Indy Explains: Housing affordability and lack of supply

Despite a society-altering pandemic, home prices in Nevada have reached record highs in recent months.

In January, the median cost of a house in Reno hit $500,000, while in Las Vegas, that number reached $345,000. Both figures have surpassed pre-2008 peaks.

At the same time, Nevada’s affordable housing scarcity has gotten worse.

The state has a shortage of roughly 79,620 affordable units available to extremely low-income renters — people earning 30 percent or less of area median income — according to the Southern Nevada Home Builders Association. 

“The pandemic, from an affordable housing perspective, has really just revealed the crisis and put so many more at risk of homelessness,” said Christine Hess, the executive director of the Nevada Housing Coalition.

Advocates, real estate agents and developers have turned their eyes to Carson City, with representatives for each group saying that lawmakers’ decisions this session will have long-term implications for the future of Nevada’s housing market.

Proposals on the table this legislative session include a measure preventing landlords from denying applicants because they rely on public assistance, a proposal to extend the timeline of a $10 million tax credit program approved in 2019 for developing affordable housing and a bill allowing developers to create more tiny homes.

Developers are struggling to meet the demand and worry that affordable housing projects can be cost-prohibitive, Southern Nevada Home Builders Association CEO Nat Hodgson said.

“I've been where I can't build enough. I've been where we've had too many builds. Right now we cannot keep the supply going for the demand,” Hodgson said. “Here’s the sad part … I’m looking at my 21 and 23-year old sons and I’m going, ‘you know what? I don’t know how you guys are going to be able to afford a new home.’”

Campaign donations made ahead of the session underscore how important housing issues are expected to be in the Legislature. Real estate companies, developers and PACs funded by those companies contributed more than $1.3 million to lawmaker campaigns — the most money any single industry donated to state legislators.

Below are some of the significant themes, bills and discussions surrounding housing this legislative session.

The Paseos village in Summerlin is seen on Tuesday, April 25, 2017.(Jeff Scheid/The Nevada Independent)

Nevada’s housing market

Twenty-four days — that’s the average length of time in February that a house in the Reno-Sparks area sat on the market before a seller moved forward with an offer.

Quick turnarounds on home sales may sound good for the economy, but experts say it’s a problem when there is not enough housing to meet demand. 

Healthy, balanced housing markets typically have about six to seven months of supply, meaning that homes will sell out if developers do not produce new housing by the end of that time frame.

State economists' predictions place Southern Nevada's housing supply at about 1.5 months. In Northern Nevada, that number is closer to one month, setting up buyers and renters for higher prices and more difficulty in securing housing.

And the market shows no signs of slowing down, said Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada (EDAWN).

"Most elected officials and most leaders, even in the business community have no clue how bad the housing crisis really is, and the reason they have no clue is because they're in their house and they're not being exposed to it," Kazmierski said. "Just go out and try and buy a house. It's nearly impossible."

While the pandemic led to fewer housing sales during the second quarter of the most recent fiscal year, it did not appear to affect Nevada's rising home prices. But widespread unemployment could eventually ripple into the housing market — state economists say that homeowners' inability to pay mortgages and continued price increases might lead to foreclosures that could slightly lower home prices in the future.

So what’s driving the boom in housing purchases and a rise in scarcity? The drivers include historically low interest and mortgage rates offered by the Federal Reserve in the wake of COVID-19; new residents attracted to a state with no state income taxes, lower living costs and less traffic congestion; and increased remote work opportunities that have spurred relocations to the region, bringing in people used to paying higher housing prices (some of whom can afford to pay cash) from California, Washington, Utah, and Arizona, among others.

Kazmierski said the emergence of new tech-based industries in Northern Nevada has allowed the region to weather the pandemic more successfully than tourism-dependent Las Vegas.

However, he also said the changed economy has intensified income disparity in the region, with wealthier households able to afford higher prices for homes and inadvertently contributing to higher overall housing costs and a greater shortage.

"The people at the end of the day that will suffer the most are the ones that can least tolerate that," Kazmierski said. "People that have a higher wage are going to be able to find a place to live and the people who are lower income, elderly, disadvantaged, part of our community is going to truly suffer if we don't do something."

Scarce affordable housing

Nevada is among the eight states with the least available affordable housing for lowest-income renters. Affordable housing is generally defined as housing that costs no more than 30 percent of a person’s gross income.

Research from the National Low Income Housing Coalition shows that Nevada has roughly 18 affordable units for every 100 people who earn 30 percent or less of area median income. 

That’s worse than at the national-level, where there are 36 affordable and available units for every 100 renters making 30 percent or less of area median income. 

Renters working in lower-income occupations are also more likely to be affected by the pandemic than higher-income homeowners, said Brian Bonnenfant, project manager for UNR’s Center for Regional Studies. 

Another metric for assessing affordability is fair market rent, a reasonable rent price for low-income families as determined by the federal government. 

According to the National Low Income Housing Coalition, fair market rent for a two-bedroom apartment in Nevada is $1,065 a month. But to afford that rent while paying 30 percent of income, a household would need to earn monthly wages of $3,549, or $20.48 per hour. That’s $11.48 more than the state's minimum wage. 

The state’s median household income is $60,365, or roughly $5,030 a month, according to data from the U.S. Census Bureau. If 30 percent of that median household income goes toward rent or housing, that would be $18,109 per year or $1,509 each month.

Roughly 12.5 percent of Nevada’s population have incomes below poverty level, which the Department of Health and Human Services defines as $12,880 for a one-person household, 30 percent of which is $322 per month, and $26,500 for a four-person household, with $662 going toward rent each month.

The high costs of building affordable housing and buyers’ willingness to purchase luxury homes that sell at higher prices tend to disincentivize builders from creating additional affordable housing and has contributed to the state’s affordable housing shortage. 

Hodgson said that increasing land and labor costs, lumber prices and transportation expenses are contributing to higher housing prices.

"We're building as affordable as we can, but again, the developer purchases everything or pays for everything to get the end product," Hodgson said. 

Construction and development proposals take time to get approved, he added. The time it takes to propose a project, wait for approval and then finally build and sell a house can also add to expenses.

Geographic restrictions also hinder developers in Reno and Las Vegas. There is little infrastructure to support housing that might expand city boundaries, and land outside of that usually falls under the federal Bureau of Land Management's jurisdiction. 

On the consumer side, insufficient affordable housing stock has ramifications for individuals' health, access to education, food security and the community as a whole, said Hess.

"When people are priced out, there's a whole cascade, right? The dominoes start falling," she said.

Though some fear another housing market crash, others say the worry is unfounded.

During a recent legislative meeting, Carson City Assessor Dave Dawley said he does not expect a similar housing bubble to pop in the near future but that some cooling off of the current market is likely in store.

"I do think there is going to be an adjustment that's going to happen in the real estate market," Dawley said. "Is it going to be as dramatic as it was back in 2008? I don't think so ... I only got through that whole bubble once so I can't really tell."

In contrast to the booming real estate market in the early-to-mid 2000s, Nevada’s high housing prices are not fueled by predatory lending, lack of sufficient regulation or negative equity. Most of the high costs have been driven by low supply, high demand and an imbalanced housing market.

“High home prices and improved lending practices mean most homeowners are sitting on equity, which pushes back on foreclosure fears,” Bonnenfant said. “Sure, some homeowners may be forced to sell, but they will not walk away.”

Experts also see continued demand on the horizon.

"In the North ... we've got 150 companies we're working with right now that are considering relocation to this region. So we see continued demand at least for the next five years, regardless of what happens nationally," Kazmierski said.

If the region cannot accommodate an influx of new employees, the companies will go somewhere else, Kazmierski said, taking potential revenue streams with them.

Regardless of what happens in the future, Hess said that the pandemic shined a light on the need to address Nevada's housing crisis and characterized the state as at a "tipping point."

"If we don't do something now and we are already behind, where are we going to be as a state? Who are our communities going to be, when the very people who work here can't live in them?" Hess said. "We aren't going to recognize our Nevada if we don't take care of ourselves.”

Construction at the Summit Ridge housing project in West Reno on Friday, March 6, 2020. (David Calvert/The Nevada Independent)

Past legislation

This session won’t be the first time the Legislature has approached the affordable housing topic in recent years.

In 2019, legislators passed SB103, a bill sponsored by Sen. Julia Ratti (D-Sparks) giving local governments the ability to reduce or subsidize impact fees for affordable housing projects. A proposed amendment to the bill discussed the concept of allowing local municipalities to adopt rent control policies, but the amendment never became part of the law.

“What I did in the last session was really about enabling local governments,” Ratti told The Nevada Independent. “The success of those kinds of initiatives will inevitably end up in the local government.”

So far, Reno is the only city in Nevada to implement SB103 — the city has had two projects request fee reductions or subsidies under the ordinance.

The projects include Springview by Vintage, a 180-unit affordable multifamily development, and Marvel Way Apartments, a 42-unit apartment project. Both projects are under review and scheduled to come before the city council in the coming months.

Ratti said the economic rollercoaster ride the state has experienced in recent years means that some tools may be less suitable today than when they passed through the Legislature. Still, at least local governments have some options for how they address housing needs.

“It would not surprise me if some of those tools have had fits and starts,” she said. 

Another bill passed by the 2019 Legislature, AB73, would have authorized a sewer surcharge and a tax increase on real estate property transfers to raise approximately $20 million designated to fund homeless services. But the bill was watered down and reduced to a local-scale venture ultimately requiring Clark County lawmakers to form a working group to address homelessness and submit recommendations to the Legislature by October 2020.

In September, The Nevada Current reported that the working group had presented a proposal (contingent upon more funding from the state) to increase housing capacity, meet mental and behavioral health needs and offer other needed services. No legislation addressing the recommendations has yet been proposed.

The state’s most high-profile 2019 effort to address the crisis allocated $10 million in tax credits for builders developing affordable housing — but rollout of that program has been slower than anticipated.

In a report on the tax credit program, Nevada Housing Division officials said the pandemic combined with the “newness of the program” slowed the initiative to a near halt.

The division received just one application during Fiscal Year 2020, but that application has not yet received approval and no affordable housing units were built as part of the program by the end of that fiscal year. 

Some lawmakers this session are hoping to remove the sunsets on the program and establish it in law to give it more time to grow.

Preserving existing affordable housing

In 2021, legislators are eyeing a variety of bills that would help alleviate Nevada’s housing crisis, one of which seeks to preserve affordable housing developments.

The state lost more than 1,000 affordable housing units in 2019 because of expirations on affordable housing designations, Nevada Housing Coalition Executive Director Christine Hess estimated.

“What good does it do if we're creating all this housing, but we're losing it out the back end?” she said. “Preserving existing affordable housing costs one-third to one-half the price of creating new affordable housing.”

Affordable housing units built under the federal Low-Income Housing Tax Credit program receive federal tax subsidies that partially offset construction costs for low-income housing projects. Federal law sets a limit on the income level of tenants, as well as on the amount of rent that landlords can charge them.

Property owners are required to maintain affordability (as defined by the terms of a tax credit agreement) for a timeframe of 15-30 years. At that point, owners can either renew the affordability status or drop the status and rent or sell it at market rate.

SB12, a bill put forward this session by the legislative advisory committee on housing, would require property owners with affordability restrictions that are subsidized and under the oversight of the Nevada Housing Division to notify local governments and tenants 12 months before they intend to let restrictions expire.

