrawals. In some cases, banks are also cutting costs by closing branches and reducing available ATMs.
Volcker Rule
The main component of the Dodd-Frank Act is the Volcker Rule, which was expected to go into effect in 2012, but has been delayed until next year. The Volcker Rule, named for former Federal Reserve Chairman Paul Volcker, imposed restrictions in response to the 2008 credit crisis.
The rule bans proprietary trading or banks from making risky investments with clients’ money instead of their own. It also limits banks’ investments in hedge funds and private equity.
Some large banks have resumed the risky investments and have suffered losses. For example, a JP Morgan Chase trader known as the “London Whale” lost billions of dollars from trading on credit default swaps. Meanwhile, Citibank just agreed to a $7 billion settlement over its handling of mortgage securities.
The Volcker Rule will cost U.S. national banks as much as $4.3 billion to implement, according to a study by the Office of the Comptroller of the Currency. The study’s regulator said most of the costs come from the rules that curb investments, such as collateralized loan obligations. The federal agency also said affected banks will most likely be those with more than $10 billion in assets.
“A lot of big banks got out of that line of trading pretty early,” Abernathy said. “They did it so they would not be caught in the crush. For the most part, banks were minority partners in these funds, so they didn’t depress the value by leaving.” He said most banks got into trading “to get some income,” and have sold them off for a modest profit.
The Volcker Rule was adopted Dec.10, 2013, by five U.S. financial regulators. Abernathy said that the rule’s biggest problem is the challenge for banks to work with five different agencies. Regulators responsible for implementing the Volcker Rule have formed an interagency group to coordinate the multiagency rule.
“It is going to get worse as time goes by,” Abernathy said. The Volcker Rule is one of the most contentious measures arising from the 2010 Dodd-Frank Act.
Banks with assets of $10 billion to $50 billion must follow guidelines from which International City Bank and other small banks in Long Beach are exempt. One requires an annual stress test, which assesses the potential impact of different economic developments on a bank’s losses, revenue, capital and balance sheet.
Abernathy said banks are still learning about the rule and developing pretty rigorous procedures to the new standards.
“Bank supervision is designed to look at future risk,” Abernathy said. “Bank supervision can’t catch problems early enough . . . more supervision needs to be a motion picture and not a snapshot of activity.” Banks also need to comply with the Bank Secrecy Act, which requires financial institutions to help the federal government detect suspicious activity.
Once bank holding companies grow beyond $50 billion in assets, they’re subject to even stricter regulations under Dodd-Frank. They must hold more in reserve as a cushion against losses and may have less control over bonuses and dividends.
“Part of the challenge is that we don’t know when the rest of the rules will be written,” ICB’s Miller said. “There are compliance issues on the way we do business today. We just have to figure it out.”
Miller claimed a lot of the larger banks can take on more regulations. He said what is frustrating for a small business bank is that, “We had nothing to do with the mortgage business. We are kind of being thrown into the mix. But, we would all say that things got out of control. If you didn’t qualify for a mortgage, in the old days they told you to come back when you could qualify. We got totally away from that.”
Miller also questioned whether Dodd-Frank needed to be 700 pages. Many people who have followed the legislation agree that if banks like stability when it comes to regulations, they are in for some uncertain times. Congress has been unproductive, they say, on financial regulation since Republicans took control of the House of Representatives in 2010.
Yet they also concur that the Obama administration has had more than five years to write the rules, however complex, to enforce Dodd-Frank.
While banks wait for additional regulations, the Federal Reserve, led by Chair Janet Yellen, remains supportive of the Central Bank’s post-crisis agenda. In a prepared speech on July 10 to an economic conference, Federal Reserve Vice Chairman Stanley Fischer said the country was making “significant progress in strengthening the financial system and reducing the probability of future financial crises.”
Fischer, an economist and former Israeli central banker who took the Fed’s No. 2 job in May, threw his support behind the Fed’s stress testing program and new requirements that large institutions hold higher levels of loss absorbing capital.
The ABA’s Abernathy wanted to remind everyone that the process is only halfway through. “We are about to get more rules being written,” Abernathy said. “Banks need to remember that half of the proposed regulations have not been finalized.”
(This story was published in the July 22-August 4, 2014 issue of the Long Beach Business Press)

