Diversification: Getting returns on the public’s investment

Nevada has a new economic diversification plan and a new state office focused on attracting jobs and investment. But it’s not a new mission.

So it was appropriate that Gov. Brian Sandoval delivered his first major economic diversification speech at the annual luncheon of the Nevada Development Authority, the nonprofit that works to lure and keep businesses here.

Gov. Sandoval noted Thursday that the creation of the Governor’s Office of Economic Development doesn’t erase Nevada’s existing economic diversification infrastructure. It merely reorganizes it and moves it into his Cabinet — and boosts funding for the cause. Annual marketing spending will increase from $5 million to $7.5 million, and a $10 million fund will help cover some business relocation costs.

Considering the state has limited resources, is such spending wise? Absolutely. The Nevada Development Authority is proof that tax dollars, spent under a sound strategy, can produce a significant return on investment. The authority’s primary support comes from business contributions, but it also receives more than $1 million per year in tax money. (Full disclosure: Review-Journal Publisher Bob Brown is on the authority’s board of trustees.)

Between July 2010 and June 2011, the authority’s work led to the opening of 27 new businesses and seven business expansions. Those businesses made $283 million in capital investments. Using a traditional multiplier, those businesses created almost 1,200 total jobs that will produce $33 million in new local tax revenues and $10 million in state tax revenues over the next five years, according to authority CEO Somer Hollingsworth.

About $1 million spent to create more than 1,000 jobs. That’s less than $1,000 per job. And unlike government-subsidized "green" jobs, which cost 10 times more, these positions are permanent and sustained by the private sector.

As Gov. Sandoval said, "Economic development is a journey, not a destination." And it appears Nevada finally is traveling the right road.