‘Innovation zone’ concept in doubt as end of session nears

CARSON CITY — There are fewer than 40 days left in the Legislature’s 2021 session, and Gov. Steve Sisolak’s cornerstone economic development pitch to let tech companies form their own county-like governments remains behind closed doors.

When asked about the status of his Innovation Zones proposal at an event in Reno on Thursday, Sisolak said that he met with Democratic legislative leaders on Wednesday about the bill and that the public would hear more about it “in the next couple days.”

But the first-term Democratic governor said that the proposal would not “move ahead without a thorough vetting.”

“It’s going to be thoroughly vetted so that everybody gets their chance to ask their questions, get their explanations,” Sisolak said.

It’s not unusual for large, complex pieces of legislation to be rolled out in the final weeks of the session. Look no further than the 2019 Legislature, when a revamp of the state’s half-century-old K-12 funding formula was unveiled with just three weeks left in the session.

But the governor left some room for doubt about whether there would be enough time to work through everything before the session ends on May 31.

“I think it’s a great idea; I just don’t know how much time we have,” Sisolak said. “We’re down under 40 days and I don’t even have a bill yet.”

Innovation zones

Under the proposal, companies with an “innovative technology” would be able to form Innovation Zones in rural parts of the state. Those zones would eventually break off from the local county in which they are located and become a separate, independent government body with the same authority as a county in Nevada, including the ability to impose and collect taxes, form school districts and justice courts and provide government services.

While no formal bill has been introduced, a draft has been public since early February and lobbyists for Blockchains LLC have been continually pitching lawmakers and various interest groups on the idea in an attempt to drum up support.

Some vocal critics of the proposal remain unconvinced , including Sen. Dina Neal, D-North Las Vegas, who said she hasn’t changed her stance against “giving (a) private corporation government powers, and at no point will I probably ever agree to that.”

“Government powers are not a Christmas gift that can be bestowed to another entity. And it’s not something to be delegated to a private corporation,” Neal said Thursday.

Increasing scrutiny

Jeffrey Berns, the cryptocurrency millionaire and CEO of Blockchains LLC behind the Innovation Zones concept, came under increased scrutiny this month after the Reno Gazette Journal reported that Berns and his wife are being sued by a former nanny who is accusing them of trying to groom her to participate in “three person sex.”

Sisolak declined to address the accusations against Berns, whom Sisolak previously said had committed to building a smart city in Storey County once the legislation was passed. Berns bought 67,000 acres in Storey County in 2018.

“I don’t want to get into the personal civil actions against him, and the facts behind that. That’s not my place,” the governor said.

Members of the governor’s staff said in an interview with Nevada Newsmakers last week that they were surprised by the allegations against Berns.

But Michelle White, Sisolak’s chief of staff, said on the program that the Innovation Zones proposal “is separate from any one individual or business” and should still be debated and discussed.

White made similar comments when asked about comments Berns has made about what he will do if the bill does not pass. In March, Berns told the BBC that if the legislation did not pass, the land “would be sold.”

“It’s never about a single person or a single company. This is about a policy for something like this to be pursued in the state of Nevada,” White said.

Economic diversification

Sisolak and Blockchains have been pushing the semi-autonomous tech-company government concept as a way for Nevada to move away from its reliance on gambling and tourism and to diversify its economic profile, without giving up any tax abatements or financial incentive packages.

But several rural counties — where these zones would likely be located given the requirement that companies own at least 50,000 acres of undeveloped land — have bristled at the idea of being forced to give up large segments of their jurisdiction to wealthy tech companies. Since March, several rural county commissions have passed resolutions to oppose the proposal, including Storey County, the prospective home of Berns’s smart city.

And those negotiations and relationships between the two sides have only degraded over the last few weeks.

Storey County commissioners last week directed county staff to no longer engage with Blockchains or its lobbyists, the powerful Las Vegas-based consulting firm R&R Partners, in talks about the Innovation Zones proposal.

“The county commissioners have said that they did not believe the conversations with R&R or representatives from the Innovation Zones were effective, and that they were not necessarily impactive and therefore not a good use of time,” said Storey County Manager Austin Osborne on Thursday.

Osborne said during the commission meeting last week that the county had reached out to the governor’s office but had not received a response.

Shortly after that meeting, Osborne said, he received a message from Sisolak’s senior advisor Scott Gilles. But Osborne’s attempts to return the call were met with no response once again, he said.

Sisolak said Thursday that they are working to make sure the rural counties “fully understand what we’re trying to accomplish here.”

“I think it would be a huge win for Storey County. You can’t just stay stagnant, or the county dies. You have to develop. You have to grow,” Sisolak said.

Innovation ‘forerunner’

But Storey County, home to Tesla’s Gigafactory, as well as massive facilities for Switch, Google and other major tech companies at the Tahoe Reno Industrial Center, vehemently disagreed with that premise.

“We’re the forerunner in the entire state on innovation and development and growth,” Osborne said. “And there is no way that Storey County, in any shape or fashion, is stagnant.”

Assembly Minority Leader Robin Titus, R-Wellington, also took issue with the governor’s characterization of rural counties.

“For too long we have seen Clark County try to push rural counties around by virtue of their population size,” Titus said in a statement.

“Our local governments are quite literally re-building our state’s prosperity and economic diversification. Governor Sisolak is less worried about working with our counties and more interested in forcing them to accept proposals with little to no details,” she added.

Osborne reiterated the county’s stance that officials there fully support Berns’s idea of building a smart city, and that it is even supported by the county’s master plan for the area.

He said the county is set up to allow for the research and development, sandbox-type environment at the industrial complex, all without the need for special use permits or planning commission approval that other jurisdictions would require.

“I don’t know how possibly they could want a place that has less government than Storey County,” Osborne said.

Contact Capital Bureau Chief Colton Lochhead at clochhead @reviewjournal.com. Follow @ColtonLochhead on Twitter.

Innovation Zone Bill Draft.update.1.31.2021 by SteveSebelius on Scribd