Vol. 3, No. 5
.jpg)
January 1, 2006
Nevada's Online State News Journal
 |
 |
 |
 |
 |
 |
 |
 |
| . | |||||||
 |
CRIMINAL DEFENSE |
COPYWRITING
|
|
Feature Story:
2005 Has Passed Into History And A Fine Year It Was
Nevada Is Fine And Fit Economically According To Many Of Our Sources
A look back at what was and maybe a look forward into what might be. The year 2005 left lasting impressions not the least of which were winter storms, historic happenings in the legislative halls, and even a government tax rebate. The year started with massive amounts of snow in the northern end of the state, measuring five feet and more in downtown Reno and all that rain and flooding in southern Nevada. Those storms will probably be known as the drought busters of '05.
We watched in disbelief as Nevada's Controller, one of the top elected officials in the state was brought before the Assembly and was impeached on three separate charges. Kathy Augustine had pleaded guilty to the charges before the state Ethics Commission, but when she went on trial before Nevada's Senate, two of the charges were dropped. Augustine is now claiming to be a victim. Right.
The legislative session was a bust in most people's minds. They couldn't (wouldn't) get the job done one more time and special sessions had to be called. In the real world, they would be fired for their lack of ability. Many could be before 2007's sessions. The legislators are given 120 days in which to get their job done. Special sessions cost you big bucks.
The governor pushed for a rebate to the state's citizens following his massive tax increases of 2003, and that didn't exactly come off as described. Some people got two rebates, some didn't get any, and when the dust cleared the state spent $300 million to make Governor Guinn look good.
The editors of The Nevada Observer asked many around the Silver State to give us an idea of how they fared during 2005 and what some of the developments of 2006 just might be. Jobs have been one of the highlights of 2005 as reported regularly, and a relatively low jobless picture has added to the rosy picture that made up much of the past year.
Casinos and other tourist oriented businesses around the state made continued economic gains adding venues, employees, and of course, taxes to the state's coffers. Other segments of the economy also fared well including mining, manufacturing, distribution, and transportation. Gold prices surpassed $500 an ounce and that is leading to a continued search for more. Nevada is already the third largest producer of the valuable metal in the world.
There are three major sources of money to run the state of Nevada: mining, tourism, and sales tax. It takes a robust economy for all three to flourish and 2005 provided that energy.
A look forward to 2006 by Governor Kenny Guinn
by Kenny Guinn, Governor, State of Nevada
Nevada is basking in the stability of a robust economy, continued growth and low unemployment. Our state general fund, fueled primarily by sales tax and gaming dollars, has and continues to be performing at even higher than expected levels. The end result was a $300 million rebate to Nevada taxpayers in 2005.
As we move into 2006, all signs lead to continued economic prosperity in the Silver State. In fact, in 2005, Nevada casino monthly win topped the one billion dollar mark four times, with October’s win total of $1.06 billion setting the record for the biggest win total in the state’s history. Nevada’s employment picture also continues to be impressive, with the state’s job rate remaining one of the best in the nation.
Tourism is certainly the backbone of our economic good fortune. Led by the gaming industry, people from around the United States and the world continue to flock to Nevada to take advantage of the various amenities our gaming industry provides. Besides gambling, the restaurants, shopping and entertainment venues at statewide resorts are driving our state general fund well into the black.
Nevada’s tourism industry currently ranks sixth in the nation for domestic and overseas visitor spending. In 2006, the Nevada Commission on Tourism is poised to expand into two of the world’s biggest potential markets: China and India. Nevada gained a foothold in China in 2004 by obtaining the first U.S. license to market a tourism destination to its 1.4 billion population. And now the state’s tourism industry is aggressively working to develop the vast, lucrative market in India.
But gaming is not the only sport drawing visitors to the Silver State. According to the U.S. Fish and Wildlife Service’s most recent survey, wildlife-related spending in Nevada surpasses $600 million annually. Wildlife watching leads the group, generating more than $250 million in annual revenues, followed by fishing ($216 million) and hunting ($134 million). Wildlife related activities are not only good for Nevada’s economic health, but for the physical, mental and emotional health of our citizens as well.
