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OPINION: Why the art of the possible can't diversify Southern Nevada's economy

Are expanded film tax credits a bad investment? Sure, but so is everything else that isn’t tied to hospitality and entertainment in Las Vegas.
David Colborne
David Colborne
Opinion
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Traffic cones block the entrance to the Peppermill Reno.

In December 2007, the unemployment rate in Nevada’s two most populous counties exceeded the national unemployment rate for the first time in six years. 

This signaled the start of the Great Recession — the greatest economic contraction since the Great Depression struck in the 1930s — and a run of economic underperformance in our state that has haunted the halls of legislators and governors in Carson City ever since. Nationally, the unemployment rate only reached 10 percent for one month (October 2009) before it began to slowly and steadily decline; by that point, the unemployment rates in Washoe and Clark counties were 11.4 and 12.5 percent, respectively, and would continue to climb for another nine months.

A graph of the unemployment rate in Washoe County, NV, and Clark County, NV.

Since the start of the Great Recession, unemployment in Clark County has continued to exceed the national average each and every month without exception. Sometimes the gap is modest — in 2019, Clark County’s unemployment rate came within 0.4 percent of the nation’s unemployment rate on multiple occasions. At other times, such as when the COVID-19 pandemic led to the temporary closure of casinos and hotels throughout the state, the gap was almost apocalyptic — from April to July 2020, the unemployment rate in Clark County was more than double the national rate.

Since then, unemployment in Clark County has stubbornly remained at least a full percentage point higher than the nation’s.

A graph of the unemployment rate in Washoe County, NV, and Clark County, NV.

As you can see above, however, that story of continual economic malaise is a singular one. At the start of the Great Recession, Reno breathlessly compared itself to Detroit. Since then, however, the economy in Washoe County is now comparatively healthy. The labor market in Nevada’s most temperate metropolitan area (this being an opinion column, I’m entitled to mine, especially this time of year) recovered faster than the nation’s after the pandemic. In fact, the unemployment rate has been lower in Washoe County than Clark County for more than a decade — and counting.

A graph of the unemployment rate in Washoe County, NV, and Clark County, NV.

What changed between then and now? In 2014, Tesla received more than $1 billion in tax incentives to build the company’s first Gigafactory. That started a boom in Reno — and the Tahoe-Regional Industrial Center in neighboring Storey County, where the Gigafactory was built — that hasn’t stopped.

So, why not try the same trick in Southern Nevada? It’s already worked once.

What’s often forgotten is that Tesla wasn’t the only electric vehicle company to receive generous tax breaks in return for promising to hire Nevadans to build the future in the desert. Faraday Future — a Southern California electric vehicle startup founded by Chinese entrepreneur Jia Yueting — was also eligible for up to $335 million in tax incentives if they could manufacture electric cars in Apex Industrial Park in North Las Vegas. 

Unlike Tesla, however, Faraday and its enigmatic founder ran out of money. As for Apex, it more closely resembles downtown Reno than the Tahoe-Regional Industrial Center, at least as far as its ability to find tenants who will actually complete a project. Nearly a decade after Faraday broke ground (and not much else), many of the infrastructural and permitting issues that have hampered the site are only starting to get resolved — just in time for demand for industrial real estate in Las Vegas Valley to collapse.

The issue facing Southern Nevada is that it, like Northern Nevada in 2010, has a lot in common with Detroit — only the Detroit it resembles is 1957, not 1987. Like Detroit in the 1950s, Southern Nevada is uncomfortably dependent on a single industry that is monopolized by a few large corporate players and is facing increased competition domestically and internationally

It’s also facing issues attracting a new generation of gamblers who are more comfortable with trading cryptocurrencies and making sports picks on their phone than they are in starting a bar tab, just as the appeal of reliably built compact cars among first-time buyers caught Detroit off guard.

Sure, Las Vegas could pivot into becoming a professional sports destination. Ford built a lot of Falcons, too — just not in Detroit.

Given all of the above, it’s no wonder people in Southern Nevada keep looking for some way to diversify their economy. They know what their economy looks like without gaming and hospitality — it looks like a 34 percent unemployment rate.

Doing so, however, requires finding a backup plan that doesn’t threaten a third of Southern Nevada’s economy. 

Rocket fuel explosions and industrial-scale chlorine leaks certainly didn’t attract tourists to the valley in the 1990s. If warehouse trucking begins to meaningfully compete against visitors driving to their favorite weekend destination, that may spark some uncomfortable conversations.

As for trying to turn Southern Nevada into a miniature Silicon Valley, modern gaming resorts are also tech companies — tech companies that compete for the same labor pool as any aspiring startup. If you’re a young tech worker, would you rather work for a large, established company with generous benefits or the next Parler? Or, if you really want to work for a startup, why not just move to Austin or the Bay Area?

So how can policymakers diversify the economy in Southern Nevada without threatening the existing economy or asking new entrants to compete against established companies for the same workers?

The answer to that question brings us at last to the film tax credit bills considered by the Legislature this year.

The pitch behind them has been that, if passed, they’ll create more than 10,000 construction jobs, followed by thousands of production studio jobs. That said, according to the Governor’s Office of Economic Development, none of the bills proposed in this session may not be as good of a deal as their proponents made them out to be.

Given how such programs have fared in other states, this shouldn’t be surprising.

Even so, I come not to heap another pile of scorn upon the bills, whatever their fate might turn out to be by the time you read this column. There’s plenty of that here and elsewhere already; I see no need to add to it.

Besides, the fundamental issue behind the bills isn’t that they’re a bad deal for Nevada’s taxpayers — backups are always a bad return on investment until you need them. Anything that helps prevent Southern Nevada from experiencing 30 percent unemployment again will be a better deal than letting that happen twice.

The bigger issue is that an expansion of the state’s film tax credit was the best possible idea policymakers could deliver to Southern Nevada while the gaming and hospitality core of its economy remains too big to fail and too rich to compete against.

David Colborne ran for public office twice. He is now an IT manager, the father of two sons, and a recurring opinion columnist for The Nevada Independent. You can follow him on Mastodon @[email protected], on Bluesky @davidcolborne.bsky.social, on Threads @davidcolbornenv or email him at [email protected]. You can also message him on Signal at dcolborne.64.

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