NEVADA BUSINESS MAGAZINE: Getting Out: The Financial Planning Features of a Business Exit Strategy

If an IPO is used as an exit strategy, it is important for ownership to begin planning for it right from the start and include it in the business plan.Starting a business takes a large amount of planning. But after the business plan is completed, retail or office space is rented and employees are hired, many entrepreneurs have neglected one crucial question: When the time comes, how will they exit their business?

When owners are immersed in the details of building a business, it’s difficult to imagine selling it or giving it up to the next generation. It’s even harder for business owners to imagine a dream business failing, forcing the liquidation of the contents of the business.

Take, for example, a company that develops slot machines or social apps for the gaming industry. To get the business off the ground the founders need capital. In this case they may be looking for venture capitalists or angel investors, who early on in the funding process are going to want to know how they’ll get a return on their investment. In this instance, an exit strategy at the beginning of a business informs investors of their time-frame for a return.

However, most entrepreneurs who imagine owning a company until they retire usually put off creating or updating their exit strategy. Most business owners will pass the business down to someone else in their family, sell it or close it down.

Regardless of the type of business, having a viable exit strategy in place can save business owners trouble and money later on, according to business brokers and certified public accountants (CPA).

“We see a high level of interest by owners who are ready to sell their businesses,” said Bob House, general manager of BizBuySell.com, a San Francisco-based online business for sale marketplace. “But, most who want to sell have to remember their business has to be in a saleable state.”

House defined “saleable state” as a business attractive to potential buyers. That could be as simple as a fresh coat of paint or a complete face lift. Spend the time and money on capital improvements, he said.

Len Krick, a certified business intermediary with Sunbelt Business Brokers in Las Vegas, said owners need to resolve any unresolved claims against the business or pending litigation before listing a business for sale.

“There are four questions that every buyer asks,” Krick said. “[Why] they are selling the business? How much does it make? Is there upside potential or will I lose money? Where did you get that price?”

Krick said if an owner can’t answer those questions, he or she might want to hold onto the business and try to grow it, instead of attempting a sale. He also said most buyers want to see three to five years of proven cash flow before they make an offer.

Leaving Before a Sale

House said some business owners may also choose to extricate themselves as a necessary entity and turn it over to a family member or business partner.

The degree of involvement in the business determines the importance, time required, and difficulty a business owner has in extracting themselves from the business. For example, no one knows, or cares, who owns a McDonalds franchise in Henderson; not the customers and oftentimes, not the employees.

However, Krick said when a sole-practitioner sells a medical practice, patient retention becomes a major issue. The buyer might want the doctor to stay on for a year to ensure that there is a seamless turnover, minimize patient loss and cash flow continuity.
Since the buyers are purchasing the implied value of the future cash flow, anything that makes that more volatile, increases the risk and, therefore decreases the price. Krick said the opposite is also true.

“If the business has a long, steady history and lots of contracts in the pipeline, then the risk is lower and the price is higher,” Krick said.

When a business owner decides to sell a business, House said they should prepare for a two to three year process. Once a business is listed for sale it can take anywhere from six months to five years to get out of it, depending on market conditions.

“In the Great Recession, a lot of people wanted to retire, but their values took a hit leaving them with few options to sell their business,” House said. “We are now seeing a lot more buyers in the marketplace and asset values have increased.”

Chris Abts, president of Cornerstone Retirement Group in Reno, agreed and added that economic conditions may have improved, but valuations of most businesses are not where they were in 2007.

According to BizBuySell.com, the median asking price for businesses for sale in Las Vegas during the first quarter of 2014 was $169,000. Those businesses had median revenues of $314,623 and a median cash flow of $81,143.

