Accentuating the Positive

Despite some negative indicators, Nevada among top states in which to do business

There may be a silver lining to the Silver State’s nation-high unemployment rate and plummeting property values.

Call it instead an available workforce and affordable real-estate market, and these conditions recently helped Las Vegas land a production plant for wind turbines that will employ more than 1,000 people.

“Add to that Nevada’s business-friendly climate,” Ed Cunningham, managing partner of U.S. Renewable Energy Group, said in a statement. “We felt that Nevada would be the ideal place to invest in this manufacturing hub.”

These conditions also helped Nevada reclaim its rank among the top five states in the nation to do business, according to 651 CEOs surveyed in an annual ranking by Chief Executive magazine. Nevada ranked second in the survey behind Texas for four straight years, fell to No. 6 in 2009 and climbed back up to No. 5 for 2010.

Texas held onto its title as the nation’s best state to do business this year, while California kept the spot it has held at the bottom (No. 51, with the District of Columbia included) since Chief Executive started the survey in 2005.

“California has a good living environment but is unfavorable to business, and the state taxes are not survivable,” says Bill Dormandy, CEO of San Francisco-based medical device maker ITC. “Nevada and Virginia are encouraging business to move to their states with lower tax rates and less regulatory demands.”

With no corporate or personal income tax, Nevada was one of only four states in the country to earn an “A” from CEOs on its taxes and regulation.

Other surveyors agree. Nevada was ranked No. 4 in a study on business tax climate from the nonpartisan Tax Foundation in the fall. And it was deemed the No. 3 state with the best tax system in an April study from the Small Business & Entrepreneurship Council.

Meanwhile, costly regulations such as Assembly Bill 32, with its call to reduce greenhouse gas emissions down to 1990 levels by 2020, are driving business away from California. CalPortland, a building materials company, reportedly canceled its plans to expand in the Golden State because of the legislation, turning its eyes instead to Nevada.

Californians have responded by recently qualifying a ballot measure that would suspend AB 32 until the state’s unemployment rate, at 12.4 percent for May, stays below 5.5 percent for a year. But as far as the state’s perception in the business world is concerned, the damage may be done.

“The leadership of California has done everything in its power to kill manufacturing jobs in this state,” says one CEO who was surveyed. “As I stated at our annual meeting, if we could grow our crops in Reno, we’d move our plants tomorrow.”

Chief Executive also asked CEOs in January to rank states on their government’s attitude toward business.

“One thing that clients react to when we deal with them is access,” says Mike Skaggs, executive director of the Nevada Commission on Economic Development. “Here the lieutenant governor, the leadership, will meet with a client anytime I ask them to. And [businesses] are just not used to that. They’re coming out of a state where if you want to meet your governor, you get in line.”

Nevada also has the lowest ratio of state and local government to every 10,000 residents, according to the study.

“There’s a healthy respect for county and city government, and so that keeps the state from being too big,” Skaggs says. “It’s a ‘closer to the people’ form of government.”

CEOs also cast their votes on the quality of workforce offered in each state and the living environment, taking into consideration issues such as real-estate costs and health statistics.

Where could Nevada stand to improve? According to the survey, it needs more hospitals and schools, a more educated workforce and safer streets.

Nevada snagged the worst ranking in the nation when it comes to crime and unemployment rates. And it was second from the bottom above Alaska for higher education.

That’s one area in which California ranked high, tying for first when it comes to the number of people completing bachelor’s degrees. Hence the “brain drain” fears of some California officials, as the Golden State educates future leaders and risks sending them elsewhere for jobs.

There’s always been healthy competition between Nevada and California when it comes to recruiting business. Things heated up in 2004, when Gov. Arnold Schwarzenegger famously drove an 18-wheel moving van down the Strip to launch his “California wants your business” campaign. Nevada struck back that fall with signs in Los Angeles and San Francisco asking, “Will your business be terminated?”

Then last year, the nonprofit Nevada Development Authority funded a cheeky series of print, TV and radio ads aimed at luring companies. One featured a talking chimp fresh out of a legislative session in Sacramento, and invited business owners to “get the monkey off your back” and “kiss California red tape and taxes goodbye.”

Cord Blood America Inc. is among the success stories, crediting NDA for influencing its decision to move one of the largest umbilical cord blood stem cell preservation companies from Santa Monica, Calif., to Las Vegas. NDA used the company as its poster child during a recent business expo.

“I do believe this is a good place to do business,” says Tom Delio, president of Las Vegas-based Manufacturing Laboratories Inc. “The business climate here is not what is deterring my company’s expansion.”