Lawmakers say this would give local governments the ability and time to react to affordable-designated units coming off of the market.

“When the economy is doing so well in terms of landlords, there's a temptation of course, to just flip those back to market,” Ratti said. “But there are lots of tools to help developers and to incentivize them keeping those units affordable. But we can only do that if we know that.”

The housing bill appears to have at least some bipartisan support.

“If it's purely a notification, I don't have any trouble with that,” former Nevada REALTORS Association President and newly elected Assembly member Heidi Kasama (R-Las Vegas) said. “Because then if through private foundations or government or local community leaders they can raise the funds and have time through a notification effort.” 

New construction near the University of Nevada, Reno on Friday, March 6, 2020. (David Calvert/The Nevada Independent)

Developing more housing 

Lawmakers, advocates and builders agree that addressing the housing crisis does not exclusively mean building new affordable housing.

One bill that the Nevada Rural Housing Authority is working on with Ratti would allow housing authorities to build market rate housing units alongside affordable ones.

Bill Brewer, executive director of the Nevada Rural Housing Authority, said that lawmakers often focus on Las Vegas and Reno, but 20 percent of the state's population lives in rural areas — and there is little support for building affordable housing in those parts of the state.

"What we intend to do with this kind of a program is to have some units at market rent," Brewer said. "The revenue from those units that would help support the rent or provide rental assistance to some other households in that unit."

Brewer offered an example of mixed-income units that would involve renting 80 percent of units in a housing complex at market rates, and then using some money from those rents to subsidize the rest of the units.

"It'd be in the same housing complex, and so that's good from a social standpoint," Brewer said. "And then it also expands our ability to serve the people in rural Nevada without having to rely on funding from the federal government."

Ratti said that though the plan may seem "counterintuitive" for a group focused on increasing affordable housing, approaching the housing crisis with creativity is essential, and all options need to be on the table.

To develop more housing options, Sen. Dallas Harris (D-Las Vegas) recently introduced SB150, which requires local governments to allow tiny houses in areas zoned for single-family residences. 

The Southern Nevada Home Builders Association has a few ideas it wants lawmakers to consider as well.

Hodgson suggested fast-tracking affordable projects through the development process, seeking federal waivers to leverage federal health program dollars by designating affordable housing as a health care need and offering a density bonus for mixed-income developments.

One of the most considerable barriers to completing more affordable housing projects is land, Hodgson added. He said that getting more land from the Bureau of Land Management or acquiring municipality-owned land and then designating it for affordable housing would also help solve the problem.

The desire for more land came a step closer to fruition when Democratic Sen. Catherine Cortez Masto introduced a lands bill on Wednesday that would allow the Las Vegas metropolitan area to expand toward California while also setting aside substantial swaths of land for conservation and recreation. 

The Southern Nevada Home Builders Association lauded the bill as a much-needed step to addressing the state’s housing crisis, but many environmental activists are concerned that it would lead to development that could increase land degradation and contribute to ecological and climate-driven destruction.

Homes under construction about two miles north of Sloan Canyon National Conservation Area on Wednesday, May 9, 2018. (Jeff Scheid/The Nevada Independent)

Tools for local governments

To give local governments more tools and funding to address the housing crisis, the Nevada Housing Coalition is working with lawmakers on two bills, one of which opponents say would lead to increased costs for developers.

The most contentious proposal (not yet introduced in bill form) would allow local jurisdictions to require developers to follow inclusionary zoning policies stipulating that a certain percentage of new construction be affordable for lower-income households — or require a fee to avoid those requirements.

The proposal also includes an option for jurisdictions to adopt fees ranging from $1 to $10 for each square foot of commercial or residential development. The municipality or jurisdiction would determine the fee rate based on a study that analyzes the balance between the funding necessary to address affordable housing needs and possibly hindering future construction.

Local governments would first have to create an affordable housing plan detailing how the funds would be used before implementing fees. Money from fees would be stored in an affordable housing trust fund. 

Hess said that the proposals would operate similarly to legislation from 2019 that reduced impact fees for affordable housing developments, allowing but not mandating that local governments adopt the policy.

"By enabling these fees, communities will address ... their shortage of affordable and available rental housing … our limited housing diversity," Hess said. "What's cool is an affordable housing trust fund is not limited like federal funds are. You're using that as a community as you need."

The other proposal on the table would require jurisdictions with more than 100,000 people to establish five-year goals for producing affordable housing units. The idea would allow for increased communication and better long-term planning, Hess said.

Bonnenfant said he worries the plan could force developers to skip the “missing middle” and build more luxury homes to make up for added costs, creating a chasm between affordable and luxury housing.

No city in Nevada has inclusionary zoning ordinances.

During the 2019 session, Ratti submitted an amendment to SB103 to allow local governments to implement either inclusionary zoning or rent control policies. The amendment did not make it into the final iteration of the bill.

The Southern Nevada Home Builders Association said that fees in place of inclusionary zoning would shift the cost of housing subsidies onto new development — and likely reduce the number of built units, increasing housing prices overall.

Kasama said that though the concept makes sense, she worries about the burden extra fees will ultimately place on consumers.

“Is that harming the people we’re trying to help by adding a layer of costs?” Kasama said. “It's the consumer [who ends up paying for additional building costs] and that's the one we're trying to build affordable housing for.”

Disclosure: Mike Kazmierski serves on the Advisory Council of The Nevada Independent.

New coalition: Lawmakers must raise revenue for schools or new funding formula won’t work

A coalition that includes teachers, school administrators and faith leaders is hoping to put pressure on lawmakers to increase taxes this session, saying that moving to a new education funding formula without additional revenue will do more harm than good to many students.

The Empower Nevada’s Future campaign is kicking off with a petition to lawmakers and a billboard installed along the freeway from Reno to Carson City, within sight of legislators heading to the capital from the airport or their homes in Reno. The group also released an analysis in tandem with a virtual news conference Tuesday showing how the governor’s plan to redistribute funds earmarked for students with higher needs — part of a long-awaited transition to a new funding formula — will dilute their impact.

“Though many expected some ‘growing pains’ in the transition, a complete lack of effort to begin fully [funding] the formula was not contemplated and cannot be accepted,” said the analysis, issued by Educate Nevada Now, which has supported the modernization of how the state funds schools but also thinks the state should be spending thousands more dollars per student to reach levels experts deem “adequate.”

Some legislative leaders have expressed support for discussing new revenue in the 2021 session, and several proposals to raise taxes on the mining industry are expected to come up, although none of the three options have been scheduled for a hearing.

Assembly Speaker Jason Frierson (D-Las Vegas) said in an interview on Tuesday that the Assembly does not plan to hold hearings on two tax-raising initiative petitions backed by the Clark County Education Association. Leadership, as well as the business community, had previously cast aspersions on those sales and gaming tax hikes; without any legislative action, they will go to a statewide vote in 2022.

“We don't know of anything specific, but we're looking forward to it,” Educate Nevada Now spokeswoman Michelle Booth said about hearings on tax-raising measures. “Hopefully they're watching or they will be watching. Hopefully you all will be signing the pledge and hopefully this is the impetus to really put the pressure on.”

On Wednesday, Frierson issued a statement to The Nevada Independent on calls for new revenue.

"Our state is in a crisis and we need to do everything we can to help Nevada families through it. As we laid out before session, all options need to be on the table," he said. "We continue to be actively engaged in discussions with stakeholders about revenue from mining and we have Assembly and Senate resolutions to consider. We may also explore closing other corporate tax loopholes. Of course, any revenue considerations require a 2/3 vote so we will proceed with that understanding."

Lawmakers are optimistic that federal funds through a COVID relief bill will soon head to Nevada to ease the painful elements of Gov. Steve Sisolak’s recommended budget, which proposes funding 2 percent below what lawmakers approved in 2019. An early version of the bill in Congress shows Nevada state and local government agencies could get nearly $4 billion in relief — a number nearly equivalent to the state’s entire general fund budget for a year.

But Amanda Morgan, executive director of Educate Nevada Now, cautioned that those funds might have significant strings attached that could preclude them from general use, and that they are needed to help students rebound from learning losses they have experienced during the pandemic.

“If we're over-relying on those funds just to fill budget holes, we're not going to be able to lift our students up the way that those dollars had really intended,” she said. 

One of the biggest problems identified in the analysis was that the governor’s budget calls for categorical funding for programs such as Zoom and Victory schools to be redistributed across the entire student body. Currently, the state sends an infusion of extra dollars to schools with high concentrations of low-income and English learner students, but the new funding formula would send extra dollars to the school of any student in the state with those extra needs as a “weight,” even if they were not enrolled in a designated Zoom or Victory school.

The change is aimed at helping funds reach a larger group of students. As it stands, only about one-third of the state’s English learners and one-fifth of state’s “at-risk” students attend schools that received the funding boost meant for such students.

But without additional funding overall, the amount of money making it to schools to meet those extra needs would be much diluted. Individual schools would then struggle to cobble together enough funding for support staff or wraparound services that they might have afforded when money was more concentrated toward Zoom or Victory schools.

“There might be some technical changes to ease in the transition,” Morgan said. “I think ultimately what we're concerned about is we don't want just technical fixes. We want us to actually start moving towards adequate funding.” 

The group isn’t endorsing any specific revenue proposals, although some members of the  coalition offered suggestions. Rather, it is urging people to support the broad concept of more funding and the lawmakers who get behind the idea.

Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada (EDAWN), said the quickest way to bring in new revenue would be to have property taxes reset upon sale. As it stands, property taxes in Nevada are based on the age of the home, rather than its market value, so older homes have lower rates than newer ones even if their value is essentially the same. Nevada is the only state that doesn’t reset the tax when a home is sold.

“States did that because they understood that if property tax is a primary funding metric in your education system, by not doing that, you are drastically impacting the ability for a school to be adequately funded long term,” he said. 

He also responded to a criticism that members of both parties have shared — that it’s not the right time to raise taxes because Nevadans and businesses are struggling during the pandemic.

“It takes a quality education system to really grow the economy for the long term,” he said. “So there's never a good time, but from a business perspective, you're investing in the future just like you would invest in anything else.”

Mike Kazmierski is a member of The Nevada Independent Advisory Council.

Riley Snyder contributed to this report.

Updated at 9:05 p.m. on Feb. 24, 2021, to add a comment from Assembly Speaker Jason Frierson.

Reno council race decided by 82 votes as ward becomes central to questions of preservation, development

Adam Buehler, 25, moved to Reno’s Ward 1 in the summer of 2018 to take a job in Northern Nevada’s burgeoning tech industry. He chose his home based on its proximity to Midtown and its location within walking distance of The Eddy, a beer garden and outdoor space near the Riverwalk District.

“When I moved here, my personal goal was to be able to walk to The Eddy, so this fit,” the former Ohioan said with a laugh.

The ward encompasses diverse neighborhoods and identities — old and new Reno, historic neighborhoods and a modernizing business district, new residents like Buehler seeking unique recreational opportunities and long-time citizens hoping to maintain the character of a city they love. 

Councilwoman Jenny Brekhus poses for a photo near Ward 1's Riverside Walk (David Calvert/The Nevada Independent)

The tight race in this diverse ward was decided in favor of the incumbent, Councilwoman Jenny Brekhus, by just 82 votes — one that residents, scholars and policymakers say was defined by contrasts in leadership styles and differing perspectives on developers’ roles in local governance.