Owners asked for, on average, a revenue multiple of 0.76 percent and a cash flow multiple of 2.73 percent. Those numbers are mostly in line with figures reported in the fourth quarter.

The median asking price for a business for sale in Las Vegas in the fourth quarter was $184,999. The median revenue was $316,949 and the median cash flow was $96,200. On average, owners asked for a revenue multiple of 0.77 percent and a cash flow multiple of 2.68 percent.

Krick said 70 percent of all potential buyers in Las Vegas are from somewhere else, many from Southern California. While the remaining 30 percent are local entrepreneurs, he said.

BizBuySell.com noted that a dry cleaning business with slot machines in Clark County sold for its asking price of $199,000 in the fourth-quarter. The business, which was not identified by name, had revenue of $131,000 and cash flow of $78,000.

Details Matter

“Planning is the key,” said Audry Batiste, president of Precise Financial Planning in Las Vegas. “At least 50 percent of businesses have no transition plan until it’s too late.”

One item that is often overlooked when planning an exit strategy is the condition of financial records, do the tax returns match the year-end profit and loss statements. Many buyers use Small Business Administration (SBA) loans and should be ready for a close inspection of the business.

Batiste said it’s important to understand the issues that affect a business including life cycle, geographic and economic cycles as well. He said planning an exit strategy is extremely important especially if an owner of a business is disabled or dies.

A majority of business owners who are disabled or die leave it to others to liquidate their company without proper planning. Many businesses in Nevada were also forced to liquidate assets during the recession. Businesses that are struggling financially to survive may also choose to liquidate their assets. A common example of this during the recession was the multitude of “Going out of Business” sales.

When a business liquidates, it typically marks down the prices of its inventory to sell it quickly. Any proceeds are used to pay off creditors and then any shareholders in that business. Most of the time, creditors and investors receive pennies on the dollar when a business shuts its doors.

Many businesses don’t plan for the day they can liquidate their company; however, it can be a good contingency plan in an emergency or everything must go situation.

Standard Exit Strategies

Exit strategies include buyouts, friendly sales, mergers and acquisitions, shutting down a lifestyle company or initial public offerings.

Typically with a buyout, the sale is executed within the company, meaning there is a planned successor, either a family member or someone in an upper level management position, who will assume responsibility for the company. If a company is co-owned, another option is for one partner to arrange to sell their shares in the business to the other partner.

In most cases of an owner buyout the founder or employees will want to keep their jobs. This scenario assumes a well-performing company is generating positive cash flow and profits, Batiste said.

With an owner buyout an agreement is reached with the investors, stockholders or lien holders establishing the value of the company. The employee group will find a way to finance the amount necessary to buy out the interest of the others, taking control of the company away from an outside bidder.

Meanwhile, a simple acquisition entails selling the company, often to a larger outside business. With an acquisition, there is often plenty of room for negotiation. But, Batiste said the trick is making sure the company is a good fit with your business.

House urges owners to think about which acquirer can help their company get into different markets, or how their product or service could bring something new to existing customers. Companies are willing to pay more if they know there is a real and lasting value in the acquisition for them.

“What your company is appraised for is within your control,” House said. “Think about what you can do to increase the value of your business. They are buying a business for its cash flow, so you want to show that cash flow growth.”

House said some business owners, whether they run a small or large company, make the mistake of running their business with the notion that a certain company will immediately want to acquire it. Just like everything else in business, he said never make assumptions about potential buyers.

It’s best if a business owner keeps their options open and run their company without any expectations of who the perfect buyer would be.

If a business is not attractive to a larger company, many entrepreneurs come to a point when merging with a similar company can maximize revenue for both owners. Merging allows a business to increase market share and the value of a company for investors or shareholders.

It can also open up an opportunity for a business to enter a new market and develop new products while lowering operating costs.
Batiste said a merger can be a stepping-stone to an exit, as owners slowly transition the management of the company. In some cases, merging can also allow an owner to retire and take on an advisory role, permitting them to remove themselves from the business over time.

