Business amendment backers hoping third time's a charm

Backers of a plan that would let the state loan money to private businesses are hoping the third time's a charm.

Question 1 on the ballot would permit public money to be invested in corporations as an economic development tool.

"When I moved here, I would have given anything for $10,000 or $20,000 to help make the move," said Steve Schmidt, who owns a small industrial plant in Stead north of Reno. "This thing could have done it."

But opponents call the proposed constitutional amendment blatant corporate welfare. And some of the opponents are business groups including the Nevada Taxpayers Association.

"The timing is wrong," said Association Director Carole Vilardo. She said there are too many potential problems with the plan to allow wide open investment of state money in businesses.

Vilardo also pointed out that Nevada voters have already rejected similar ballot questions twice. In 1992, the idea of letting the state invest public money in private corporations was defeated by a 3-1 margin. In 1996, it was defeated by a 2-1 margin.

Some of the strongest criticism of the plan comes from solid conservatives including former Republican Assemblyman Bob Thomas who said there are banks and investors, including venture capital groups that specialize in funding high-tech business start-ups.

"If they aren't willing to invest in one of these businesses, why would we want to put public money into it?" he said. Thomas said it doesn't make sense to put public money into ventures private financiers won't take a chance on.

D. Dowd Muska, writing for the Nevada Policy Research Institute, expressed doubt Question 1 would attract the high-tech businesses its backers say it would. Muska argued in an opinion brief that Nevada has trouble attracting those types of businesses because of its poor schools.

"With a dropout rate double that of the national average and a dismal college continuation rate, entrepreneurs from the technology industry don't see many potential employees in Nevada's labor pool."

But Chuck Alvey, of the Economic Development Association of Western Nevada, said the ability to get state venture capital would give groups such as his another tool to attract new businesses to the state. He said Western Nevada in particular isn't big enough to have attracted major venture capitalists.

"Startups and new companies are going to grow this economy," he said. "We just don't have the core funding because it isn't worth their effort here. There's got to be that critical mass."

He said until that happens, Question 1 would let state government provide that kind of funding to new companies willing to start up in Nevada.

He said he knows of one food company which moved back to California from northern Nevada "because they couldn't get venture capital here."

And Schmidt said the idea isn't new; 44 other states do something along those lines.

"We can learn from them what does and doesn't work," he said.

Vilardo countered that the state could also lose money. She said she doesn't believe the state will have much money for that kind of investment in the near future.

"Given all the concerns about additional revenue the state must have. I believe there's not a huge sum of money to go out for this," she said.

Muska also expressed doubt the state has the expertise to pick the right investments, citing problems state officials have had in developing computer systems for welfare and DMV as well as legislative ignorance of Internet technology.

"In Nevada, there is abundant evidence that government officials are incapable of understanding the complexities of the information age," he said. "If recent history is a guide, allowing politicians and bureaucrats in the Silver State to invest public funds in high-tech startups is unwise."

Alvey said the ballot question wouldn't create or mandate public cash investments in private businesses, only remove the constitutional prohibition and give economic development groups another tool to compete with.