During the primary election campaigns, Buehler said he heard about Brekhus’ reputation as someone who was sometimes difficult to work with and cast his ballot for Britton Griffith, vice president of her family’s development firm, Reno Engineering Corporation, whose policies he said he appreciated.

After Griffith did not make it past the primary, though, Buehler said he started receiving an overwhelming number of mailings from both Brekhus and her challenger, real estate agent J.D. Drakulich, with an average of one to two a day during the height of the campaign.

Real estate agent J.D. Drakulich stands for a portrait near his home in Ward 1 (David Calvert/The Nevada Independent)

A majority of the mail pieces Buehler received came from Drakulich. Some were attack pieces with one containing a checklist documenting instances when Brekhus was combative during a meeting, made it difficult to get through an agenda item because she kept asking follow up questions, or increased tension on the council.

One mailing that stood out to Buehler was one about Drakulich’s stance on Reno’s homeless crisis. Buehler said the pamphlet was the reason he almost voted for Drakulich, but when he began looking into the candidate’s campaign funding, he noticed that Drakulich had received many campaign donations from real estate developers, some of which came from out of state.

Buehler said he saw a disconnect between a candidate claiming he was trying to reduce local homelessness and taking money from high-end real estate developers.

“I thought it was important for this, particularly because Reno's housing market is expanding incredibly quickly and there's obviously a lot of money to be made,” Buehler said. “Having a City Council member who's obviously going to benefit from high-end housing policies I don't think is a good situation for Reno to be in.”

Drakulich’s intention to keep working as a real estate agent while holding a City Council position was another reason Buehler decided to cast his ballot for Brekhus, even though he still had qualms about her.

“At the end of the day, their jobs are to get things done in the community so if they're being hard to work with, less is going to get done,” Buehler said. “And I think that is also not good for the community.”

Maintaining checks and balances

Buehler’s dilemma about who to vote for illustrates the nail-biting nature of a race that was only called after Washoe County commissioners canvassed the votes. It's an outcome supporters heralded as a victory for independence and accountability on a council they say often acts in concert with special interests, but one that critics bemoaned as maintaining a combative presence on the council that could hinder needed development and growth.

“I think that that [the Ward 1] race came down a great deal to differing perceptions of the level of power and influence being exerted by real estate developers and their associates over local politics and development,” said Alicia Barber, a historian and scholar whose work focuses on the cultural geography of Nevada and the American West.

Scenes from Ward 1's Riverside neighborhood and parks. (David Calvert/The Nevada Independent)

Barber pointed out that Ward 1 contains some of oldest, most historic neighborhoods in the city, both commercial and residential, making the ward center-stage in battles over space and how the city will or will not shift to accommodate new industries and residents.

Everyone who was watching the Ward 1 race knew it would be close, said Mike Kazmierski, the president and CEO of the Economic Development Authority of Western Nevada (EDAWN), an organization focused on attracting and retaining thriving businesses and quality jobs in the Reno-Sparks area.

Brekhus’ pointed inquiries and sometimes critical perspectives draw some public support but also tend to make it difficult for developers to get a project approved without very detailed work, he said.

“[Drakulich] is more of a, we need housing, the community needs housing … so we want to be as a community, working with our developers in a more positive way,” Kazmierski said. “[Brekhus] has been known to be the lone no vote on many, many of the votes that tend to occur, even after many hours, oftentimes of answering and getting her feedback and questions, which has caused the council to be less positive."  

Images of Idlewild park and community within Reno's Ward 1 boundary. (David Calvert/The Nevada Independent)

Drakulich said he ran because he believed he had a better feel for the pulse of the ward than Brekhus, and he hoped to help make Reno the type of town in which his seven-year-old son would eventually want to raise a family.

The 38-year-old real estate agent who has deep ties to the town and graduated from Reno High School ran his first campaign on a platform geared toward addressing homelessness, an issue he says he cares about after serving for four years as a board member of the Eddy House, a center providing assistance to homeless people, runaway foster kids and other at-risk youth ages 12-24 in Northern Nevada.

Drakulich included his family in his campaign, emphasized the importance of community interactions and said that Brekhus’ antagonism hurt her relationships with other council members and by extension, Ward 1 voters.

“I believe she wasn't collaborative enough. And that's not only with her fellow elected officials, but other people in the community,” he said. “Business owners in West Midtown were very clear: They felt like they didn't have a relationship with her or that they were being heard. And that comes, once again, to the collaboration and teamwork attitude.”

Scenes of Ward 1's weekly motels. (David Calvert/The Nevada Independent)

Though Barber said she has heard criticism from some local business owners that Brekhus is “negative for the sake of being negative,” she does not believe that is a fair characterization of the councilwoman.

Brekhus, an urban planner by trade, often advocates for maintaining checks and balances. When she asks tough questions or votes against a project, she is usually pointing to issues that need to be addressed on behalf of citizens, Barber said.

In a small town like Reno, having a dissenting opinion can be seen as a negative, especially when it comes from a strong-willed female leader, but over-simplifying and streamlining council processes can sometimes remove much-needed public and expert review, Barber said.

“I mean, the thing about [Brekhus] is that you’re never unclear about her justifications for voting for something,” Barber said. “I think she pretty much always explains why she’s voting a certain way.”

Photos of Ward 1 around Swope Middle School in Reno. (David Calvert/The Nevada Independent)

Brekhus’ interest in city planning and municipal government stemmed from her father’s work as a mayor and council member of Ross, her hometown in Marin County, California. 

Brekhus, 53, remembers tagging along with her father to visit various properties and being surrounded by discussions about variances and city codes, which prompted her to pursue a professional degree in city planning.

After graduate school, she worked for three cities. Then, starting in 2011, after she had watched  a slew of city council meetings in Reno, where she moved in 1998, she realized she wanted to use her knowledge in a different capacity.

“One day, it just clicked: ‘well, I know more about cities than these people who are City Council members,’” Brekhus said.

She was first elected in 2012 with the goal of restoring the city’s fiscal well-being and developing a master plan to guide Reno’s growth and investment.

Brekhus acknowledged that in her time on the council she has been a fiscal conservative and says when she’s approaching issues, she’s always looking to the longevity of the city and the needs of her ward.

“I'm not always right, and I don't get satisfaction from [dissenting],” Brekhus said. “But there's very few of those votes that I would take back.”

Outreach to voters

In a campaign season shaped by a global pandemic, Brekhus and Drakulich had to resort to alternative campaign outreach strategies in a ward where residents are used to being courted with door knocks and in-depth conversations.

Drakulich and Brekhus said they worried that the reliance upon flyers and pamphlets meant voters did not have the opportunity to ask questions or share thoughts.

Drakulich, who hails from a high-profile Reno family, mounted a well-funded campaign during a time when City Council members were facing criticism for their handling of the coronavirus and of race-related tensions as well as a host of other issues.

But incumbency has a staying power that can be difficult to overcome, especially if residents are unfamiliar with the challenger — and in this case, most could not speak with Drakulich in-person because of his adherence to COVID-19 restrictions.

Image of a couple walking along the Truckee River in Ward 1. (David Calvert/The Nevada Independent)

Brekhus, who has historically relied upon door-knocking and face-to-face contact to share information about her platform and hear from voters, said she began dropping campaign literature at different houses, but it was a poor replacement for in-person conversations.

“You could cover about five times as much territory, as many doors, in one outing, but you talked to fewer people,” Brekhus said. “You weren't having as many contacts but you were covering more doors, but I think at the end it wasn't as effective.”

Drakulich echoed a similar sentiment. He began knocking on doors last November and noted that while he visited almost 2,000 homes before COVID-19 restrictions shut down opportunities for in-person contact, the lack of in-person connection hurt his campaign.

“[Communicating with voters], you earn the right to actually represent these people because you've heard them, you've asked them. It’s not about them seeing me on social media, but it's about them being face to face with me, telling them what's important and listening,” Drakulich said.

On Election Day, both candidates visited voting sites in Reno, waving signs and chatting with constituents.

Scenes from Election Day at Reno High School, within Ward 1 on Tuesday, Nov. 3, 2020. (David Calvert/The Nevada Independent)

As for campaign funding, Kazmierski said nearly every candidate will receive funding support from developers, although that doesn't mean the candidate will enact every developer's whim.

“I don't know any that have not taken money from developers. I mean, you have to have funding to do your campaigning. Developers are part of that,” he said.

Heading into the race, Brekhus knew Drakulich would be difficult to beat, Adam Czajkowski, Brekhus’ campaign manager and a political consultant in Reno, said. If Drakulich had run in a different ward against a different opponent, the outcome would likely have been in his favor, Czajkowski posited.

However, Brekhus’ campaign-funding strategy including her commitment to seeking a majority of small donors and providing constituent services helped give her an edge, Czajkowski said.

“On many, many issues there was not a lot of daylight between [Brekhus] and [Drakulich],” he said. “But I think at the end of the day, developers versus neighborhood activists is probably the biggest dichotomy.”

An amalgamation of neighborhoods and opinions

One of the key factors in the race was the changing demographics of Washoe County, and by extension, Ward 1.

In a presentation in November, Brian Bonnenfant, a researcher at UNR’s Center for Regional Studies, noted that the county’s population grew about 2 percent from 2018 to 2019 and is projected to grow 2 percent in 2020, with most incoming migration coming from other parts of Nevada, as well as from Asia and California. The majority of those who recently moved from outside Washoe County fell between the ages of 20 and 34 years old, he said.

Kazmierski and others noted that within Ward 1, the age breakdown (and therefore concerns of residents) tended to be geographically linked by neighborhood.

The older Southwest and Newlands community in Ward 1, featuring larger, older and more expensive homes, contains a sizable bloc of voters who want to maintain Reno the way it was and who generally lean toward the anti-growth part of the political spectrum, Kazmierski said.

Scenes from the Older Southwest part of Ward 1 in Reno. (David Calvert/The Nevada Independent)

In comparison, people living within the more newly developed portions of Midtown and some of the ward’s downtown areas are some of places where the technology-based workforce lives and are more excited about growth, he added.

Scenes from Midtown within Ward 1 in Reno. (David Calvert/The Nevada Independent)

Czajkowski said that even though City Council races are nonpartisan, many of the races fall along partisan lines — and the closer someone is to the Virginia Street corridor and I-80 in the western part of Ward 1, the more likely a voter will lean Democratic.

He added that the suburban and Caughlin Ranch area voters tend to lean more conservatively, but regardless of where they live, most voters in the ward do not tolerate “extremism” or “weirdness,” and are mainly focused on core services such as fire and police.

Scenes from Ward 1's Caughlin Ranch area in Reno. (David Calvert/The Nevada Independent)

From his communications with voters and door knocking, Drakulich said that West Midtown generally features younger, more progressive voters, and the Southwest, with lots of character and old Reno flair, hosts more traditional Reno residents.

Scenes from areas of West Reno within Ward 1. (David Calvert/The Nevada Independent)

In the newer parts of the Southwest, Drakulich said he met younger families wanting to be within certain school zones, many of whom were first-time homeowners with a sense of pride and ownership in the community.

New tech companies have not yet shaped the landscape of the city in the same way as the casino industry did, Barber said, emphasizing that understanding the historical fabric and demographic make-up of a ward or district is essential for candidates looking to understand the perspectives and needs of voters. 