He added that a merger can also give an owner time to ensure that their business and its employees are properly cared for and not laid off with a change in management.

Abts noted that there is another type of business to consider, he called it the lifestyle company. He described a lifestyle company as one where it is the intent of the owner to make as much money as possible for themselves without planning for future expansion.

With these businesses, all profits go directly into their pocket instead of being put back into the business to help it grow, and expenses are kept to a minimum, Abts said.

These businesses tend to be small and private, and the owner dissolves the business when it is no longer profitable or they want to move on to a new business venture. An example of a lifestyle company is a business consulting firm.

An IPO as an Out

One exit strategy that has received a lot of attention over the years is the initial public offering, or IPO. If an IPO is used as an exit strategy, it is important for ownership to begin planning for it right from the start and include it in the business plan.

Taking a company public can be expensive; it can also be hugely profitable.

“We don’t see too many IPOs in Northern Nevada,” Abts said. “It’s not the culture here. In the past, we’ve been driven by two industries, gambling and construction.”

Business brokers caution that out of the millions of businesses in the U.S., only about 7,000 of them are public, and most of those were not started by entrepreneurs, but spun out from existing corporations.

“Somewhere as you’re building your business, there needs to be a succession plan or exit strategy,” Abts said. “It needs to be done sooner rather than later. Too many times, business owners looking to retire and sell their business can’t tell me what their exit strategy is.”

Abts said what tends to happen is a sale is put off for six months to two years while the business is organized and prepared to be sold. A crucial delay to make the business saleable that could affect the sale price of the business.

Abts and Krick agree that all businesses are different, but 2014 is probably the best time since 2007 to consider selling a business in Nevada.

Cosmopolitan tries new effort to set itself apart

 

By CHRIS SIEROTY

LAS VEGAS REVIEW-JOURNAL
January 13, 2014 – 7:51pm

Over the past three years, The Cosmopolitan of Las Vegas has emerged as the luxury Strip resort known for its sexy and edgy advertising, a corporate philosophy that has set the property apart in a crowded gaming landscape.

Today, the $3.9 billion casino-hotel continues to move beyond the normal associated with casino advertising, introducing carve-out ads in Esquire and Vanity Fair as well as offering mints and coupons on United flights and running ads in movie theaters.

That industry normal includes ads in luxury magazines and newspapers, billboards, TV commercials and ads running continuously on small TV screens in local taxicabs.

“The Cosmopolitan does a terrific job,” said Jim Signorelli, CEO of ESW Partners in Chicago. “Most casino advertising is centered around ‘come and play and win.’ They are selling an attitude that goes beyond what the typical casino promotes.”

Signorelli said The Cosmopolitan is concerned about reaching an audience that might not be interested in visiting a casino. He compared its commercials to those produced by Nike or Apple.

“They were the first to do it,” Signorelli said. “They put the first flag in, and it’s very hard for others to copy. Instead of selling the church, they are selling the religion.”

That approach to advertising is overseen by Lisa Marchese, who helped set The Cosmopolitan apart with its provocative media campaign launched alongside the hotel’s opening in 2010 with the theme “Just the Right Amount of Wrong.”

The Cosmopolitan also wrapped taxis in Las Vegas with advertisements.

“We’ve always tried to find unique ways to connect with customers,” said Marchese, The Cosmopolitan’s chief marketing officer.

Marchese’s challenge now is to find ways to continue the property’s string of successful campaigns.

The “Just the Right Amount of Wrong” campaign released two months before opening day celebrated all sorts of misbehavior happening within the property.

That campaign was followed in 2012 by a spot featuring a man flirting with a blonde at the poolside bar with lyrics to Queen’s “Bohemian Rhapsody” as the only dialogue.

Now, The Cosmopolitan has taken to the friendly skies as it expands its reach by offering passengers a gift box with seven cards with tips about Las Vegas and special offers along with sugar-free mints.

