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OPINION: Critical changes for a stronger future



At the end of every economic downturn there are a few communities that emerge out of the ashes and enjoy renewed economic growth.  Typically it is a mix of serendipity and some creative thinking that leads to the rise of economic fortunes.  There are also the communities that find the economic downturn is the beginning of the end as the business and community leaders become mired in a ‘what-worked-yesterday’ mentality.  Reno is on the knife’s edge of this economic crossroad.  What this community does, or fails to do, in the next 18 months will determine the fate of northwestern Nevada for the next decade.

While none of this is news to most conscious northern Nevadans, the response of many of our leaders is to say is the same thing we’ve been hearing for over a decade:  Lower taxes, do less, cut programs, and blame others.  But what we have not heard for over a decade is a vision of what Nevada, and in particular Reno, could and should be to the citizens and visitors of our region.  There are seven areas of opportunities for our community to come out of this recession with a renewed, vital, growing economy, but it involves rejecting much of what we have been told.

CRITICAL CHANGE 1:  Gaming – Let it go

If Nevada has a sacred cow it is gaming and that cow is out of milk.  For years the loss of our monopoly on gaming has been sucking our economy dry.  This has had a double impact as both business revenue and tax revenue has been feeling the full effect of the decline of gaming.  To be clear, gaming is not in a down cycle, it is in free fall and there is no bottom.  The days of tourists flocking to Nevada to gamble is over and it’s time to let it go.  Because of this decline of tourists the properties have become more dependent on local clients, which is unsustainable.  Gaming requires the inflow of money from outside of the community to be a viable industry.  As gaming desperately tries to find gambling tourists the properties keep competing for the same market and same client and there are not enough customers to go around.  This has caused local properties to slash room rates in order to put someone on the gaming floor, which further reduces revenue.

In the desperate chase to grab what’s left of the gaming market, properties drive away other viable markets that must be tapped for the long-term survival of the economic health of the community.  Not to stereotype, but as a general group, most gamblers consist of smoking, dysfunctional, unhappy, non-affluent people.  Non-gamblers don’t like being around gamblers and therefore if a property decides that the important customer is the gaming client, that automatically means the non-gambler is disenfranchised by the property.  To move forward we have to let go of what is holding our community back and that will involve purging the paradigm that gaming is a viable market.

CRITICAL CHANGE 2:  Reinvent (Mecca-nize) the local tourism industry

We have a unique situation in Reno.  Few, if any, communities the size of Reno have as many hotel rooms and meeting venues.  We can legitimately compete with major markets for conventions and meetings because the community has hotels in a more compact geographic area than in most major markets like Houston, Minneapolis, and Denver, which means the logistics for moving attendees of large conventions to meetings is easier in Reno.  The problem is we limit ourselves by pandering to a dwindling market of gamblers who make the properties less desirable.  The concept that “if the customer is not going to gamble, we don’t want him or her;” is keeping Reno from seizing the advantage we already have in capturing the tourism dollar and the tourism dollar is absolutely critical to the health of our community.  (See Figure 1.0 The Value of Tourism)

The key to tourism is to be the ‘Mecca’ for an attraction that is unique.  However, it does no good to be a ‘Mecca’ for people who have little or no spendable income.  Again, not to stereotype, but as a general rule bowlers and antique car owners do not rank in as the most affluent tourists.  People may have been offended when President Obama said that people shouldn’t be coming to Nevada to spend their college money, but the reality is that people who gamble beyond their means are not the type of tourist that will be sustainable in the long run.

It is important to understand that to be a tourist Mecca, there must be an overwhelming opportunity for a tourist to enjoy the local offerings.  Two art galleries do not make a Mecca, but 30 art galleries probably would not only attract the tourist, but the artist as well.  Half-hearted attempts to be a Mecca will always fail.  To be the center of the any successful tourist activity the local business and government leaders must; 1) work together, 2) be absolutely committed to it, 3) expect to lose money on the attraction in order to gain the secondary revenue (hotel, food, shopping, etc.), 4) have a concept that is unique for a 800 mile radius, and 5) be creative thinkers who love their customers/tourists.

CRITICAL CHANGE 3:  Restructure the tax base

Everyone wants lower taxes, the problem is no one can give a single example of a successful economy that has low or no taxes.  Without exception, low taxes have resulted in a poor economy.  We have been told for years that low taxes attract business, but if tax breaks for the well-to-do attract more business, then Nevada should be awash in new businesses. It’s time we except that to have a strong economy you must have a strong tax base.  It may be hard to accept, and harder to comprehend, but ‘tax and spend’ is the key to the healthy flow of money and in hard times the government needs to spend more.  The last twelve months have proved beyond any doubt that government spending is good for the economy when it is spent in America.