A map showing local development from 1868-1928 and color coded by the year it was developed shows that some of Reno's most historic structures and neighborhoods are located in Ward 1, Barber said. The brown pentagon shape in the middle was the original 1868 plat map, and then it expanded outward, making preservation a key issue in the ward.
A map showing local development from 1868-1928 and color coded by development year shows that some of Reno's most historic structures and neighborhoods are located in Ward 1, Barber said. The brown pentagon shape in the middle was the original 1868 plat map, and then it expanded outward, making preservation a key issue in the ward. (Map courtesy of Alicia Barber)

In a question about historic preservation posed during a This is Reno Ward 1 candidate forum, Barber said that the two candidates’ responses may have shaped how voters cast a ballot — especially voters living within the ward’s more historic neighborhoods.

Whereas Brekhus discussed the complexities of balancing preservation with development and recognizing the role historic structures play in revealing community character and how they can be used to support independent business along with other factors, Drakulich pivoted the discussion to focus on the need for additional housing and streamlining the process for new developments, Barber said.

“I would imagine that [Brekhus’] support for historic preservation as one component of responsible city development likely rings true for many who live in her ward,” Barber said. 

A ‘political unicorn’

As Brekhus heads into her last term as a city councilwoman, she said she’s well aware of some of the characterizations of her and how she’s voted, but looking back, she would not change many of her dissenting votes.

“I don't take it personally. I don't mean it personally … I'm not doing, and I will not do, relationship and transactional politics. I just won't,” she said. “It has to be a very collective decision-making basis on what's in my heart, fiscally best for the city, equitably best for our population and best long term. “

Brekhus’ campaign manager characterized Brekhus as a “political unicorn” who doesn’t vote for a specific team or party. He said that Brekhus appealed to voters who cast a ballot for Devon Reese in the at-large race and those who chose his opponent, Eddie Lorton — two candidates with different political leanings and opposing views of how a city should be governed

There were Joe Biden supporters who voted for Drakulich and vice versa, and though many like to try to place Brekhus in a box, that’s just not possible, Czajkowski said. 

“[Brekhus] is going to disagree with even her most staunch supporters on at least two or three issues,” Czajkowski said.

He added that Brekhus’ planning background drives her fiscal conservatism but that she also supported Sen. Bernie Sanders in his presidential bid.

“There's no Democratic way or Republican way to fill a pothole,” Czajkowski said. “I think a lot of people want that clarity that says, ‘Hey look you're in my tribe,’ and [Brekhus] won’t give people that.”

Builders work on a roof in a home within Ward 1. (David Calvert/The Nevada Independent)

As for Drakulich, he said he’s still mulling the outcome of the race, but he’s committed to continuing to contribute to Reno through volunteer work with the youth homeless outreach program at Eddy House and hopefully joining some of the council’s citizen groups and advisory boards.

He said he’s still receiving calls from residents he connected with during the campaign process and wants to serve the ward in whatever capacity he can.

“I won't be sitting on the sidelines for the next four years,” Drakulich said. 

Nuevos trabajos llegan al Norte de Nevada durante la pandemia

Por: Lesly Virgen-Mariscal y Jayden Perez

Nota de la editora: Esta nota fue publicada por KUNR y Noticiero Móvil y su versión original ha sido adaptada como parte de la colaboración entre KUNR, Noticiero Móvil, y The Nevada Independent en Español.

Tres nuevas compañías pronto llegarán al Norte de Nevada y eventualmente contratarán a más de 300 empleados.

PlusPlus, YOGO, y Affinity Development Group (o ADG, por sus siglas en inglés) abrirán oficinas en el Norte de Nevada. PlusPlus es una plataforma de aprendizaje para colegas de empresas grandes, YOGO crea alfombras de yoga ecológicas y ADG ofrece programas de gestión de relaciones con clientes. De los tres, YOGO trasladará su sede corporativa a Sparks.

El presidente ejecutivo de EDAWN Mike Kazmierski anunció la llegada al Norte de Nevada de tres nuevas compañías junto con sus representantes y el personal de EDAWN en Reno, NV. el miércoles 10 de junio. Captura de Pantalla / EDAWN Vía Facebook Live.

Mike Kazmierski, presidente ejecutivo de la Autoridad de Desarrollo Económico del Oeste de Nevada, o EDAWN, hizo el anuncio.

"Los esfuerzos de diversificación de nuestra comunidad en los últimos diez años han realmente dado frutos durante esta crisis", dijo Kazmierski. "Nuestra tasa de desempleo es dramáticamente menor que en la parte sur del estado y definitivamente creemos, cuando consideramos la manufactura y la tecnología, que la mayoría de esas personas siguen trabajando. Muchas de esas compañías no existían en el norte hace cinco o diez años".

La tasa de desempleo de Nevada en abril fue del 28.2 por ciento, la más alta de toda la nación. Ese mismo mes, la tasa de desempleo en el área metropolitana de Las Vegas era del 33.5 por ciento. En cambio, durante el mismo periodo, la tasa de desempleo de Reno fue del 19.6 por ciento. Kazmierski dijo que la recuperación económica será lenta y el cuerpo laboral no será el mismo de antes.

"La buena noticia es que las cosas empiezan a mejorar y algunos vuelven a trabajar", dijo Kazmierski. "Pero la mayoría de los economistas te dirán que muchos de esos trabajos [perdidos] no volverán. Las cosas han cambiado, el mundo es diferente. Y con el cambio, lo que sucede ahora, es la importancia de traer nuevas y buenas compañías donde la gente pueda tener la oportunidad de solicitar, formar parte de y apoyar".

Kazmierski dijo que en los próximos meses EDAWN anunciará más de una docena de negocios que vendrán a Reno.

After vocal public pushback, Washoe County, city officials look to reconfigure proposed federal lands bill

Washoe County building sign

Handouts about the bill began circulating in October. 

At first the plan was to vote in January. Then it was March.

Now it could be April or May before Reno, Sparks and Washoe County vote on a request to Congress to open federal public land to development as officials go back to the drawing board. With local governments focusing on the coronavirus outbreak, it could take even longer.

After a contentious public comment session last month in which environmentalists, ranchers and elected officials spoke out against the bill, the county is considering ways to fine-tune a lands bill proposal, Washoe County Assistant Manager Dave Solaro said in an interview last week.

“We are going through that process right now,” Solaro said.

Not only does the proposal face opposition, there is also a time crunch with Rep. Mark Amodei looking to package an omnibus Northern Nevada lands bill.

At the center of the debate are even larger questions and anxieties about how the region, facing high housing costs and the increasing urgency to address climate change, should grow in the coming decades. 

The Reno-Sparks area, similar to Las Vegas, is largely encircled by federal public land — and its population is growing. Developers feel landlocked, and they want more land to build on. But in order to open federal land, they need a congressional bill designating it for a future transfer. 

Washoe County’s plan sought to do that. 

It contemplated opening about 90,000 acres of public land to potential private development. 

“If you are looking to develop land for housing, for example, we are rapidly running out of land,” said Scott Bensing, a lobbyist who represents the coalition of groups that are supporting the bill. 

Those groups, Bensing said last week, include the Economic Development Authority of Western Nevada the Builders Association of Northern Nevada, realtors and workforce housing interests. 

Under the bill modeled after the Southern Nevada Public Lands Management Act, 85 percent of funds generated by any sale of public land would go toward conservation in Nevada, another 10 percent would go to local governments and 5 percent would go toward state education funding.

But the plan’s critics question whether public land needs to be opened for development at all. 

They argue that the 90,000 acres, enough to create another city, would facilitate sprawl, strain infrastructure, counteract efforts to mitigate climate change and harm access to open space. 

Brian Beffort, who leads the Sierra Club’s Toiyabe Chapter, said the large request to expand the developable acreage by creating what is known as a “disposal boundary” was “unreasonable.”

“The county has failed to demonstrate how they will pursue this proposal while protecting our region's open space, wildlife habitat, access to outdoor recreation and quality-of-life,” Beffort said in an interview last week. “They've failed to answer questions about infrastructure and who is going to pay for it, about where we're going to get the water, about how many homes we actually need and how they will accommodate our need for affordable housing.” 

For Beffort, the legislation reveals structural questions about growth and the incentives that are driving local governments. He called for reforming a property tax structure that often leaves local governments scrambling for funds and needing to expand their tax bases for more revenue.

Beffort is not alone in his criticism of the proposal. Dozens of residents attended an open house at the Reno-Sparks Convention Center on Feb. 20 to express frustration with the bill — and the process. Their comments, along with electronic comments, have been posted on a website.

In addition to substance, some felt that the process lacked transparency. It echoed concerns about a similar effort to push the lands bill in 2018, an effort that was paused after the election.

“Create a transparent process and then we can talk,” Bob Fulkerson, the development director and the co-founder of the Progressive Leadership Alliance of Nevada, said in an interview.

He said the county had yet to put forth any concrete legislative language for the public to review. Fulkerson believes the process lacks transparency, in part, because he thinks it is unpopular.

But Solaro pointed to recent public meetings — and the comment website — as proof there was a transparent process. He added that the county “had to start somewhere” to put forward a “balanced proposal," working with groups that represented the larger population

“I thought we were there,” he said. “But it's obvious from the feedback we've gotten from the public that they don't agree this is a balanced proposal trying to meet the needs of all residents.”

At its core, the legislation looks to unlock federal land around Reno. But Washoe County is not confined to its urban core. Most of the county’s land, stretching to the Oregon border, is rural. It is managed by the federal government, mainly the Bureau of Land Management, for wilderness, mining claims, grazing, recreation and imperiled species, including the Greater sage grouse.

As a way to offset the effects of development, the legislative proposal says it would protect more areas in northern Washoe County with more conservation designations, including wilderness. 

The Washoe County proposal would re-designate thousands of acres of Wilderness Study Areas, currently managed as wilderness, with lower-grade conservation designations that allow ranching and mining. Environmental groups often favor protecting many of these areas as wilderness to prevent the fragmentation that comes with increased development or activity. 

Their proposal has both sides concerned. Conservation groups believe too much protected land would be open to development. Ranchers and miners feel too much land would be closed off. 

Shaaron Netherton, executive director of Friends of Nevada Wilderness, said last week that her group wants to ensure that the proposal does not open up protected landscapes with sensitive habitat. 

Although the status quo provides adequate protection, she said that conflicts wildlife managers and ranchers have with wilderness could be resolved by designating a National Conservation Area in certain places. Such a designation could provide for more management flexibility.

In general, she said people remain most wary about the bill because of concerns about growth. 

“The process hasn't really answered a lot of people's questions on that,” she said.

And growth is a concern for ranchers too.

At the public comment meeting last month, ranchers in Modoc County, which borders Washoe in Northern California, expressed frustration with the current proposal. Ned Coe, a Modoc County Supervisor, cast the conservation designations as restrictions on their ranching activities.

“This proposed lands bill pushed by Reno and Sparks is for the economic development of your immediate area. But it comes at the negative economic impact to the largest single private economic engine in the far northern Washoe County and Modoc County,” Coe said. 

From the view of developers, the debate about growth comes too late. The die is already cast. 

Mike Kazmierski, who leads the Economic Development Authority of Western Nevada, said last week that the bill was necessary because shortages in developable land had driven up housing prices. 

“The why now may be because our housing prices are going through the roof,” he said.

He and other backers of the proposal stressed that infill was important too, but that it was hard to make a project pencil out — or even break even. They argue that developers are looking to build on the edges, and they will, with or without the bill. The proposal to create a “disposal boundary” for future development, they say would direct growth in a more organized way.