The gift boxes are being offered on United Airlines flights to McCarran International Airport from its 10 hubs, including Chicago, Dallas, Phoenix and Los Angeles.

Marchese acknowledged that there were a “fair amount of operational challenges” in the beginning.

With 2 million passengers visiting Las Vegas annually on United flights, she said, the passengers were “a captive audience” for The Cosmopolitan.

She said the campaign also taps into their excitement about visiting Las Vegas.

“It’s been a fantastic way to reach visitors,” Marchese said. “Even if they aren’t staying at The Cosmopolitan, we’re hopeful we will get them interested in visiting our property.”

Marchese said advertising is about connecting with customers.

“We get to engage them for three or four minutes on a flight in a more gracious way than our competition,” she said. “It’s about making sure they have a fantastic experience in Las Vegas.”

One gift box given out on a flight from Chicago included a 2-for-1 deal at The Cosmopolitan’s Wicked Spoon buffet, $25 in free slot play, a free cocktail at chef Jose Andres’ China Poblano or Jaleo restaurants and a coupon for three nights for the price of two.

The offers will be changed every three months, Marchese said.

She said the property also bought ads in Esquire and Vanity Fair magazines to market Rose. Rabbit. Lie. , a new social club that opened on New Year’s Eve.

The seven-page ad has black-and-white photos of party scenes and celebrities from the 1940s. In the middle is a booklet titled “The Cosmopolitan of Las Vegas presents”

The booklet features messages, including “We desire a place to gather” and “Experiment with the night.”

“We thought the social club harkened back to the days of the speakeasy,” Marchese said. “So we used that as a launching point. We knew it was a super impactful way to get our message out. It’s a compelling insert in compelling magazines.”

The Cosmopolitan is also buying 60-second ads in movie theaters in Dallas, Chicago New York, San Francisco and Los Angeles. Those mini-movies market Rose. Rabbit. Lie.

It’s an expensive media strategy. Marchese declined to disclose the advertising budget, beyond saying that media buys “come at a premium.”

“They are unique but more impactful,” she said. “We are going to look for more opportunities like our United campaign. We are doing our best to separate ourselves from the competition.”

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893. Follow @sierotyfeatures on Twitter.

NEVADA BUSINESS MAGAZINE: A Future of Change: Economic Development

By Chris Sieroty
At the top of the economic development wish list is unmanned aerial vehicles, also known as drones, presenting one of the biggest opportunities for Nevada.Nevada, because of its narrow focus on three industries, was devastated by the recession and eventually led the nation in foreclosures and unemployment. As both the director of the Governor’s Office of Economic Development (GOED) and a resident of Nevada, Steve Hill believes there is a rising wave of economic development diversifying an outdated and vulnerable economy built on construction, gaming and mining.
However, Hill believes the state’s current development efforts will produce stronger economic diversity and growth in the future, protecting Nevada from the vicious effects of the next recession.
“It took a while to identify the opportunities and design the plans to make them a reality,” Hill said. “We are seeing progress.”
Hill said Brookings Mountain West’s “Unify, Regionalize, Diversify” plan for diversifying the state’s economy was an important starting point for GOED, but the state used the report to develop its own economic plan.GOED is focusing on aerospace and defense, manufacturing, logistics and operations, agriculture, information technology, energy, healthcare, mining and tourism and gaming.

Nevada’s Future in Flight

At the top of the economic development wish list is unmanned aerial vehicles. Hill said unmanned aerial vehicles, also known as drones, present one of the biggest opportunities for Nevada.

In December, Nevada was chosen as one of six states to host test sites as part of the Federal Aviation Administration’s plan to integrate unmanned aerial vehicles into the national airspace.

Nevada was selected as one of the test sites partly because it has been home to military drone operations for almost two decades. Drone aircraft operate from Creech Air Force Base north of Las Vegas. Pilots and system operators live in Southern Nevada.

