Blockchains stays bullish on ‘Innovation Zones,’ promises economic opportunity to skeptical lawmakers

Gov. Steve Sisolak and Blockchains LLC’s ambitious dreams of a self-governing, high-tech “Innovation Zone” fizzled in the 2021 legislative session, and advocates of the concept are still facing skepticism from legislators across the political spectrum.

State lawmakers on a joint special committee studying the zones met Thursday to probe the contentious proposal, which would give county-level authority to a brick-and-mortar community Blockchains hopes to build in Northern Nevada. A broad coalition of progressives, Republicans, tribal leaders and Storey County officials led Sisolak to drop plans for a bill last session, and hesitance lingered in Thursday’s meeting. 

Representatives from Blockchains and other backers laid out a broad overview of the proposal’s potential economic impact, with legislators questioning the need to give a private sector entity the governing powers of a county. A number of attendees also voiced concerns about setting a bad precedent with granting public authority to a single company, while others expressed cautious optimism for possible benefits.

“We hope that over the course of the next four to five months, we’re able to make that case that this is maybe the single-most important idea that we’ve dealt with in our careers,” said Pete Ernaut, a Blockchains lobbyist.

The company hopes to develop a “smart city” over a 75-year timeframe on Storey County land that CEO Jeff Berns previously purchased. Representatives from the company said an “Innovation Zone” would use “hundreds of thousands” of sensors to collect real-time data combined with blockchain technology (decentralized records of digital transactions) to yield highly responsive decision-making. 

Jeremy Aguero, principal analyst with Applied Analysis hired by Blockchains, said it is estimated to create $16.4 billion in construction development and provide 123,600 jobs. Aguero also projected that the community’s ongoing operations would lead to $4.6 billion in average annual economic impact and would support 40,300 jobs.

Matthew Digesti, vice president of Blockchains’ regulatory strategy, described what life in the Innovation Zone might look like.

“Innovation Zone residents will own and control their digital identities, engage in peer-to-peer renewable energy transactions, manage all government interactions from a mobile phone, share in public infrastructure revenue, cast real-time votes on hyperlocal community issues, pay taxes in real time, create passive income by monetizing assets, manage and control their medical records, and engage in other use cases that we frankly cannot imagine,” Digesti said.

But legislators expressed some reservations about establishing an “Innovation Zone” and equipping a private company with governing power.

Assemblyman Howard Watts (D-Las Vegas) asked how Blockchains plans to balance trust and transparency with personal privacy. Sen. Mo Denis (D-Las Vegas) sought more clarification on why an “Innovation Zone” had to exist outside of Storey County’s jurisdiction. And Assemblyman P.K. O’Neill (R-Carson City) asked why blockchain technologies couldn’t just be used in Storey County as it exists.

Blockchains representatives said an “Innovation Zone” would make it easier to retrofit existing county buildings and infrastructure, and the technology used throughout the community would be decentralized and encrypted to preserve privacy.

Concerns also persisted over how a new development would affect the environment, including water consumption and the Pyramid Lake Paiute Reservation.

Storey County representatives called in during the meeting’s public comment period, raising pointed questions.

“Why can't Blockchains LLC work within one county — Storey County — known as the most business-friendly, innovative-friendly county, not only in the state, but in the country?” asked Mary Walker, a lobbyist for Storey County.

Storey County Commissioner Clay Mitchell voiced support for the economic opportunity but expressed skepticism about creating a new governing entity.

“I'm quite excited about the opportunities presented here,” Mitchell said. “It leaves me wondering, why haven't the specifics of this idea been presented to the host county first?”

Innovation Zones study still sees issues raised by Storey County, others

Although it has been a month since the contentious proposal creating autonomous “Innovation Zones” was scrapped and turned into a study, the concept has continued to receive pushback as it moves through the Legislature. 

The concurrent resolution, SCR11, would establish a committee of six appointed lawmakers to study the Innovation Zone proposal, including evaluating its effects on economic development, natural resources, the environment and local tax revenues. The measure passed out of the Senate on May 19 on a voice vote.

During its hearing in the Assembly Committee of Revenue on Tuesday, comments from lobbyist Mary Walker in neutral testimony, representing Carson, Douglas, Lyon and Storey counties sparked a conversation about tax revenue and future growth concerns in Storey County — the likely location of any Innovation Zone, as the concept backers Blockchains Inc. owns about 67,000 acres of land and spearheaded efforts in favor of the concept earlier this year. Blockchains did not testify in the committee hearing.