“This is a playbook that worked extremely well in Southern Nevada,” Kazmierski said.

Still, critics of the legislation, including Reno City Councilwoman Jenny Brekhus, an urban planner by training, wonder whether the Southern Nevada model makes sense for Washoe County, where regional planners have identified parcels where new development could go. 

“I don’t think that a logical approach is being taken,” Brekhus said. “The concept of drawing lines on a map is 19th century-ish. When the pioneers head out West, they stand on a hill and point out to a valley and say ‘all this will be settled.’ We’re more complex than that.”

Although there are existing parcels that could be developed and infill typically places less strain on city services, Solaro said that the challenge is getting developers to build units there. 

“I can’t compel anyone to build there,” he said. 

As backers of the bill face pushback, everyone involved could face a time-crunch. 

Last week, Amodei introduced an omnibus Northern Nevada public lands bill to advance several county requests to open several federal parcels for development while creating conservation designations in other areas. The legislation could move with the National Defense Authorization Act, a must-pass bill for Congress that will likely contain the proposed expansion of Naval Air Station Fallon. Washoe County’s most recent proposal was not included in the legislation. 

Their revised proposal could be added later, Amodei’s staff wrote in a cover letter. Amodei has argued in the past that passing any legislation after July 4th in an election year could be hard.

But attaching it to the defense authorization bill is already drawing some opposition. 

On Monday, 13 groups including the Great Basin Water Network, the Center for Biological Diversity, the Progressive Leadership Alliance of Nevada, Basin and Range Watch, Great Basin Resource Watch and the Sunrise Movement, wrote a letter to Sen. Catherine Cortez Masto and Sen. Jacky Rosen saying the Washoe proposal should not be part of the defense authorization. 

The NAACP Reno-Sparks Branch, 350 Nevada, League of Women Voters of Nevada, Western Watersheds Project, Ecomadres and Moms Clean Air Force also signed onto the letter. 

“For the sake of future generations,” they wrote, “there’s no need to rush.”

City of Reno orders non-essential businesses to start closing

Reno City Hall sign

The plan was changed at the last minute. 

Going into a press conference Monday afternoon, Reno Mayor Hillary Schieve intended on requesting all non-essential businesses — mainly bars, restaurants and gyms — begin preparing to close on Tuesday in an effort to contain the spread of the novel coronavirus. 

But shortly before the press conference, Schieve received information from the Washoe County Health District that led her to believe that the district favored mitigation measures with more urgency. And Schieve said the closures would be mandatory, effective at 10 a.m. Tuesday, and they would apply to casinos. Businesses were caught off guard.

After the press conference, the city backed off, but only slightly. 

The city released a statement clarifying that the closures applied specifically to bars, nightclubs, gyms and restaurants, excluding takeout, delivery and drive-thru. Casinos can keep their gaming operations, but their bars and restaurants have to shut down. Businesses can continue operating this week, the city said in the statement, but should aim to close by Friday at 5 p.m.

They will have to stay closed until at least April 5th.

With the announcement, Reno became the first jurisdiction to announce the mandatory shutdown of businesses, placing more pressure on Las Vegas to do the same. It also placed added pressure on Reno’s neighbors, Washoe County and Sparks, to close businesses. 

“At this point, we have to make the decisions that are tough for the city of Reno,” she said.

In an interview Monday evening, Schieve defended her decision to close bars and restaurants, saying the cost of not doing so would be far greater by allowing the virus to spread. She said the action, which states across the country have taken, has loomed over discussions about how to contain the coronavirus and that “everyone has been talking about it in a roundabout way.”

“It has to be on everyone’s mind,” she said. “If you are an elected official, it has to be.”

Schieve said that it was one action the city was taking under its emergency declaration. 

“Everyone needs to do all they can right now,” Schieve told reporters on Monday. “We are under some strict timelines when it comes to this virus. That’s why we are taking the measures that we are. We are doing this to save lives. I think everyone needs to understand that first and foremost that we are doing this to save lives. If that’s not enough, I don’t know what is. I don’t.”

Essential businesses, including doctor’s offices, gas stations and grocery stores, will be allowed to remain open. College campuses can also remain open for regular business, but restaurants on campus most close or transition to drive-thru and pick-up orders only. 

During the press conference on Monday, Schieve said the Washoe County Health District had sent a text saying “we need to make [the closures] mandatory,” a direction the city of Reno was already going in. But on Monday evening, the health district clarified in a statement that it had not called for mandatory action, though it supported business closures and event cancellations.

Washoe County and the city of Sparks have not directed businesses to close.

Responding to a tweet Monday afternoon, the city of Sparks said that its “managers are in meetings and we are working closely with our regional partners to determine the best approach while following the recommendations by the @WashoeHealth and the CDC.”

Small businesses could be hit especially hard by business closures.

Ann Silver, CEO of the Reno-Sparks Chamber of Commerce, said she was torn when she heard the news because “the intent is very pure and sincere” but the fallout could be “astronomical.”

“It is tragic in terms of the impact on small businesses that are desperate to stay alive,” Silver said, noting that many small businesses cannot weather a closure if it extends for months.

Schieve said the decision was challenging, especially in a state like Nevada, where hospitality businesses often operate around-the-clock and employ a large percentage of the workforce.

“This is hard,” she said. “We’re not used to this. For a lot of us across the state, this is really challenging because we can go anywhere at any time of day, night and find just about anything you want here in Nevada. For us, to be restricted is even that much more challenging."

The leader of Northern Nevada’s top economic development agency wasn’t surprised by the decision, but he also didn’t sugarcoat the financial toll it will wreak.

“Most small businesses, especially in the retail space, are in for some rough days,” said Mike Kazmierski, chief executive officer of the Economic Development Authority of Western Nevada.

Even so, Kazmierski said the region has a “vibrant economy” and should be able to weather this significant, albeit unexpected, situation in the long term. He said a company considering a relocation to the Reno area is still planning a visit this week.

There are currently nine confirmed cases of coronavirus in Washoe County, where officials have noted the occurrence of community spread. The Southern Nevada Health District has confirmed 35 cases but has yet to make a recommendation about the closure of bars and restaurants. 

At a press conference Monday afternoon, Michael Johnson, a community health director for the health district, said an action could be likely but that it would be the governor’s decision to make.

Las Vegas city spokesman Jace Radke said late Monday that the city continues to monitor the situation but that Mayor Carolyn Goodman was “not considering a business shut down at this time.”

In an email she sent to the “city family” on Monday, she expressed confidence that “our great scientists and medical professionals are working diligently on solutions which shall in time, prevail.”

“As we assess the strange situation in which we are living at this time and with the day-to-day plans being dictated by others who are in positions of greater authority, please be assured that we in the City, too, are ever-vigilant in a time-sensitive manner, are being extremely cautious but are not being blinded by the fear and panic that is resulting,” she said. “Now, we must continue to rely on each other to remain calm, wise, and be diligent bearers of what Las Vegas has come to be. This is our City, our home, our future, and one-by-one, all together, we will overcome.”

Update: This story was updated on Monday, March 16 at 10:04 p.m. after the city and the Washoe County Health District sent out clarifying press releases.

Planned updates to state’s economic development blueprint sat unused for more than a year

In his first meeting as the director of the Governor’s Office of Economic Development, Michael Brown made a vow — the state would finally update, improve and publish a new version of Nevada’s old statewide economic development plan.

“The business plan for 2012 cannot be the strategic plan for 2020,” he said in December. “It must be updated before we can advance forward.”

Brown’s vision for the agency matched public comments made by Democratic Gov. Steve Sisolak, a skeptic of the incentive-heavy approach to economic development pioneered by his predecessor, Republican former Gov. Brian Sandoval, and who has promised major changes in the state’s approach to diversifying its economy.

But a key detail went unmentioned during that December 2019 meeting. 

In spite of the promises for a “new” path for an action plan, GOED leaders under Sandoval had in late 2018 already taken steps and commissioned two major studies (with a combined price greater than $200,000) to compare and assess its current structure and lay the groundwork for a new, statewide economic development plan.

But for more than a year, GOED did not publish or publicly announce the findings of those reports. Multiple individuals interviewed for the report, including a GOED board member, say they were never told about what happened with the report, or if it was ever released. One of the reports was only published on the agency’s website on Jan. 31 after The Nevada Independent inquired about the report and acquired it through a public records request.

Sandoval, who heaped praise on the initial 2012 statewide economic development plan, made diversifying Nevada’s then-moribund economy a core priority during his two terms as governor, as part of a strategy to avoid the kind of record-setting job losses and unemployment that afflicted the tourism- and construction-dependent state through the 2008 economic recession.

But GOED officials acknowledge even now that the 2012 report is outdated, partially because of new thinking on how states should use tax incentives and abatements to attract businesses and partially because the state’s economy has improved significantly over the last eight years.

Although billed as a general assessment, the reports do contain several pointed recommendations and suggested changes for continued growth. These included major changes to the existing group of tax abatements (deemed no longer strong enough to attract new businesses), revamping the higher education system and even changing property tax formulas. But the results were never shared with the 2019 Legislature or even widely throughout state government, with one GOED board member saying he had “no idea” why it was never published or shared.

Although the report was intended to give the state’s new governor a menu of options and possible changes heading into the 2019 legislative session, it remains unclear why the agency sat on the report for nearly a year. The long delay is likely to cost the state extra dollars — GOED officials say they’ll need to contract with SRI International and Brookings Mountain West again this month to update the now out-of-date report (but noted it won’t require a full re-do of SRI International’s 2018 report).

Brown, who was appointed director in late October after a lengthy and at-times contentious search process that included a months-long pause of tax incentive applications, said in an interview that the 2018 report by SRI International would be updated and included in a new effort to develop an updated statewide economic development plan.

But Brown and GOED Deputy Director Bob Potts declined to provide an exact rationale as to why work products from the six-figure contracts had never been published or publicly used by the agency, chalking the delay up to difficulties in transitioning between governors with very different outlooks on how states should approach economic development.

“The 2012 plan was all about getting people back to work,” Potts said. “Now it's about quality. And that plan was supposed to be updated, and that didn't happen. Everybody was so busy doing their job, they just didn't get it done.”

Commissioning the reports

Prior to Sisolak’s victory in the 2018 election, GOED entered into a $106,000 contract with prominent think tank SRI International to conduct a comprehensive analysis of the state’s recovery from the 2008 recession. The same organization had been tapped by the state in 2011 to do an initial analysis prior to publication of a statewide economic development plan.

The final 233-page report was finished in December 2018 and included interviews with more than 140 top government, education and business officials. It constituted a thorough assessment of the state’s economic strengths and weaknesses along with dozens of “strategic possibilities” of what future state leaders could prioritize.

Approval for the report came during an August 2018 meeting of the state’s Board of Examiners — composed of the governor, attorney general and secretary of state and charged with approving major state contracts — and gives a preview of what GOED officials hoped to accomplish heading into future years.

In documents submitted to the board, GOED officials wrote that they hoped the study would be used as the baseline for a new five-year state plan for economic development that would ideally be in place prior to the start of the 2019 legislative session.

The agency opted not to put the contract out to bid and instead retain SRI International, stating that it was more “fiscally responsible” to remain with the organization because it had completed similar work for the state as part of the initial process to create the 2012 economic development statewide plan.

