How Economic Firm Spotted Nevada's Weaknesses

LAS VEGAS -- When the Nevada Legislature appointed a group of community leaders in 2009 to make recommendations on ways to improve Nevada's quality of life, the members hired New York City economic research company Moody's Analytics.

The firm returned in September 2010 with a hard-hitting report on behalf of the Nevada Vision Stakeholder Group that said the state needed to diversify its industrial structure to reduce economic volatility, improve its transportation system and increase its high school graduation rates. The state also had to do a better job attracting venture capital and increasing alternative energy production.

One of Moody's harshest observations was that only Alaska and Washington, D.C., had less diversified economies than Nevada. Moody's reported that nearly half of Nevada's jobs were in leisure and hospitality, retail and construction.

"This lack of diversity and the Nevada economy's high exposure to discretionary consumer spending and commodity prices make employment in the state more than twice as volatile as in the nation overall," Moody's reported. "Nevada's dependence on a small number of key industries leads to a modest growth outlook and also exposes the state to boom-bust business cycles."

Moody's stated that volatility hurts a regional economy because it can discourage firms from investing in jobs and facilities.

"Nevada's lack of economic diversity has further implications for the future in that it has left the state with relatively little exposure to high-growth industries," Moody's stated. "With gaming and construction both mature, new engines of growth will be required."

Moody's warned, though, that promoting diversity should not come at the expense of viable current industries.

"The fertile ground for industry expansion in Nevada lies in its natural resources, healthy migration trends, low tax structure, existing infrastructure, access to markets in California and Asia, and the existing skilled labor force and supply chains of its dominant industries," Moody's reported. "Expanding high-tech and green jobs would lessen Nevada's dependence on traditional industries and improve its growth potential."

Among Moody's recommendations to improve the economy is by matching new firms with existing industries.

"For example, entertainment production, design and technology firms could locate near Las Vegas to take advantage of the metro area's world-class status as the premier entertainment and hospitality destination," Moody's stated. "The sophisticated security networks associated with the gaming industry also could be exported to other areas or private sector and public sector entities in need of the industry's knowledge of high-tech security systems."

Moody's also recommended that the challenges faced by Nevada police and fire departments

in dealing with tourism could be shared with public safety personnel elsewhere through a training academy.

Another recommendation was for Nevada to attract more venture capital by creating an investment council that would market itself to venture capitalists, And in conjunction with the state's aging population, it was recommended that Nevada promote research and development in the health care field.

"The University of Nevada School of Medicine in Reno and the University Medical Center in Las Vegas, as well as the Children's Hospital of Nevada and the Cleveland Clinic could form the nucleus of a health care cluster with state-of-the-art research, creating spin-offs in the medical equipment and supply fields," Moody's stated.

Nevada's central location and its commercial rail and airport facilities make it a natural home for transportation, distribution and warehousing, and the state can take advantage of its "relatively manageable environmental regulation" and its lack of an inventory tax to attract new business, the report said.

The report also recommended reinventing Yucca Mountain and the Nevada National Security Site for energy development, a national laboratory, security technology, or a government data center.

"This would leverage existing infrastructure with high-tech potential," Moody's stated. "These sites have the capacity for storage, tech research and goods production -- activities that could create spin-offs in Nevada's cities and towns, broadening economic activity."

Moody's also called for completion of a proposed interstate from Las Vegas to Phoenix, expansion of McCarran International Airport's freight capacity, a better trained workforce to attract high-tech and green industries, and a streamlined process that would make it easier for private industry to develop federal land in Nevada while balancing the need to preserve the state's natural beauty.

Among other recommendations from Moody's:

* Nevada could take better advantage of its solar, wind and geothermal resources by coordinating with the federal Bureau of Land Management to speed land approvals for the development of renewable energy. Public facilities should be retrofitted with energy-efficient technology. The state also should explore ways to locate energy-generating equipment close to consumers to minimize transmission costs.

* The state could create more jobs by increasing its recycling rates and investing in more recycling centers. Nevada should promote single-stream recycling, where paper, glass, plastic and metal is commingled by consumers to make recycling more convenient.

* Nevada should invest in additional roads to relieve traffic congestion in Southern Nevada. The state also should consider innovative ways to borrow money to accelerate road projects such as through the use of Grant Anticipation Revenue Vehicles, which are bonds that may be eligible for federal reimbursement.

Southern Nevada should consider a light rail system to connect neighborhoods to businesses and recreation areas. Bicycling plans also should be incorporated into new construction or rehabilitation projects involving state roads.

Construction of Interstate 11 from Las Vegas to Phoenix and the upgrade of U.S. 93 to freeway standards would help boost transportation. The proposed I-11 also would be part of the CANAMEX corridor, the proposed trade route that would link Mexico, the U.S. and Canada through the Intermountain West.

Nevada also should continue to pursue development of a high-speed rail service linking Las Vegas with Southern California, develop policies to support alternative-fuel vehicles and promote the development of an inland port in Las Vegas that would allow the region to benefit from cargo shipped by highway or rail from surrounding states.

* In addressing Nevada's low ranking in numerous educational categories, it was noted that higher educational attainment expands employment opportunities, such that "jobless rates decline steadily as levels of educational attainment rise." Whereas fewer than 20 percent of leisure and hospitality workers have bachelor's degrees, 40 percent of the employees in public administration, financial, business, health and educational services have bachelor's degrees. "Higher education is therefore critical to a more diverse economy," Moody's stated.

Recommendations at the kindergarten through 12th grade level include adopting alternative models of education such as magnet schools, apprenticeship programs, career academies and online learning opportunities. The state should also support the Millennium Scholarship program, which rewards Nevada high school graduates with scholarships to attend Nevada's universities.

Nevada also should maximize its ability to attract good teachers, foster increased communication between schools and parents, support professional development programs for teachers, and expand English language learner programs to reflect the state's changing demographics.

The state also should bring school attendance and achievement levels up to national averages through appropriate funding and by having experienced grant writers who know how to compete for funds such as the federal Race to the Top program. Attracting more math and science teachers also would be helpful.

It was recommended that Nevada's colleges and universities increase the number of college degrees in fields related to growth industries, and improve their ability to attract research grants. Colleges and universities also should be able to retain a greater share of tuition revenue rather than have the money go into the state's general fund, and should be allowed to charge different tuition for different programs.

"Students who pursue such degrees as masters in business administration have higher earnings potential, and schools can adjust tuition rates accordingly," the report stated.

The state also should invest in early-childhood education and raise standards for early-childhood education centers. "Nevada needs to raise its low requirements for early-childhood teacher qualification," Moody's stated.

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