Another major contributor to the state’s well-being is the mining industry. Gold and silver prices rose higher in 2005 than in more than two decades. With Nevada being the largest gold producing state in the nation, as well as a significant producer of silver, mining will no doubt continue to be a major benefactor to state coffers in 2006. The rapid rise in gold prices has also led to increased exploration in our state. Existing mining operations in Carlin are expanding and a new operation is underway in Battle Mountain. And, according to Canada’s Fraser Institute, Nevada is one of the most favorable locations in the world to explore for minerals.
Agriculture, coupled with tourism and mining, form the foundation of Nevada’s economy and quality of life. Nevada’s agricultural industry generates about $500 million annually; an amount that has been fairly consistent over the last five years. Nevada farmers produce some of the best alfalfa in the world, and our ranchers manage one of the largest populations of livestock in the United States. The organic farming industry and local farmers’ markets are experiencing rapid growth in Nevada, as are alternative crops such as wine grapes and pistachios.
Nevada has certainly benefited from our robust tourism, mining and agricultural industries, and there’s no reason to believe that will not continue into 2006. As a result of our tremendous economic good fortune, I am happy to report that in cooperation with the Legislature, we have not only replenished the state’s Rainy-Day Fund, we have been able to make a greater investment in this important program; increasing its balance to $159 million. Further, an additional $37 million has already been appropriated for FY 2007. This represents a much-needed investment in Nevada’s future.
For the nineteenth year in a row, Nevada leads the nation in percentage population growth. People continue to flock to the Silver State to take advantage of our tax structure and booming economic growth. And businesses relocating to Nevada because of our business-friendly atmosphere are helping to diversify our economy. Nevada’s construction boom and continuing growth in the hi-tech field, both of which support increased business opportunities in a number of related fields, are examples of how our state is working to remain economically vibrant.
The economic future of Nevada continues to be the envy of many of our neighboring states, and the citizens of this great state are the true beneficiaries of our prosperity.
•••
The economic picture from southern Nevada
Southern Nevada's economy is dominated by gaming and tourism and 2005 was a banner year for those businesses. Construction also boomed during the year and many in the economic fields feel there might be a softening in this sector. Statewide, construction jobs increased by more than 12 percent during the first ten months of 2005. The total number of jobs in southern Nevada increased by more than seven percent during that same period.
Nevada has a population of almost three million souls, slightly less than two million of whom live in southern Nevada. Some feel continued population growth at the rates seen in recent history is probably a thing of the past. One factor that might slow the continued immigration is water. The search for new sources of water will also become a stronger factor in the months and years to come.
The Southern Nevada Water Authority (SNWA) draws most of the water for the Las Vegas Valley from Lake Mead and the Colorado River, but Nevada's allocations are just about capped. SNWA has gone into rural Nevada for water sources including tapping into ground water in White Pine and Lincoln Counties. SNWA doesn't actually own the water rights; they would have to purchase water from those that do.
There is considerable opposition to the plans to build a 300-mile water pipeline from a location near Ely in White Pine County to Las Vegas. One company owns most of the water rights along the pipeline and would make that water available to SNWA. Vidler Water Company owns more water rights in Nevada than any other company or entity. By law they can only sell their product to a water distribution agency.
Developers cannot build unless they have a guaranteed source of water and at this time that water is not available. Federal lawsuits are being planned by ranchers and government agencies in Utah to stop the SNWA pipeline project, and the State Engineer has not signed off on any of the water sources.
There are other factors that might slow down the economy of southern Nevada; the price of energy is one. High prices for natural gas, coal, and oil are in the picture at this time and could affect continued building plans for hotels and casinos as well as increase the cost of living for those wishing to live in the valley.
Economic diversification in southern Nevada isn't as much a part of the picture as is found in northern Nevada, but there is manufacturing and distribution and many feel they will continue to grow albeit a bit slower than in recent years.