“Contracting with the same vendor will help with the long-term view and will be more efficient as the new study becomes a 2.0 version of the original plan vs. starting from scratch,” GOED officials wrote. “The agency anticipates receiving another quality study that will be used to move Nevada forward in diversifying and strengthening the state’s economy.”

The contract was approved without comment by the board.

Additionally, GOED commissioned a separate, internal report with the national analytics firm of Newmark Knight Frank to compare the state’s slew of incentive programs to states such as Texas and California. That contract — which cost a hair under $100,000 and was paid for through grants to regional economic development agencies — found Nevada to be treading water in the incentive battle with neighboring states, and made another set of recommendations to make the state more attractive to relocating businesses.

Brown and GOED Deputy Director Bob Potts said in an interview that the 2018 SRI plan was the first phase of an update to the state’s overall economic development strategy, calling it a “foundational” assessment of the state’s economy and recovery since Sandoval took office in 2010. 

“(The) past administration was dealing with a crisis and they had to move forward,” Brown said. “This administration is in a time of transformation and we have the opportunity to be very deliberative about this and study it closely, and that's what I'm going to do.”

The SRI Report

SRI International’s report gave the state relatively high marks on its economic recovery between 2010 and 2017.

It states that Nevada’s Gross Domestic Product growth was 20th among all states and Washington, D.C. over that seven-year span, and marked the seventh best recovery since the 2008 recession. Part of that was because of economic development changes undertaken by Sandoval, it said.

“The economic development initiatives that Nevada has undertaken since the recession have helped accelerate a complete recovery from what was a critical moment in the state’s history, as evidenced by its increasing economic diversification,” the report stated.

But SRI’s report also stated that Nevada “still has room for growth” on economic development metrics, citing the state’s relatively high unemployment rate among neighboring states and a declining labor participation rate — possibly because of a growing older population but also possibly because of a “pool of discouraged workers, even after seven years of recovery.”

The report takes deep and detailed looks into nearly every aspect of the state’s economy — factors affecting urban and rural portions of the state, a detailed look at which industries in the state have grown or shrunk, a detailed “asset” list assessing the state’s economic strengths and weaknesses, plus proposed “strategic directions” that policy makers should adopt.

Chief among those “strategic directions” is the recommendation to significantly overhaul the Nevada System of Higher Education. It states that while the system has made “measurable” improvements over the past decade, “by almost any measure the system as a whole falls far short of the level of performance required to ensure that the state of Nevada continues its transformation to an innovation-based economy.”

“Nevada’s workforce and the performance of its educational institutions is the single greatest challenge to the future of the state,” the report states.

Potential reforms listed include changing the higher education system’s governing structure from its current, independently elected board to one under the direction of the governor and Legislature, and delegating the government of all NSHE colleges and universities to a board of trustees. Another proposed reform is altering the current community college funding formula and finding new leadership “committed to radical innovation in higher education.”

“State leaders should begin the public debate on the need for change immediately, and they should begin recruitment of change agents for the system immediately,” it states.

Though the report was never publicly distributed, the proposed change to NSHE’s governance is already in the works — a measure on the 2020 ballot will give voters the chance to remove the Board of Regents from the state Constitution and place them under the direction of the state Legislature. 

Changing tax incentives

The report also briefly touches on issues with the state’s tax incentive and abatement programs, stating that many of the stakeholders interviewed by the think tank believed that the programs “no longer serve the needs of many of the state’s development goals.”

While crediting state government leaders availability and access (notably the massive 2014 Tesla tax incentive deal approved during a special session of the Legislature), the report found that the current abatement programs “are not strong enough to attract firms to Nevada,” and instead are typically awarded to businesses that have already decided to move to the state and “simply ‘sweeten the deal.’”

Additional criticisms were levied at export requirements on many of the abatement programs, saying that they are “detrimental” to service or tech related firms that do not export a physical product. Similar requirements hurt startups and entrepreneurs from taking advantage of abatement packages. 

The report also credits the state’s tax structure as being favorable to business development, but suggests adding sales tax abatements for manufacturing equipment purchases — something more than 40 other states have done.

It also, notably, called for changing the state’s property tax structure, echoing the complaints of many municipalities and school districts in the state that say the tax cap system substantially limits a key revenue source for municipal and education services. 

“This arrangement, while it helps to maintain affordability in the state’s housing market, also prevents municipalities from being able to adequately increase funding for services such as education,” it stated. “Several stakeholders emphasized that they would be willing to pay more in real property taxes if the funding was allocated to better public education in the state.”

Between 2010 and 2018, GOED reported offering tax abatements or incentives to at least 270 companies (out of a total of 624 total companies assisted), and has provisions allowing it to claw back or reclaim abated taxes if businesses do not meet wage or growth requirements. 

But GOED’s use of metrics such as median wages to determine who gets abatements has been questioned by Sisolak and others. A 2019 Nevada Independent analysis found the state gave abatements worth millions of dollars to businesses with a significant amount of their workforce on Medicaid, for example.

Keeping up with California

That wasn’t the only report to delve into how Nevada’s system of tax incentives and abatements works. Prominent national firm Newmark Knight Frank was commissioned by GOED to produce a report in December 2018 called “Project Sagebrush” so the agency could compare how it stacked up against agency tax incentives in four neighboring states — Texas, California, Arizona and Utah.

The 69-page report essentially created two sample companies — one an “office/shared services” and another advanced manufacturing entity — to conduct a competitive benchmark between the economic landscape offered by Nevada and competing states, including real estate, labor costs, utilities, taxes, and incentive and abatement programs.

The assessment largely found Nevada’s package of incentive and abatement programs to be “competing reasonably well” with other metropolitan areas, and the economic abatements and sweeteners currently offered by Nevada were not enough to rise out of the middle of the pack.

The report stated that the mere fact of lower business costs or generous incentives was not enough to break ratings ties with other metropolitan areas competing for the same types of relocating businesses, and that the functional tiebreaker would likely go “to jurisdictions that may be qualitatively evaluated as larger or better business locations with labor markets and business conditions more favorable to growing companies.”

“Newmark’s recommendation is for Nevada to vie for project investment on the strength of its low business costs plus even more competitive incentive offerings, while simultaneously investing in a steadily improving set of qualitative business conditions,” the report stated.

Notably, the report found that Nevada’s lack of a state-level corporate income tax did not “make a significant change in the end result of this competitiveness study.” It also criticized the state’s “Catalyst Fund,” a discretionary grant program offering transferable tax credits to new or expanding businesses as “cumbersome.” 

Lawmakers during the 2019 legislative session made no major changes to the program, which has not received state dollars since the 2016 fiscal year. GOED officials told lawmakers that they expect the roughly $3.5 million in tax credits left in the program to last until the 2021-23 budget cycle. 

Unlike the SRI International report, Potts said, the agency funded the report as an “internal study for our own internal consumption.”

Transitions struggles

While the Newmark Knight Frank study was for the agency’s internal use, it’s unclear why the SRI report never saw the light of day after it was finished in December 2018.

Hints at the report’s progress exist. It was mentioned during a presentation to GOED officials during a meeting of the state’s Economic Forum in October 2018, and brought up in former GOED Director Paul Anderson’s monthly report in September 2018. It was also mentioned briefly by Anderson during a February 2019 legislative committee.

But Anderson — a former Republican Assembly caucus leader who was appointed to lead GOED in January 2018 — resigned from Sisolak’s administration in March 2019, with the governor appointing GOED official Kristopher Sanchez as interim director several weeks later.

The search for a permanent director took longer than anticipated. Tensions rose between a search committee and gubernatorial staff, who clashed over whether or not to engage in a full nationwide search for a new director, and a general philosophical question over where the agency was headed.

Ultimately, the search committee turned to Brown — a former mining executive turned director of the state’s Department of Business and Industry — as its recommendation to lead the agency over Sanchez, who also applied to be the full-time director. Sisolak formally appointed Brown to lead the agency on Oct. 31, nearly 10 months after taking office.

“It was provided in the transition and it was eventually going to find its way to the new GOED director, which turned out to be me,” Brown said of the report. “But that turned out to be in November. I don't know why, I don't know what the thinking was in the last administration on that.”

In the 12 months since the report was finished, several of those interviewed for the project said they never were given any follow-up or rationale as to why the report was never released.

Republican Assemblywoman Jill Tolles, who was interviewed for the report in October 2018, said she never received any follow-up information and was unaware the report had been published until contacted by a Nevada Independent reporter.

GOED board member Dan Klaich, a former Nevada System of Higher Education chancellor, said he was interviewed by SRI researchers but said he was never given a rationale as to why the report was never publicly released.

“I had no idea why seemingly nothing has come of it,” he said, adding that he only received a copy of the report after asking for it during GOED’s elongated director search.

Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada, declined to comment on the delay in the report being produced beyond saying it was likely the “normal friction that occurs with an administration change.”

What happens next

Brown, who compared the experience of becoming GOED director to “getting a PhD in six months,” said he was adamant that the agency would use the existing SRI report as a baseline to conduct work on a new statewide plan.

“I did not want to start from ground zero, you know, and one of the board members had said to me ‘We don't want to throw the baby out with the bath water on this,’” he said. “I wanted the people who were the smart people who were involved back in 2012 to also be involved in essentially the second phase of this.”

The agency plans to bring forward a contract before the February Board of Examiners meeting for development of a new statewide plan in cooperation with Brookings Mountain West, which would subcontract with SRI International. Brookings Mountain West helped develop the initial 2012 statewide economic development plan, and Potts said the cost would be in the same ballpark as the 2018 contract with SRI International.

If approved, Brown said he would plan to have a draft before GOED’s board sometime in June, and said there would likely be some form of public participation in putting the report together.

He said he had spent the initial months of his term as GOED director meeting with various think tanks and economic development experts across the country, and quoted from a Cleveland Federal Reserve Bank study on the intersection of workforce development and economic development as the kind of policy he hoped for the agency to adopt moving forward.

“We need to do a better job of matching our workforce with the jobs and seeing what we can do within state government to help train the train up the workforce that we need for the available jobs that are there,” he said. “And so there's a lot of original thinking going on right now in this policy sphere.”

A New Economic Agenda for Nevada - Final Report by Riley Snyder on Scribd

A New Economic Agenda for Nevada - Final Report by Riley Snyder on Scribd

Water district linked to developer will consider reforms after eminent domain action revealed web of conflicts

Industrial Center GID Board President

After blurring the line between a private and public utility for nearly two decades, the water district that serves the world’s largest industrial park is looking to part ways with a developer.

That action comes after The Nevada Independent reported this month that the public water district, with the governmental power to seize private property, is operated by a private entity and governed by three board members who report income from companies connected to Lance Gilman, the face of the industrial park. The board members also reside at Gilman’s brothel, the Mustang Ranch.

The board’s structure and a recent vote to use eminent domain has raised concerns about the concentration of power at a public water district that has been operated by a private developer. 

At a meeting Thursday, the board plans to consider basic administrative rules for the water district, procurement protocols that comply with state law and conflict of interest disclosures. 

The public water district, a quasi-municipal entity, was formed to provide utilities to the Tahoe Reno Industrial Center. High-profile companies — Tesla, Amazon and Walmart — have set up footholds in what is advertised as the world’s largest industrial park, about 30 miles from Reno. 

Starting in 2001, Storey County allowed a developer’s private water company to operate the public water district, exempt from utility regulation and with many powers of a local government. A new document reviewed by The Nevada Independent shows the district’s elected governing board delegated many of its non-statutory responsibilities to the developer-controlled company.