Unfortunately, Nevada has done everything wrong in the area of taxes.  Our State has pandered to the concept of less tax for the well-to-do by not using corporate income tax, corporate gains tax, income tax, or inventory tax to help pay for the services that effect quality of life.  Rather, the tax burden is shifted to the people who have less income to pay.  Nevada’s fuel and sales taxes are high because our State operates on the idea that the well-to-do need more tax breaks than those with less spendable income.  Everyone suffer so the comfortable can be more comfortable.

We have one of the most transient populations in the United States and that is directly and indirectly a result of the State’s tax structure.  Because we don’t have enough money to properly fund education we have a workforce that is unattractive to most major businesses, which results in a poor selection of potential employees for skilled jobs.  Add a tax burden that is placed on the worker and underfunding of all the quality of life services and we have an environment that is both unaffordable and undesirable to many who move to Nevada.  We need to shift the tax burden off the worker and require those who earn over $250,000/year and have more spendable income to pay their fair share.

And what about Personal Income Tax?

The fact is that we need a personal income tax as part of our revenue base; however, there is no reason that the income tax can’t be targeted to those who have placed more burden on existing services.  A graduated personal income tax that is based on length of residency as well as income level would compensate for new growth and reward long-term residents.  A residency based income tax base that drops by 25% for 5-10 year residents, 50% for 10-15 year residents, 75% for 15-20 year residents, and gave 20+ year residents income tax exempt status would help increase our tax revenue base and reward people to stay in Nevada.

CRITICAL CHANGE 4:  One local government, not three

There are some who cling to the idea that Sparks needs its own identity and that the needs of the citizens are better met by a separate city government.  This argument is compelling, but absolutely false.  By State Constitution, Nevada has no ‘Home Rule’ privilege therefore creating a city boundary does little more than create a new layer of bureaucracy.  In the Truckee Meadows we have at least four local law enforcement entities, three planning commissions, three zoning agencies, and the list goes on.  There is no logical reason to have multiple municipal entities and financially we cannot afford to maintain three governments.  We are known as Reno to the world and when we compete for tourist business we must be unified.  Three must become one and it must happen yesterday.  Those who cling to the idea that they are somehow different than the people who live one, two, three, four, or five miles away should consider forming a club rather than doubling or tripling the cost of local government with separate bureaucracies.

CRITICAL CHANGE 5:  Transportation is life

One way to guarantee the long term success of a community is to have the state of art in transportation.  When the railroads were built it secured the future for the communities on the line.  The same thing happened with the Interstate Highway System.  In addition, cities with a major mass transportation focus have always survived hard economic times.  London, San Francisco, New York, Paris, and Chicago are all cities that invested heavily in mass transit early and despite the costs and difficulties those cities have prevailed.  Denver faced severe economic times in the 1980’s and built an airport and invested in light rail.  Denver did not experience the depth of this recession like Nevada because of what it did in the 1980’s and 90’s in improving its transportation.

With the exception of the train trench, our community has taken half steps in mass transportation.  The problem is that people don’t use a mass transit service that will only get them halfway there.  If the mass transit service can’t get a person within two blocks or less of his or her destination the average person won’t use it.  Mass transit has to blanket a community to be effective or else it will only be used by those who can’t afford a car.

In addition to making a major commitment to local mass transportation we need to solve one of our biggest regional issues:  the unreliable and costly I-80 ‘over the mountain’ artery in California.  There is no reason for our economic link to California to be jeopardized by every snow storm.

Building a tunnel from west of Verdi under Granite Peak (See Figure 2.0) would come out near Stampede Reservoir.  That would eliminate the narrow, windy route along the Truckee River.  From there it would be a relatively straight shot to Truckee.  From the southeast side of Donner Lake a long tunnel could connect to the American River canyon.  From there it would be a downhill run to the eastern Sierra foothills meeting the current I-80 between near Colfax, California.  Never would the Interstate Highway need to exceed an altitude of 7,000 ft.  Add a commuter train line to the tunnel system and people could commute to and from Sacramento, which would help both communities.

The United States has been falling behind in utilizing the advantages of tunneling technology to the point that Japan, Europe, and Asia is making our transportation systems look second rate compared to what they have available to their citizens.  Building two tunnels through the Sierra Nevada range would secure Reno’s economic future for generations and save millions of dollars in snow plowing, sanding, and repairing chain damaged road surfaces.  The time to do a project like this is now while Senator Harry Reid is there to work with the California representatives over the next six years.