Although criminal activity probably won't have that much affect on the total economy of southern Nevada you can bet it will be a source of headlines for the entire year. There are enough federal indictments already handed down to fill most newspapers for months to come, and there are continued investigations that could bring even more indictments.
Several land development projects are under state and federal investigation, airport authority land speculation is going to be in the headlines for months to come, $kindustry businesses continue to foster headlines, and of course, the federal court trial of current and former members of the Clark County Commission will get underway soon. It's not called Sin City without reason.
Southern Nevada is home to more of the state legislature than any other part of the Silver State and 2006 is an election year. The Primary Election is in August this year and many campaigns are already underway. Nevada's Assembly is up for election as are all the state's officers.
Rural Nevada economics dominated by mining and ranching
Many people in the more industrialized parts of the country aren't aware of the economic impact of mining on the communities in which the activity takes place. Rural counties with active mines benefit greatly from taxes and wages paid to the miners. The state benefits as well from sales taxes, and other monetary benefits. Local businesses are helped by mine purchases as well as those by mine employees.
Nevada Governor Kenny Guinn said, "The price of gold has increased sharply in recent months, foretelling a bright future for the state's mining regions."
The Nevada Observer asked Russell Fields, President of the Nevada Mining Association to outline what these benefits are to rural counties and to the state.
•••
Nevada Mining and Taxes ---Misunderstood By Many
by Russell Fields (Doctor John Dobra, Natural Resources Industry Institute, UNR contributed to this article)
The Nevada mining industry has been an important source of state and local revenue almost since the earliest days of mining in the state. That is the case today as well.
Mines pay all the state taxes that most other businesses in Nevada pay plus an additional tax, called the Net Proceeds of Minerals Tax (NPOMT). Because modern mining is a capital-intensive business, that is it spends large amounts on mining and processing equipment, both sales tax and property tax are relative large taxes for the mining industry. Mining, like all Nevada businesses, pays the Nevada’s modified business tax based on the mining company’s Nevada payroll. Since the tax is payroll based rather than employee based, mining pays relatively more per employee than most Nevada businesses because mining employees are the highest paid sector in the state (the average annual wage in 2004 was $67,700 for metal mining).
Russell Fields
The tax unique to the mining industry, NPOMT, is actually a property tax on the minerals. When Nevada became a state in 1864, the politicians of the day understood that the mines, then by far the biggest economic activity in the state, could not accurately estimate the value of their ore deposits until the minerals were actually extracted. That fact remains true today. Ore deposits vary in size and richness (grade) and mineral prices change, in some cases, by the minute. The NPOMT is based on the value of the mineral extracted. The value is established by a sale of the mineral. In the case of gold and other commodities for which there is an established worldwide metal exchange that posts the price daily (or more frequently), that establishes the price used to calculate the sales value.
The NPOMT is, as the name suggests, a net tax. Certain allowable deductions, such as the cost of extracting, processing, transporting and marketing the minerals are subtracted from the sales value. The result of that calculation (the net) is multiplied by up to 5 percent. All gold mines are taxed at the 5 percent rate. Some mines, for example, barite or gypsum mines, may be taxed at a lower rate, but never less than the county property tax rate.
Because of the way the taxes paid by mining are allocated to the various governments, local and state, according to state law, the majority of taxes paid by mining remain with the local governments in the area where the minerals are mined. An estimated two-thirds of mining taxes stay with the counties and cities nearest the mines. This pays for schools, roads, water systems and other infrastructure. The remaining estimated one-third of mining taxes goes to the state general fund. Total state and local taxes paid by the mining industry in 2004 were $103.4 million. The figure below shows taxes paid by the industry in Nevada, 1987 through 2004.
