Development agencies draw fewer businesses

Local agencies charged with luring new businesses to Southern Nevada reported a drop in recruitment numbers in fiscal 2006.

The Nevada Development Authority and the city of Henderson’s division of economic development helped fewer companies relocate to or expand in Southern Nevada in the year that ended June 30.

Economic-development ex-perts attributed the falloff in recruiting indicators to several factors.

Some of the decline comes from standard year-to-year variances in agency staffing and business sizes.

The Nevada Development Authority had one fewer salesman in the fiscal year, said Somer Hollingsworth, the authority’s president and chief executive officer.

And Henderson’s economic-development arm must compare fiscal 2006 with an unusual 2005, when online shoe retailer Zappos.com single-handedly brought more than 200 jobs to the city.

"Numbers will always vacillate somewhat, so we’re not too upset with (employment declines)," said Bob Cooper, manager of economic developent at the city of Henderson.

But economic factors also suppressed business recruiting in Henderson, Cooper said.

Land prices in Southern Nevada remain well above real estate expenses in competing regional markets, and that’s driving large operations to cities outside the Las Vegas Valley. Vacant property in Phoenix, for example, costs almost 50 percent less per acre than the $793,700 per acre that raw land commanded in Southern Nevada during the first quarter, Cooper said.

With pricier land comes more expensive housing. A softening of the local housing market — prices in July fell 4.8 percent in the last year to a median of $295,000, according to the Greater Las Vegas Association of Realtors — hasn’t depressed home costs enough to convince owners of smaller businesses that their employees could afford to live in Southern Nevada, Cooper said.

Finally, growth of the national economy has slowed in recent months, and tightened access to credit paired with downturns in the housing market have made businesses reticent to relocate or expand. Henderson lost out on a major prospect when a major mortgage provider nixed a 500-employee loan-processing center after business cooled, Cooper said.

National experts said the downturn could be specific to Nevada. Recruiting was also off in Reno, where the Economic Development Authority of Western Nevada saw a dip in new and growing companies. The authority assisted 37 businesses in fiscal 2006, down from 46 companies in fiscal 2005, though higher wages for new jobs pushed economic impact from $330 million in 2005 to $402 million in 2006, said Chuck Alvey, the organization’s president and chief executive officer.

Yet, Rob DeRocker, executive vice president of Development Counsellors International in New York, said economic development is expanding nationwide.

"We’re not hearing that the pipelines are any less full this year," DeRocker said. "It could be a Nevada chill."

DeRocker said he wasn’t sure why Nevada would see slowing recruitment while much of the United States is enjoying sustained new business.

Perhaps the exodus of companies from California, a top recruiting target, has slowed as the economy in the Golden State has improved. Or maybe the Silver State is simply maturing.

"Nevada is growing up," DeRocker said. "It’s having growing pains. Suddenly, there are some businesses for which the state is not going to be as attractive as it was early on because there are new cost considerations. I think Southern Nevada would need to look at whether it’s continuing to move up the value chain."

Economic-development officials must also compare 2006’s numbers with some previous banner years.

"If you have a great year, then a good year doesn’t look as impressive," DeRocker said. "You can get hoisted on your own successful petard. In effect, it may just be a natural correction."

Local officials said they still consider 2006 a healthy year for economic development.

Hollingsworth pointed to increasing diversity in the origins of businesses opening operations in Southern Nevada. California remains a key source of new companies, but businesses also came to Las Vegas from Idaho, Texas, Florida, Missouri, Colorado, Washington, Tennessee and Virginia.

The Nevada Development Authority also assisted 17 manufacturers in moves to the Las Vegas area. Among the companies are makers of power-conservation devices, walls for prefabricated homes, recycled carpets, appliance parts, cultured marble and roofing materials. Even with higher land prices in Las Vegas, Hollingsworth said, many of the companies’ managers decided they would come out ahead financially based on lower operating costs such as workman’s compensation insurance.

For the executives of Multi-ceptor, which makes equipment that removes greases, fats and oils from water, Las Vegas had a "magnetic pull," said James Cornick, principal director of technology.

The company left Honolulu for Southern Nevada in the spring so it would be closer to growing mainland markets, Cornick said. The volume of flights into McCarran International Airport meant convenient access to Las Vegas, and the city’s pull as a tourist destination will make it easier to convince potential clients to visit Multi-ceptor and get acquainted with the company’s products.

"Las Vegas is going to be a windfall for us," said Cornick, who added that he expects Multi-ceptor’s staff count to rise from six people now to 30 to 60 workers in the next year or so.

Cooper also expects positive growth in coming years. His agency is already working with several established businesses, including one that might bring 300 jobs to Henderson, and he’s fielding relocation and expansion queries from as far away as Taiwan, Germany and Scotland.

"It looks like a pretty strong class of recruits coming in," he said.

DeRocker said this year’s lagging numbers don’t signal dwindling diversification in the future.

"It seems like a sniffle to me and not something to be worried about," DeRocker said. "Las Vegas is not exactly on the skid row of economic development."