“Nevada has been home to unmanned aircraft systems (UAS) for decades,” said Governor Brian Sandoval. “Our climate, terrain and abundance of air space create a perfect environment for the emerging drone industry.”

Sandoval said by working with private industry, the university system, community colleges and local school districts, “we have been building Nevada’s unmanned aerial systems civilian workforce for the future.” He believes those efforts led to attracting the state’s first drone company and discussions with other companies.

Other sites the state has found suitable for drone testing are Nellis Air Force Base in North Las Vegas, the Naval Air Station in Fallon, Nevada National Security site/Desert Rock Airport and the Reno-Stead Airport.

“It is something the state has put a lot of focus on,” Hill said. “We certainly are talking to a large number of companies in the industry that are interested in Nevada. The Federal Aviation Administration (FAA) needs to work through the process and that’s really the key.”

Hill said once the FAA has approved its drone rules and testing gets started “you’ll start to see more companies coming to the state.” The FAA is expected to approve its rules by September 2015, according to GOED.

Nevada expects drones to become a huge economic development opportunity. Nationwide, drones are expected to become an $11 billion-a-year industry with 70,000 jobs.

Within a decade, GOED officials expect 15,000 people in Nevada to be involved in the drone industry. That’s the size of the Silver State’s mining industry.

UAS operators make an average of $80,000 a year and the average salary of a pilot is about $110,000. Hill said the state has set aside $1 million in its budget plus $4 million in contingency funds to establish the non-profit Nevada Institute for Autonomous Systems Unmanned Aircraft Systems Program Management Office when it was lobbying to become a test site.

GOED officials are also looking to the state’s two major universities to train a drone workforce.

The University of Nevada, Las Vegas (UNLV) and University of Nevada, Reno (UNR) have both developed educational programs to produce skilled workers for the industry.

By spring 2015, UNLV’s School of Engineering will offer a minor in unmanned aerial systems. The program includes three core courses, including design and application, vehicle simulation and testing and a law course to address privacy issues.

In addition to core courses, students will take four courses within their specialization track; systems-design, control systems, communications or human-computer interaction.

In Reno, university officials say 25 students enrolled in January in the college’s drone minor. The program focuses on aerodynamics, control systems and autonomous mobile robots. UNR’s decision to offer an unmanned aerial systems minor is part of economic development officials’ pitch to potential companies.

Northern Nevada

“We are not waiting to promote the region,” said Mike Kazmierski, president and CEO of Economic Development Authority of Western Nevada (EDAWN). “We are selling our region as a potential growth area for companies.”

Kazmierski said EDAWN executives have been to two or three conferences to promote the region. He said those visits have resulted in eight to nine companies seriously considering Northern Nevada to base some, or all, of its drone operations.

Kazmierski said EDAWN’s economic development efforts go beyond drones. He cited the arrival of Apple Inc.’s data center in Reno as a deal that “gives our region some credibility.”

Kazmierski said the Apple deal opened the door to be considered a location for Tesla Motors giant, $5 billion battery plant. The “gigafactory” would put 6,500 people to work in a 10 million-square-foot facility, Tesla said in a Securities and Exchange Commission filing.

Construction should start later this year. Tesla expects the plant to open in 2017 and reach full production capacity by 2020. The company, based in Palo Alto, Calif., wouldn’t specify what locations are up for consideration.

“We are pretty happy about the possibility of Tesla choosing Northern Nevada and we are hoping for an announcement soon,” Kazmierski said. He declined further comment.

But at 500 to 1,000 acres, Tesla is looking for a large piece of property. Options for Tesla include the 107,000-acre Tahoe Reno Industrial Park in Storey County, about nine miles east of Reno. The facility is already home to distribution centers for Wal-Mart, eBay and Toys R Us.

“Only 8 percent of our economy here is tied to gaming,” Kazmierski said. “We are known for logistics, distribution and manufacturing. That’s our strength here.”