As the figure illustrates, total taxes paid by the Nevada mining industry over this 18-year period has totaled approximately $1.7 billion, or just under $100 million per year. Each of these major taxes paid by the mining industry responds to the mineral price and industry growth cycle in slightly different ways. For example, the increase in NPOMT in 2003 and 2004 primarily reflected the increase in gold prices. With the relatively stable production costs and production levels, commodity price increases directly increase Net Proceeds. Higher production costs, or lower commodity prices have the opposite effect, as they did in 1999 through 2002, a period of relatively low gold prices. New mine development or existing mine expansion costs and near mine exploration can lower NPOPMT in current years but are investments for the future that will lead to longevity of mining, yielding greater overall taxes. An issue that is frequently raised in public policy debates at both the state and national level concern the imposition of taxes and royalties on the minerals industry. One of the common misconceptions about the minerals industry that frequently arise in these discussions: This misconception is that since the mining company cannot move the mineral deposit, mines are immobile sources of wealth that can be taxed without consequence. While it may be true that a mineral deposit is immobile, there is ample evidence and numerous examples that will attest to the fact that mining capital, which includes both technical expertise and investment funds, is highly mobile. Hence, this rationale for mineral taxation and the imposition of royalties is myopic at best. The failure of exploration spending in Nevada to rebound to mid – 1990’s levels in spite of a rebound in gold prices because of the uncertain regulatory environment is an indicator of just how mobile mining investment can be.
•••
Northern Nevada's economy varied and healthy
Tourism and gaming in northern Nevada continues to be a strong contributor to the area's economic health despite the emergence of legalized gaming at Native American casinos in nearby California. Some of those casino operations are located right along Interstate 80 the major roadway into northern Nevada. During 2005 several hotel casinos shut their doors and work began to convert them into condominiums. Other casino hotels that had been shut in earlier years also began condo conversion. With water at a premium in northern Nevada, the same as in the south, conversion to condominiums make sense since water and sewer allocations to the buildings already exist.
Land developers continue to look for more areas in which to build and the lack of clean water sources leads the Truckee Meadows Water Authority directly to Vidler Water Company. Vidler owns some agriculture land in northeast California near Honey Lake where they grow thousands of acres of alfalfa with their major water right.
In the Vidler Water Company web site it is spelled out in no uncertain terms that they believe that water is far more important for urban use and agricultural use should be curtailed or discontinued. Vidler has already said they would end their agriculture practice at Fish Springs Ranch and make the water available for importation by Washoe County interests.
As much as 8,000 to 10,000 acre-feet could be imported into the development areas north of Reno with a pipeline and County Commission action is expected soon. The primary source of water in the Reno/Sparks area is the Truckee River and wells. The Truckee River allocations are just about at their limit and ground water is dependent on continued wet winters so the aquifers can be recharged. During the last seven-year drought many in the rural areas surrounding the two cities had to drive their wells deeper to find water.
During 2005 Reno became host to "The Trench." This actually is a trench running for several miles across the city and now is where the major east-west railroad tracks are bedded. The project was brought about from what many feel were arbitrary and untrue "facts" about safety, noise, and a large increase in the number of trains predicted for the future.
Some hailed the lack of train whistles, others claim to miss the nostalgia, and the City of Reno now is planning another major change to downtown. Since the trains aren't contributing to traffic problems Reno planners feel they must and are planning to change Virginia Street from four lanes to two.
Among things to look forward to as 2006 moves into focus are continued efforts by the cities of Reno and Sparks to expand their areas of influence. Reno has already moved west to the California line and now is looking to expand north and south as far as possible. There are many that feel this is more than just a land grab to gain more in tax revenue. County building codes are different from the city's, lots can be much smaller, there must be delivered water, not on site wells, and there generally must be sewer systems not on site septic tanks.
Developers are probably behind the efforts, but the picture doesn't have enough focus yet to pinpoint the exact reason for continued expansion. Sparks is looking to include an area 30-miles north of the city's center for inclusion in the City limits. Without large sums of money in the balance, it doesn't really make sense for these two cities to look for such expansion. It is where that money might be coming from that will be one of the focuses of The Nevada Observer in weeks and months to come.