“Most people were unaware of some of the details of potential conflicts of interest,” said Mike Kazmierski, the president and CEO of the Economic Development Agency of Western Nevada.

Through a spokesman, the Public Utilities Commission, which regulates private water utilities, declined to comment. Although Storey County formed the water district, it is a political subdivision of the state. A spokesman for Gov. Steve Sisolak said that his “office defers to the appropriate jurisdictional agencies for any review of these entities and their interrelationships.”

The sooner, the better

For years, the board operated under the radar. Now the conflicted water district has been thrust into the spotlight as it leads a regional project to construct a multimillion-dollar effluent pipeline. When completed, the 16-mile pipeline will connect the region’s wastewater facility with the park. The project could be a win-win for regional development, bringing recycled water to the thirsty industrial park while helping the cities of Reno and Sparks defer millions of dollars in upgrades for the sewer facility. 

To construct it, the water district wants to use eminent domain, a power that lets public entities seize private property for projects that benefit the public. Given the water district’s connection to the private developer, a property owner challenged the board’s use of the special public power

The water district failed to properly notice the affected property owner and asked a judge to dismiss the case. It could potentially reconsider its eminent domain request at a future meeting.

A new general manager for the water district is working to create more independence between the public entity and the industrial park’s private developer.

But present and past conflicts, some of which the board president denied last week, could continue to haunt the water district. It also calls into question whether it has negotiated in good faith and complied with state ethics rules. 

While pursuing the pipeline over the past several years, the water district has negotiated with state officials, city officials, regional water planners and companies at the park. Tesla and Switch, a data storage company pushing the pipeline, did not reply to requests for comment. 

A spokeswoman for Blockchains, the cryptocurrency company that now owns most of the land at the park, said company officials were “currently trying to familiarize ourselves with the facts.”

Kazmierski said he understood why the board was structured the way it was. Under state law, water districts — formed as General Improvement Districts (GIDs) — must have a governing board comprising elected local residents or the County Commission. The residents eligible to serve the industrial park’s water district almost exclusively live at Gilman’s brothel. In recent months, the Storey County Commission has considered assuming oversight of the board. 

“The sooner they get through the transition the better,” Kazmierski said.

The current structure, he said, “just doesn't smell right as they get into their larger role.”

Private and public

The water district is operated by the developer’s private water company, TRI Water and Sewer Company. That company began servicing the industrial park as a private utility. In 2001, Storey County allowed the company to keep servicing the park by taking over an existing water district. 

Even after the private company went public, the developer remained in the driver’s seat. 

Documents and interviews reveal that the 2001 deal allowed the developer to avoid regulation from the state’s utilities commission, while retaining most of its authority as a private company.

For instance, one clause in a 2001 Operating Agreement appears to hand over certain rights of the governing board, intended to comprise elected residents, to the private water company. 

According to the agreement, “any right or obligation not required by law to be performed by the [board] as a nondelegatable function is hereby delegated to the [private water company].”

Examples of authorities that the board has delegated to the company include the supervision of contractors and the handling of many of its finances, including expenditures and revenues. 

The district’s Operating Agreement also includes a section exempting the company from laws around purchasing, public works and prevailing wages, “to the furthest extent allowed by law.”

“There are a lot of portions to that document that are not legal,” argued Paul McKenzie, a former Reno councilman who works for a builders union. “They can’t sign public responsibilities away.”

Despite the inclusion of that provision, Bob Sader, an attorney for the developer and a former assemblyman, explained that the private water company was not involved in constructing the infrastructure. The master developer paid millions to construct the water infrastructure and dedicated it to the water district at no cost. Such projects are often exempt from public works requirements and that type of dedication practice is common in development projects.

As part of the agreement, the developer helped subsidize the water district. In an email last week, Gilman noted that the developer operated the district “at a loss for over a decade.”

But McKenzie remains concerned about whether the board provided adequate oversight.  

“[The board members] have a fiduciary responsibility to those people,” McKenzie said, referring to customers. “That’s why they have to approve the budget and not the operating company.”

Kris Thompson, the board president, pushed back in a recent interview. Thompson said that the board was independent and has always acted in the best interest of the industrial park. 

He said forming the water district was one of the reasons the park was successful, noting that Storey County did not have the financial wherewithal to build an extensive water system in the late-’90s. When asked why the developer did not operate a private company, he said that would have subjected it to state utility commission regulation and delayed the industrial park’s growth. 

“If it’s a private company, it’s governed by the [Public Utilities Commission of Nevada], which is so expensive and so onerous in terms of legal requirements and regulatory requirements that no one could have set that up in a financially doable manner,” Thompson said on Wednesday.

The district, Thompson noted, is regulated by the Department of Taxation and the Nevada Division of Environmental Protection. The firms it contracts with are some of the best, he said.

Disclosure statements

There are numerous cases in which public boards, such as medical licensing agencies, present inherent conflicts for those that serve on them. But Yvonne Nevarez-Goodson, the executive director of the state’s Commission on Ethics, said that does not absolve board members from disclosing conflicts or abstaining from votes when they affect the direct interests of their employer.

It is not necessarily a conflict for a dentist to serve on a dental board. But if dentists are voting on issues that involve their business or the business of someone with whom they have a significant relationship — a household member or an employer — it could merit a disclosure or abstention.

“Just because it's a developer-governed board doesn't mean there isn't the potential to have this crossover of interests that could trigger conflicts,” Nevarez-Goodson said in a phone interview.

Meeting minutes reviewed by The Nevada Independent last month did not show instances in which board members abstained from votes or disclosed their relationships with the developer. 

That is starting to change. 

Last week, two board members read disclosure statements before voting on a utility rate study.

A third board member and a contractor at Gilman’s brothel, verbally agreed with the disclosure because her statement was stored on her phone, which she was using to call into the meeting. 

Despite the planned reforms for the district, Thompson, the board president, offered a pointed defense of the water district board before he read his prepared disclosure statement last week.

He said that there have been “gratuitous comments flying around” about the board’s apparent conflicts of interests. Thompson lives at Gilman’s brothel, works as an independent contractor for the industrial park, as an independent contractor for Lance Gilman Commercial Real Estate Services — the park’s exclusive broker — and as the risk manager for Gilman’s family trust. 

“I met personally with one of the top ethics attorneys in Nevada,” Thompson said at the board’s Nov. 4 public meeting. “And we went through the statutes word-by-word, line-by-line. I am absolutely 100 percent convinced that there is no violation of any conflict-of-interest statute by any of the board members to vote on the matter at the last meeting or to vote on these matters. And so anybody that says or insinuates that there is a conflict of interest obviously has not read those statutes.” 

At the last meeting Thompson references, the board approved an eminent domain action for the pipeline. His employer, the industrial park developer, has signed numerous contracts discussing the project. Thompson has signed several contracts involving the pipeline on behalf of the district. 

Nevada’s ethics law requires public officers to avoid conflicts when a public duty is affected by a personal interest. A conflict could consist of a financial interest or a close personal relationship. Public officials are required to inform the public of the nature and extent of those conflicts. 

A second test is used to decide whether a reasonable person would view the conflict as material so as to disqualify a public official from voting on a matter. The Ethics Commission responds to complaints filed by the public or initiates its own investigations, pending sufficient evidence.

Gilman is closely connected to the industrial park’s development. In a separate lawsuit, his attorneys have stated that he is a principal in and Director of Marketing for the Tahoe Reno Industrial Center. His lawyers have stated that his company, Lance Gilman Commercial Real Estate Services, where two water district board members report working, is the park’s broker.

Gilman said the district’s structure and the board’s composition was the only option, given the circumstances when the park was first being developed, and statutory requirements for the board. 

"We followed the state rules and regulations to the letter,” he said in an interview Wednesday. “We didn't cut corners. We did exactly what we had to do. We maintained compliance. It might not have been the ultimate best circumstances. But it was the only circumstances [that were] available to pull off what is one of the best industrial parks in the United States."

On Nov. 4, all three board members voted to approve a utility rate study for the park. They said that the items on the agenda did not directly affect the pecuniary interest of their employers.

At the meeting, Thompson said “there’s been a lot of sensationalism” about “brothel people” serving on the water district board. But he said it was a reality of the statute that board members had to live within the district. Without them, he said the water district “would’ve gone into chaos.”

“For them to join the board as they did to keep us legal, to keep this governing board sufficient and to help the park grow” was a “brave act on their part,” Thompson stated during the meeting, “because they probably knew that they were going to get some insinuations at some point.” 

Thompson did not elaborate on how they came to join the board. “Had Lucy and Jennifer not stepped up to the plate and joined our board, this [district] would've gone into chaos,” he said.

Administrative changes

The rate study is one step in helping the water district cut ties with the developer. With higher rates, it expects to hire an independent administrative assistant and an operations manager.

It could also get a new board. 

At the request of the water district, Storey County is considering a takeover of the board. The county is conducting due diligence, and the commission has yet to vote on the issue. Gilman is one of three members on the Storey County Commission, presenting another potential conflict.

Until recently, the water district had no staff. It was operated by the developer and contracted out its services. After nearly two decades, the district hired its first general manager, Shari Whalen, in July. 

Whalen, a former Fernley City councilwoman and a professional engineer, is now responsible for the difficult task of negotiating with the developer over its exit and building up the district.

At Thursday's meeting, she is asking the board to establish administrative policies and procurement procedures. An agenda says the board members will also consider “conflict of interest scripts.”

The procurement policy will ensure that the water district follows laws governing public works projects and purchasing. Whalen said she wants to ensure it is operating in a transparent way. She could not speak to how the water district had bid contracts or procured services in the past. 

Finally, the board will consider the approval of a contract with the UNR Center for Economic Development “for assessment and technical assistance” with the water district’s transition.

The district has hired its own attorney with experience in Nevada water law. The water district is the owner of most of the industrial park’s water rights, but the developer, which dedicated many of those water rights, has largely controlled how the interest in those water rights are allocated.

“What I'm trying to do is create some level of confidence in sustainability and the operations of the [water district,]” Whalen said. “There is a transition plan that is being implemented.”

New tax incentives, abatements halted until state economic development agency appoints new leader

Gov. Steve Sisolak’s administration has approved a temporary halt to all new or pending applications for tax incentives offered to businesses through the Governor’s Office of Economic Development until the agency hires a new executive director.

Sisolak spokesman Ryan McInerney confirmed to The Nevada Independent on Monday that the agency will hold off on approving any additional tax incentives until the agency finds a new, full-time executive director. Sisolak appointed Kris Sanchez as interim director of the agency, often referred to as GOED, in March.

The Governor and Board are hopeful to soon be getting recommendations from the Executive Director Search Subcommittee so a permanent GOED Director can be appointed,” McInerney said in an email. “Applications are expected to resume at the next quarterly meeting following the appointment of a permanent director. The Governor remains committed to furthering GOED’s mission of promoting a robust, diversified, and prosperous economy for all Nevadans”

The pause is the first significant halt in Nevada’s strategy of offering tax benefits for new or expanding companies since GOED was formed in 2011 by former Gov. Brian Sandoval as a way to kickstart economic development efforts amid the recession. The agency offers a variety of incentives including abatements on sales and use taxes, property taxes and payroll taxes to businesses that meet certain capital investment, jobs created or minimum hourly wage targets. It has assisted more than 620 companies since 2010, and granted more than $395 million in tax abatements and “Catalyst Fund” grants over the last four fiscal years.