Kazmierski said officials are also in discussions with companies in Northern California about moving backroom operations to Reno. He said they’ve been marketing the region to Silicon Valley firms and pitching them the corporate tax benefits by moving to Nevada.

“We tell them they are next to California, but not in California,” Kazmierski said. “We are offering them what they have there but at half the (price).”

He said EDAWN’s efforts brought 3,400 jobs to the region last year. EDAWN is on track to bring more than 3,100 jobs to Northern Nevada this year, according to the agency.

The story is the same for the Northern Nevada Development Authority (NNDA). The economic development agency, whose area includes Carson City as well as Churchill, Douglas, Storey and Lyon counties, has a number of projects in the works.

“We have a number of defined projects, but they are not turning dirt over yet,” said Maurice Washington, deputy director of the NNDA. “There is the Western Nevada Rail project, a trans-loading center for recycling tires. Once it’s full-blown we expect 1,000 jobs to be created.”

Washington said the biggest development project is the Capital Mall project, an eight city block development near the state Capitol and Legislative building that includes office space, retail, a Marriott hotel and convention center.

The $100 million development will include 180,000 square feet of Class A office space and a 60,000-square-foot conference center. Washington said the NNDA is also looking to support development of commercial buildings, whether they are built on spec or built-to-suit projects.

“We have the dirt to offer,” Washington said. “We are engaging speculative builders because we have exhausted our inventory of commercial buildings.”

Washington also said the region’s economy was based on mining, manufacturing, agriculture and some railroad logistics. The NNDA is looking to diversify even further by attracting telecommunications and fiber optics companies to the region.

He added that the Brookings Mountain West report was helpful in determining the agency’s direction.

“It wasn’t anything we didn’t know, but it confirmed what we needed to do,” Washington said.

Henderson Development

A nine hour drive from Carson City you’ll find Barbra Coffee in a modest office in Henderson developing plans for the city’s economic development and diversification efforts. Her goal is simply to use the city’s “well-educated workforce and quality of life” to attract companies to the state’s second-largest city.

“You always want to have a healthy workforce and enough jobs,” said Coffee, manager of economic development and redevelopment for the city of Henderson. “We want to grow our economy to be less of a bedroom community that is reliant on other areas.”

To diversify Henderson’s economy, Coffee is about creating clusters of industries. Those industries include financial service, manufacturing, healthcare and bio-technology, high-tech, aerospace and defense and warehouse and logistics.

To build upon FedEx’s arrival, Henderson is auctioning off 358 industrial acres near Interstate 15.

“We are targeting industrial development,” Coffee said. “It’s a great employment opportunity. We have some assets that position us to be attractive to big-box retailers. We haven’t always had the space, but the 358 acres gives us some additional options.”

She said the area’s existing industrial space is filling up. But in the 100,000-square-foot industrial market, Henderson doesn’t have existing build-to-suit opportunities.

“It’s about building a strong and diverse economy,” Coffee said. “We will have some logistics and transportation, but there will be a balance.”

Coffee explained healthcare and bio-technology is a good fit for Henderson. She expects to attract companies that can work in partnership with Touro University and Roseman University of Health Sciences.

Coffee said her development efforts also include downtown Henderson. The city is working to attract commercial businesses to downtown as well as mixed-use developments in order to achieve a work-live environment.

Tax Woes

Despite their best efforts at promoting Nevada as a place to do business, economic development officials are unanimous in their belief that “The Education Initiative,” also known as the business margins tax would complicate their efforts.

“Part of our efforts have been focused on making Nevada the most business friendly state in the nation,” Sandoval said. “When it comes to bringing new companies and jobs to Nevada, we must maintain a positive business environment and pursue every opportunity to attract those businesses to our state.”

The business margins tax is on the November 4th ballot. The initiative proposes a 2 percent revenue tax on businesses generating more than $1 million a year.

“It’s not good to increase taxes on business,” said Coffee. “Our goal is to keep a low tax environment. Any tax that is in addition to our current taxes is going to make it more difficult to attract or maintain businesses.”