In the meantime 2006 will see continued expansion of the economy from sources such as manufacturing, distribution, and financial and high tech companies. Ken Pierson, Director of Business Development for the Economic Development Authority of Western Nevada (EDAWN) said that while distribution expansion is continuing, and financial and high tech expansion is also increasing, heavier manufacturing expansion may decrease somewhat.
Ken Pierson
"This past year was a banner year," Pierson said, "and activity wise, 2006 looks to continue the economic success." Pierson said the life style available in northern Nevada has a lot to do with businesses wanting to move to the area. "We have four seasons, excellent climate, good recreational features, and an employee base to draw from," he said.
Pierson pointed out one of the reasons there are several plastics manufacturing plants in the area. "Our climate is actually exactly what the companies need for manufacturing plastics."
One of the projects EDAWN is working on is Target2010 as discussed in the December 15 issue of TNO. The project hopes to be able to bring new business to the area without having a harmful affect on the life style of those who are already here. Target2010 also offers an opportunity for feedback from business interests and the general public.
Northern Nevada has drawn major manufacturing, distribution, and warehousing interests because of intercontinental railroad service, Interstate Highway access, and an international airport. One of the largest industrial complexes in the state (there is some conjecture that the complex may be the largest in the world) is just west of Reno, and is soon to be home to a multi-state Wal-Mart distribution center. That center is also going to be home to companies that supply Wal-Mart.
The Tahoe-Reno Industrial complex is actually in Storey County, Nevada's smallest county and according to county officials the industrial center is a very welcome addition to the county tax base. It was announced recently that Rivers' End Trading Company will be building a distribution center in the area as well.
As Pierson pointed out, high workers compensation rates in California and other negative business laws and taxes helped drive the Rivers' End Trading Company to Nevada, and northern Nevada's life style, friendly business rules, taxes, and laws will keep them here. "After all," he said, "they are joining giants like International Game Technology (IGT) and Micro Soft Licensing."
Pierson said it is possible that as many as 40 new companies will be expanding into northern Nevada in the coming year. "We are hoping for 12 new distribution outlets, 22 new manufacturing outlets, and six companies in the services, that is financial and high tech areas.
•••
From the Director, Department of Employment, Training, and Rehabilitation
Nevada's employment picture is following usual seasonal downward trends, but the state's strong economy is creating enough new jobs to keep the jobless rate steady at 4.1 percent over the month. Birgit Baker, soon to retire from the department said she is pleased that Nevada's traditional seasonal dip in construction and gaming employment was offset by increases in retail hiring. "The state's employers added another 1,200 jobs during November," she said.
"I am thankful that as I leave state service that I can retire knowing I am turning over the reins of the department during a prolonged period of economic growth," Baker said. "The incoming director, Terry Johnson will have a lean department to oversee," according to Baker. Johnson was named as Baker's replacement by Governor Kenny Guinn.
Each of the major Nevada industry groups with the exception of the information industry has created new jobs over the past year, Guinn pointed out.
•••
Yucca 2006 not much different from Yucca 2005
The Yucca Mountain Nuclear Repository made news throughout the entire year and there is no reason to believe that efforts on Nevada's part to stop the project and efforts on the part of the feds to open the facility is going to end. Bob Loux is the head of the Nevada Nuclear Projects Agency and along with a busy staff has challenged the veracity of every agency involved on the project.
Look for continued court action throughout 2006, watch for possibly increased Congressional action, and if you can believe some, the DOE is on its heels about to turn and run. Congressional hearings have been taking place, but more and more in Congress are beginning to recognize the value of having the high level nuclear waste stored at the various nuclear energy plants around the county. Challenges to so-called good science are building regularly against the Environmental Protection Agency (EPA), the Department of Energy (DOE), and the Nuclear Regulatory Commission (NRC).
The Nevada Observer has been one of the news outlets in the Silver State that has been questioning the entire concept of a repository and has been a leader in promoting on-site storage of the waste. Watch for continued opinion pieces on the subject.
•••
______________________________________________________________________________________