For years, the GOED board — chaired by the governor and made up of other elected officials and business leaders — served an essentially perfunctory role, meeting every two months to approve any incentive applications that had cleared GOED review and was eligible for incentives. Former agency executive director Steve Hill said in a 2017 interview that GOED treated the tax incentives as a “right” for any business that qualified for them.

But the agency’s agenda for Thursday’s meeting shows no pending incentive applications listed; just normal agenda items such as public comment as well as “Governor Sisolak comments.” The agency also canceled and re-scheduled a meeting of its search subcommittee for Friday, where its agenda lists “Committee Recommendation of Executive Director Candidate(s) to GOED Board” as a possible action item, though no applications or information on potential candidates are publicly posted on the agency’s website.

In an email, GOED spokesman Keith Paul said the suggestion to pause vetted applications was made by interim executive director Kris Sanchez, and that the agency was still working with companies on applications that it projected would be approved at the agency's December meeting and after a new executive director is chosen.

According to the Reno Gazette-Journal, board members on the search committee last month chafed against the governor’s office on the use the agency’s funds to conduct a search for a new executive director. Sisolak’s chief of staff, Michelle White, told the search committee at the time that spending an estimated $100,000 for a search was “off the table for now.”

At the full board’s last meeting in June, it approved tax abatement and incentive applications for ten companies, but Sisolak said he would “re-evaluate” how the state uses incentives going forward.

At least one local economic development official said the decision could pose problems for business growth.

Mike Kazmierski, CEO and President of the Economic Development Authority of Western Nevada, said he was first made aware of the change in policy after being asked by a Nevada Independent reporter, and said the agency had two to three pending applications that would be disadvantaged by the halt in incentives.

“We are affected,” he said. “There are businesses that are waiting on the state to acknowledge the incentives. We’re going to have to go back to them and tell them we have no idea what or when we can give them an idea when it comes to incentives.”

In a statement sent Wednesday, Las Vegas Global Economic Alliance President and CEO Jonas Peterson said the agency had four companies that have submitted tax abatements applications affected by the temporary halt and was "looking forward to processing their applications as soon as possible.”

“In today’s competitive environment, performance-based incentives are still an essential tool for growing our local firms and attracting new, high-value companies," he said in an email.

In spite of his prominent support for a hotel tax increase to raise $750 million for construction of the Las Vegas Raiders stadium, Sisolak has taken a more cautious approach to incentives and abatements on both the campaign trail and after being elected governor. He said during a primary election debate that he wanted the state to use a “cost-benefit” ratio to better filter incentives, and told the Reno Gazette-Journal in December 2017 that he wanted the state to “move away” from large-scale abatements such as the $1.4 billion tax deal offered to Tesla in 2014.

Sisolak also vetoed a bill in the 2019 legislative session that would have created a legislative committee studying tax incentives; saying in a veto message that its intent was “noble” but that creating a committee studying the state’s use of incentives and abatements would be “redundant” to audits and other public reporting already required of GOED and the Department of Taxation.

Updated at 11:09 a.m. to include a statement from the Las Vegas Global Economic Alliance.

Reno casino operators: Market ‘transformed’ and ‘more stable’ as new competition springs up in Northern California

Potential competition coming from more than $1 billion of Indian casino development in Northern California isn’t causing Reno gaming operator David Farahi to lose any sleep.

If he ran a casino in Sacramento, however, Farahi says he would have concerns.

“California is already saturated,” said Farahi, chief operating officer of Monarch Resorts, which owns Reno’s Atlantis Casino Resort. He said the three new casinos, operated by Hard Rock, Boyd Gaming Corp., and Caesars Entertainment, and expected to open by 2020, will steal business away from Indian gaming properties in Sacramento and the Bay Area, rather than from Reno.

“The short answer is, no,” Farahi said. “Reno has a more diversified economy than before and we’re much more stable than the last time.”

The Atlantis in Reno, Nevada. (David Calvert/The Nevada Independent)

Farahi was referring to the mid-2000s.

The 2003 opening of the United Auburn tribe’s Thunder Valley resort near Sacramento, coupled with expansions at two nearby Northern California Indian gaming properties, decimated Reno’s gaming market.

Washoe County’s gambling revenues – Reno accounts for 75 percent of the market – hit an apex of $1.14 billion in 2000. A slow downward spiral began that year and was enhanced by the recession toward the end of the decade. When the bottom hit in 2012, Northern Nevada casinos had lost almost $400 million in annual gross gaming figures.

Now, in the eyes of the region’s business community, economic development leaders and gaming analysts, Reno’s casino business is in far better condition to weather competition from California.

“In my view, the new properties in California will have no impact whatsoever on Reno,” said Jefferies gaming analyst David Katz.

An economic upswing in Northern Nevada, thanks to an influx of large and small technology-based companies, has transformed Reno’s gaming industry from a tourism-dependent market into a traditional regional gaming destination driven by a local customer.

Mike Kazmierski, CEO of the Economic Development Authority of Western Nevada, said the move into the Reno area by some 200 companies has made the region less dependent on gaming.

“Reno has much different economy than in years past,” Kazmierski said. “The model is less susceptible to activity outside the market. Where this has helped the casinos, to some degree, is the growth in midweek business activity.”

Gaming revenues produced by Reno casinos have bounced back. The market has grown each of the last six years, including 2017’s 8.7 percent increase. Reno revenues were $636.9 million in 2018, an increase of 4.1 percent. Washoe County experienced 16 straight months of increases before the numbers declined in September.

“The growth trajectory the market has been on isn’t going to last forever,” said Michael Lawton, the Nevada Gaming Control Board’s senior research analyst. “Everybody believes a 3 percent yearly growth rate is realistic moving forward. The market is doing quite well.”

But it’s more than just slots and table games. Reno’s casino industry doesn’t resemble the 1990s and 2000s.

Older properties – such as Grand Sierra (formerly Bally’s Reno and Reno Hilton) and the Nugget in Sparks (formerly John Ascuaga’s Nugget) – were acquired by new operators who invested millions of dollars in upgrades, new restaurants, spas, entertainment and other non-gaming amenities.

The Nugget is building a $6.2 million, 9,000-seat outdoor amphitheater in downtown Sparks across from the casino that is expected to open this summer.

Home-grown Eldorado Resorts – which has expanded into the third largest regional casino operator in the nation with 26 properties in 12 states – hasn’t ignored Reno. The company’s three inter-connected downtown Reno properties across six city blocks – Eldorado, Silver Legacy and Circus Circus – have been dubbed as “The Row,” offering guests dozens of new non-gaming amenities.

The control board’s Fiscal 2017 Gaming Abstract showed that 51 percent of all revenues produced by casinos in Reno came from gaming activities. Ten years earlier, 54.3 percent of the revenues came from gaming.

Lawton said the market is slowly evolving, but it’s still not Las Vegas, where gaming revenues account for less than 35 percent of the total market.

The Eldorado in Reno, Nevada. (David Calvert/The Nevada Independent)

California competition

California is the nation’s largest Indian casino market, accounting for more than 26 percent of the nation’s tribal gaming revenues. According to economist Alan Meister, the state’s Indian casinos produced $8.4 billion in 2016, roughly $2 billion more than the Las Vegas Strip.

The current expansion is the largest in a decade and surrounds the state’s capital city.

Hard Rock, which is owned by the Seminole Tribe of Florida, is partnering with the Enterprise Rancheria of Maidu Indians on a $440 million resort in Yuba City, 30 miles north of Sacramento.

Caesars and the Buena Vista Band of Me-Wuk Indians are developing a $168 million casino 30 miles east of the city.

Boyd Gaming and Wilton Rancheria of Miwok Indians are building a $500 million complex in the Sacramento suburb of Elk Grove.

“Our location is ideally positioned to serve both the Sacramento and San Francisco Bay markets, making this project a significant opportunity for the tribe as well as our company,” Boyd CEO Keith Smith said on a quarterly earnings conference call in October.

All three properties are within a three-hour drive of Reno.

However, Macquarie Securities gaming analyst Chad Beynon doesn’t believe new casinos “over the hill and west on Interstate 80” will have the same impact on Reno the market experienced a decade earlier.

“Reno casino operators like to point out that you have to drive past all those casinos in Sacramento to get to Reno,” Beynon said. “That means a customer really wants to go to Reno.”

Farahi cited the 2013 opening of the Graton Resort near Santa Rosa, roughly 45 minutes north of San Francisco, as an example of Reno now being immune to California competition.

“We saw little if any effect from Graton on our business,” he said. “I think [Northern California Indian casinos] Graton, Thunder Valley, Red Hawk and Cache Creek will see the most impact from the new casinos.”

The number of visitors to Reno from California has diminished in recent years. The last visitor profile from the Reno Sparks Convention and Visitors Authority, dated 2015, showed California provided 32 percent of Reno’s visitors. In 2011, the figure was 39 percent.

Reno is drawing visitors from other markets, though, including the South and Midwest, and there is still a drive for convention business. The Reno Sparks Convention Center leadership is expected to approach the Legislature this year about funding for an expansion.

Meanwhile, the Reno-Tahoe International Airport has experienced 42 consecutive months of increased passenger travel. For the first 11 months of the year, passenger volume was more than 3.8 million travelers, up 4.9 percent over the same period last year.

A locals gaming market

Outside of Eldorado Resorts, which relies on tourism for 75 percent of its business, analysts said most Reno casinos focus on locals.

Farahi said Atlantis’ customer base is 55 percent locals. Beynon suspects others, including the 2,000-room Grand Sierra, approach 60 percent locals business.

Katz said the rejuvenated Reno economy has boosted the casino numbers. Higher wages and low unemployment mean people have a more disposable income for entertainment.

“It seems like the city has turned a corner,” Katz said.

Filling hotel rooms in Reno has not been a problem of late, either.

In the last 12 months, 29 companies moved their corporate headquarters to Reno. Kazmierski said these businesses average roughly 100 employees. Corporate meetings are big business for the midweek market. However, the area’s housing shortage has left many new utilizing hotel rooms for extended stays during the midweek.

Farahi said the hotel occupancy is somewhat a double-edged sword. Occupancy is solid, but operators can’t drive a higher rate.

“Reno is still very far away from the Las Vegas model,” Farahi said. “We’re not making as much of a profit from non-gaming and our gross gaming revenue is still 20 percent below the peak.”

As for any potential expansion in the Reno market, Station Casinos owns an eight-acre site near the convention center but stalled any development plans to focus on nearly $600 million in combined renovations to Place Station and Palms in Las Vegas.

Farahi said Monarch owns 40 undeveloped acres surround the Atlantis for expansion, but the company is currently focused on expansion of its hotel-casino complex in Colorado.

During the recession, there was a contraction in the Reno market. Several older casinos closed. SunTrust Bank gaming analyst Barry Jonas suggested the closing of additional older Reno casinos could give the market an additional boost.

“There really doesn’t seem to be any risk to Reno from the tribal gaming supply in California,” Jonas said. “What the market truly needs is a little more from the non-gaming side.”

Howard Stutz is a freelance gaming reporter for The Nevada Independent and the Executive Editor of CDC Gaming Reports. He has worked as a Nevada journalist for 30 years. He can be reached at howardmstutz@gmail.com. On Twitter: @howardstutz