Under the original proposal, Blockchains would be allowed to create a new form of local government operating as a “county-within-a-county,” but the measure brought up concerns it would receive all of the tax revenue from technology companies located within the “Zone,” causing Storey County to miss out on taxes it would otherwise receive. Opponents also raised concerns about the Tesla Gigafactory, which has property tax abatements nearing expiration in 2024 and is expected to generate millions of dollars in tax revenue for state and local governments.

Austin Osborne, Storey County manager, brought up the county’s 2016 master plan which includes a high density, urban housing development near the tech properties.

“We're not looking for ranch houses on one acre parcels with horses on that property, we have places in Storey County for that and we want to protect those areas for that,” Osborne said. “[This area is] for the millennials, the Generation Z, the high-tech people, people that want to live very close to innovation.” 

Although Osborne and the county were in neutral on SCR11, he said if a study was to move forward, it should compare the progress of the proposed Innovation Zone project versus what development would look like with Storey County's existing framework — touting that zoning and planning process takes only about 180 days, depending on the developer’s plan. 

In March, Storey County Commissioners voted to oppose the Innovation Zones concept as a bill.

“As long as the state of Nevada puts in the necessary structure in place to manage those [technological] resources appropriately, we're totally in support of it, no problem… As far as the separation from local government and everything related to, the commissioners are strongly opposed to that,” Osborne said. “If an interim study does move forward, we're going to find that really it's not necessary for this method to move things for what I think the goals are placed here… We really are the Innovation Zone already.”

Assemblywoman Teresa Benitez-Thompson (D-Reno) shared some of her reservations with economic development bills and projects that oftentimes lack consideration of how it might affect the area, from infrastructure and affordable housing, to the environment and water consumption.

“My experience with a lot of projects where we say that we want to focus on economic development, is its economic development in a vacuum, without consideration for these other things,” Benitez-Thompson said. “When we talk about impacts, I think this conversation is long overdue… We've got to have a conversation about how this all plays out, and how the next decade looks regionally.”

Editor’s Note: This story first appeared in Behind the Bar, The Nevada Independent’s newsletter dedicated to comprehensive coverage of the 2021 Legislature. Sign up for the newsletter here.

Bills reversing 2015 changes to collective bargaining pick up steam in last week of Legislature

Union member stands holding flag

Two bills reversing changes made to Nevada’s collective bargaining law in the Republican-controlled 2015 Legislature appear to be finally moving forward in the last week, although the fate of a more ambitious bill extending bargaining rights to state workers is still in flux.

Months after the bills were first introduced and heard, members of the Senate Finance Committee held hearings Monday on SB153 and SB111 — two bills sponsored by Democratic Sen. David Parks that aim to reverse many provisions of a wide-ranging collective bargaining bill passed in 2015 that modified the collective bargaining process for local employees and prohibited principals from participating in collective bargaining agreements. Several labor unions argued the bills would improve the bargaining process and cut down on time spent in arbitration, while the Clark County School District warned that the bills add tens of millions in new costs.

Though their appearance in the Finance Committee is a sign that the bills are likely to start moving through the legislative process with roughly a week to go before the end of the 120-day session, their appearance is likely to spark questions about the future of SB135, which would allow state government workers the right to collectively bargain.

Parks said he didn’t know when or if the bill — entombed in the Senate Finance Committee since mid-April — would move forward. But he said his other two collective bargaining bills would go a long way to restoring the system in place prior to the passage of the 2015 law, which he and only three other Democrats opposed at the time.

“I think that it certainly fell far short of what the intent was when those bills were introduced,” he said. “My attitude is from having many years of labor negotiations and experience in the public sector, we had a system that didn’t work perfectly, but it certainly worked well. What (SB241) did was just make a mess of it, and it’s been that way since.”

The biggest fight on Monday came over Parks’ SB111, which reduces the amount of funds a local government can exempt from their ending fund balance in collective bargaining negotiations from 25 percent to 16.67 percent, and a new requirement that any money appropriated by the Legislature for salary and benefits be part of a negotiation during collective bargaining and considered by a fact-finder or arbitrator when determining a school district’s ability to pay compensation.