Coffee said it’s something Henderson economic development officials “are sensitive about.”

Those supporting the measure, lobbied for by the Nevada State Education Association, the state’s teachers’ union, say the tax is needed after years of inaction in the Legislature over boosting education funding for the state’s K-12 system.

Opponents question where the tax’s proceeds will end up. The Education Initiative, if approved by voters, is expected to generate $650 million to $750 million annually.

They also believe that the added tax burden on business will slowdown economic growth as well as send businesses elsewhere as Nevada continues its post-recession recovery.

“It’s not helpful at all,” Hill said. “Anytime you add a tax it is not going to be helpful. The counter side of that is everybody wants to improve the results of K-12. I don’t think those things are mutually exclusive.”

If approved by voters, the margins tax would be effective in January.

“No question, it will have a negative impact on our efforts to attract businesses here,” said Tom Skancke, president and CEO of the Las Vegas Global Economic Alliance.

Washington said the NNDA’s biggest concern is the margins tax will stifle the progress the economy has made. Many business owners have a wait and see attitude about the proposed tax.

Economic development in the Silver State is in a time of transition. Diversifying Nevada’s economy, improving education and boosting tourism are on the minds of business-owners throughout the state. The next few years will likely hold some interesting times for Nevada.

Federal solution to online gaming debate preferred – iGaming North America

By Chris Sieroty
LAS VEGAS REVIEW-JOURNAL
Posted: Feb. 22, 2013 | 2:29 a.m.

For legislator Bobby Moak, getting his bill to legalize online gaming through Mississippi’s Legislature and signed by its governor is only part of the difficulty.

Moak, a Democrat and House minority leader, introduced the legislation for the second consecutive year, and a hearing on the new bill likely will take place in a committee that rejected it last year.

But Moak told gaming executives and regulators Thursday that he’d prefer a federal solution. He spoke at a panel discussion on issues facing state legislatures at the 2013 iGaming North America Conference at Planet Hollywood Resort.

He warned that without a federal bill legalizing online gaming, it would create “a patchwork quilt of laws” in each state.

Moak said his bill has the support of the state’s land-based casinos, and he’s hopeful it will attract bipartisan support. But any gaming bills face opposition, he said, from religious groups and those focused on morality.

Still, he added, “You have to have those conversations. We can get through those issues.”

Mississippi is home to 30 land-based or riverboat casinos and three tribal casinos, according to the American Gaming Association.

Besides Moak, lawmakers in California, Hawaii, Illinois and Iowa have introduced online gaming bills this year. And Jonathan Griffin, policy analyst with the National Conference of State Legislatures, expects more to be introduced.

Griffin said efforts by Nevada, New Jersey and Delaware to legalize complete online casino gambling are motivating other states to consider similar measures. New Jersey’s updated bill should be unveiled by the end of the month, he said.

Meanwhile, Delaware expects to launch online gambling by Sept. 30, and lawmakers in Nevada are expected to remove the final restrictions preventing online gambling’s full arrival in 30 days.

Iowa Democratic state Sen. Jeff Danielson said his state needs to be aware of trends that could affect its gaming industry. He called it “an economic issue as much as a gaming issue.”

The two-day conference hosted a series of panel discussions on topics such as online marketing, customer service and responsible gaming, expanded sports wagering and Internet lotteries.

Danielson doesn’t expect a divided Congress to take up online gaming.

Caesars Interactive Entertainment CEO Mitch Garber said Thursday during a panel discussion on online gaming’s future that he expects federal legislation in five years.

Joel Leonoff, president and CEO of Optical Payments, said the growth of online gaming on a state level will create a need for a federal bill.

A lot of eyes are on Nevada and New Jersey, he said, to see if they’ll be successful.

Contact reporter Chris Sieroty at csieroty@reviewjournal .com or 702-477-3893. Follow @sierotyfeatures on Twitter.