CRITICAL CHANGE 6:  Education is oxygen

The biggest threat to the survival of Nevada is the dismal quality of education.  This is not a slam at the educators who have done so much with so little, but a direct result of political game playing with a vital resource.  Better preparing Nevada high school students for college has little to do with standardized tests, private schools, voucher programs, nor Educational Gift Certificates.

The solution involves; 1) funding schools appropriately, 2) removing politicians from having any authority over schools and, 3) returning schools back to a focus of the teacher and the student.  There are a lot of exciting new concepts in the field of education, but few can be tested or refined because of the baggage of politicians.  The young human being is not a machine.  What works for one student may not work for another.  We need to stop listening to the catch-phrases of the uneducated about education (voucher programs, readin’, writin’, and rithmatic, etc.) and let teachers teach.  But first we need to stop setting them up for failure by withholding the money needed to make it happen.  Smarter people will make our life better in ways we cannot imagine, but we have to give them the chance to learn and that costs real money.

Colleges and universities are a different situation.  Paying hundreds of dollars to park, hundreds of dollars in fees, thousands of dollars in housing, and thousands of dollars in textbooks before anyone has entered a classroom is not a viable model in a world where anyone can gather more up-to-date information through a Google search.  Education is undergoing a fundamental change at the college level and while administrators may be aware of the changes, there is little evidence they are embracing the extreme makeover that is coming.

Reno has an opportunity to make higher education a vital component of our economy, but it will require focusing on using 21st Century methods, not 20th Century dead concepts of what a university is or should be to a 18 to 21 year old student.  Like secondary education, the focus has to be on the teacher and the student.  The college administrator has to return to the role of serving, not managing and controlling.  It is mystifying that accreditation of universities has increased the power and salaries of the administrator, while failing to improve the quality of college education.

Tomorrow’s colleges will be plugged in, dynamic, flexible, and inexpensive, and the community that figures this out, wins.  Reno needs to become the new version of a college town offering higher education without the higher costs and the pointless rules and policies.  If someone can land in a college classroom (real or virtual) at under $200 (registration, fees, books, etc.) before tuition, that institution can take their pick of students.

CRITICAL CHANGE 7:  Healthcare as an economic opportunity

Whenever there is a major problem, there is an equally major opportunity.  Kaiser Permanante has been successful by making money through helping people be healthy, while most other healthcare providers make their money off the unhealthy.  It seems that the biggest opportunity in America is to provide wellness, not healthcare.  Reno has been a Mecca for the addicted and unhappy and that is not working for us.  Maybe it is time we tried to be a Mecca for restoring health for a change.

To understand the value of tourism to a local economy one must understand some primal economics.  Two key factors to the economy of any community are the Daily Local Monetary Flow (DLMF) and the Daily Local Monetary Availability (DLMA).  Local Monetary Flow refers to how easily money moves in a local economy.  Theoretically, the measure of Daily Local Monetary Flow is the average number of transactions a single dollar has per day in any local community.  The more transactions the better the health of the local economy because with each transaction the value of the dollar increases by 100%. (See Example 1.0)

    Example 1.0
    A person pays $100 for groceries.  That is a DLMF value of 1.00 (one transaction per $1 per day.)  If the manager of the grocery store takes that $100 and buys $100 worth of vegetables from a local farmer on the same day then the DLMF value is 2.00 (two transactions per $1 per day.)  If the farmer buys $100 from of fuel from the local gas station on the same day then the DLMF value is 3.00.  However, if the grocer buys only $50 of produce from a local farmer and $50 from a farmer outside of the community, then the DLMF is only 1.50.  If the grocer decides to buy $20 of local produce, and the rest is held for the next day, then the DLMF value is only 1.20.
    The Daily Local Monetary Availability refers to how much money is available to be spent on any given day in a community.  If the DLMA value is high then the health of the local community is good.

The problem is that in any given local economy the citizens only have a finite amount of money and a finite amount of goods and services, which means that DLMF and DLMA are finite.  Tourism brings money that would have been normally spent in the tourist’s local economy and puts it in our local economy.  That means both the DLMF and DLMA values are increased because it adds dollars spent that aren’t from the local economy.  Tourism money is new money that boosts the economy.  Without tourism the local citizens would have to spend more money to achieve the same level of Daily Local Monetary Flow, but that still wouldn’t increase Daily Local Monetary Availability.

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