That last section of the bill sparked opposition from the Clark County School District, which placed a massive fiscal note on the bill saying that implementation would cost $36 million a year, and $72 million in future budget cycles in order to comply with annual pay raises without sufficient funding. But it could also play a critical role as lawmakers look for ways to fund a promised 3 percent teacher pay raise without having the district use the funds for other purposes.

Stephen Augspurger, head of the Clark County Association of School Administrators and Professional-Technical Employees, gave legislators a copy of the last budget’s legislative allocations showing that the state had appropriated $164.8 million for a 2 percent merit increase for educators and staff, and said that the provisions in SB111 would ensure that the money would actually be spent for merit increases as opposed to filling gaps in the district’s budget.

“The Legislature has provided that money to the school district,” he said. “They have that money. It should be spent for normal movement on the salary schedule. It hasn't, it would be disingenuous to say now that there's a fiscal note on this bill.”

Brad Keating, a lobbyist for the school district, said the fiscal note was accurate and that the district often faced unexpected and huge costs (such as an extra $18 million needed for special education) and that the state’s antiquated and byzantine funding formula made it hard to draw a straight line between money appropriated by state lawmakers and actual dollars going to educators for merit pay increases.

“When dollars go into the formula, they don't come out to the same amount and nothing is broken down by line item,” he said. “So how are we supposed to give out at guaranteed raises when we don't know how much we truly receive as a district?”

Parks said he didn’t believe the school district’s fiscal note was accurate.

“I have a strong opinion about fiscal notes, and I think that if you want to kill a bill, you put a fiscal note on it,” he said in an interview. “I think that in this particular situation, I think it’s an unsubstantiated fiscal note.”

The other portion of the bill — lowering the reserved ending fund balance that could be walled off from collective bargaining negotiations — was supported by union representatives and Mary Walker, a lobbyist for several rural counties who said the change would still ensure governments had at least two months in a reserve balance while having enough financial flexibility for personnel costs during times of an economic downturn.

“I believe this is sound fiscal policy, and that SB111 will provide local governments financial stability in times of recession,” she said. “This will help minimize layoffs during cutbacks.”

The other bill, SB153, makes several reversals and repeals sections of former Republican Sen. Michael Roberson’s bill from the 2015 session that added several restrictions toward the ability of school principals and administrators to collectively bargain.

The bill repeals three sections of the 2015 law, including provisions requiring that employee organizations offer concessions for the full cost if an employee takes leave to perform duties or services for their union, and two sections requiring school principals to be at-will employees and for certain school administrators to re-apply for their positions every five years. It also allows school principals and other administrators below the rank of superintendent to participate in a collective bargaining unit separate from school teachers — undoing another provision of the 2015 law.

The measure also revises certain rules on arbitration for impasses in collective bargaining negotiations, including a requirement for four (rather than eight) negotiating sessions and time limits on holding hearings after selecting an arbiter. It also would allow for “evergreen” clauses in collective bargaining agreements, which are provisions that allow regularly scheduled pay raises and other parts of collective bargaining agreements to continue after an agreement expires.

Former Gov. Brian Sandoval vetoed a similar bill last session that attempted to make many of the same changes to the 2015 collective bargaining law.

Professional Firefighters of Nevada lobbyist Tom Dunn said the lack of those clauses hurt workers and incentivized local governments to delay negotiations as long as possible.

“All it's going to do in the long term is cost both local government and more importantly the bargaining units that we represent time and money,” Dunn said. “All it's going to do is drag out the process further than it was prior to 2015, and there is going to be a harm to local government employees because every day that this process gets dragged out is potentially a benefit or more importantly a PERS retirement contribution that has been decreased. And it's a complete and total budget savings for local government.”

As introduced, the Clark County School District said implementing the bill would cost around $36 million per year to implement, raising similar concerns to Parks’ other bill that would require additional spending for merit pay increases without any increase in funding.

Chris Daly, a lobbyist for the Nevada State Education Association, said that the current bargaining rules were “cumbersome and unworkable,” and said the district’s assumptions in the fiscal note were a worst-case scenario and unlikely to actually occur.

“We think that this fiscal note is not real in terms of how this would play out for that school district,” he said.

Democratic Sen. Joyce Woodhouse, who chairs the Senate Finance committee, said she hoped to bring both bills up for a committee vote sometime later this week.