Aided by state tax incentives, SoCal-based Berkley International latest company to hop on Reno-Sparks relocation bandwagon
RENO, Nev. — When Jeff Berkley, founder of custom molded fiber packaging company Berkley International, was hunting for a new location to expand manufacturing operations, he knew he needed to stay in the western region to service his primary customer base.
Berkley looked at multiple locations, including Las Vegas and Salt Lake City – but Northern Nevada was the best fit, he says.
“The reality is that the folks in Reno were really great to work with and very supportive,” Berkley said prior to his company’s May 17 groundbreaking at Tahoe Reno Industrial Center, located just west of Reno-Sparks in Storey County.
United Construction is building Berkley International’s new 82,000-square-foot manufacturing facility on Peru Drive.
“They made it a simple decision, and there were quite a bit of tax benefits,” Berkley said. “Leaving California for sure (helped), but there were additional incentives that made it way more attractive for us.”
As part of the deal to expand here, Berkley International received sales tax, modified business tax and personal property tax abatements totaling just under $180,000 from the Governor’s Office of Economic Development.
The company is the latest of more than 40 businesses to relocate here and receive incentives. GOED offers a slew of incentives to help companies plant their flag in Northern Nevada — with the most widely known example being $1.3 billion in incentives and abatements awarded to Tesla to locate is Gigafactory at TRIC.
Companies large and small have come to expect an incentives package as part of their relocation efforts to the Silver State. Berkley says his team didn’t even need to run the numbers to know that relocating to Nevada provided the best situation.
“We use quite a bit of water, power and gas in our process, along with quite a bit of labor doing assembly for displays, and when you take those four pieces of business and look at cost structure in California versus the state of Nevada, along with the location of Reno, it was a very, very simple decision for us,” Berkley says.
Becoming ‘much more aggressive’
Incentives are just one of the many tools that help make Northern Nevada an ideal location for companies with West Coast operations.
The region has long been favored as a logistics and warehousing hub due to the fact that goods can be delivered to millions of western-region customers within a day’s drive. And while some may argue that the state is giving away too much – especially with its economy firing on all cylinders – there’s no denying that incentives have helped change the business landscape of Northern Nevada over the past five or so years.
The new businesses that have relocated here brought a plethora of high-paying jobs for skilled workers and above-average wages for unskilled employees.
More importantly, they’ve also helped diversify the regional economy, which puts Northern Nevada in a much better position to weather the next recession, says Mike Kazmierski, president and chief executive officer of the Economic Development Authority of Western Nevada.
“We have been much more aggressive in attracting the companies we need to diversify our economy, from advanced manufacturing to data centers and technology companies,” he says. “Incentives have been part of the package (to lure them here). But we have sold this community much more broadly, and for the highly sought-after companies, you can sweeten the pot by helping them offset some of the costs of relocating, which is very expensive.”
Many of the companies that now call Northern Nevada home had multiple relocation options, Kazmierski adds. Incentives get their attention to take a serious look at all the many advantages this region offers. While tax abatements are a primary incentive offered by GOED, other states offer far more, Kazmierski notes.
“This state offers a fraction of what see you see in the Southeast or Midwest,” he says. “What we do here is the best use of incentives, which are tax abatements over a couple of years to allow companies to make the transition and pay fewer taxes while they get up and running.
Once their operations are at full speed, the incentives fade away and they pay their full taxes.”
Nevada’s tax incentives are geared toward helping new businesses get settled in, Kazmierski adds. Businesses still have to relocate here, scale their operations and workforces, and pay their taxes. Then they are provided with a rebate or abatement on the taxes they’ve already paid.
“You never have a clawback option,” he says. “You have to pay the taxes first in order to get the abatement.”
Taking Northern Nevada ‘to the next level’
Prior to Tesla, Northern Nevada didn’t have the track record of success it now can flaunt – rather, it had tens of thousands of residents looking for jobs, Kazmierski says.
According to the Department of Employment, Training and Rehabilitation’s March 2019 report, jobs in Nevada increased at 3.4 percent, the fastest rate in the nation for the sixth consecutive month. In the Reno-Sparks region, jobs increased at 5.8 percent for the month, with 13,900 new jobs added year over year.
Unemployment in Northern Nevada in March stood at 3.1 percent – a stark contrast to six years ago, when unemployment in the Reno-Sparks metropolitan statistical area was 10 percent. Regional unemployment peaked in January 2011 at 13.9 percent, with 30,879 people out of work.
Getting residents of the Truckee Meadows back to work was certainly worth the tax abatements over a period of time, Kazmierski adds.
“Offering those incentives as a reason for companies to look at us was very important,” he says. “Relocation is a very important decision, and incentives entice them to take a better look at what our community has to offer.”
“As we look at automation, artificial intelligence and all the things coming in the fourth industrial revolution, many existing jobs will go away,” Kazmierski adds. “If we don’t replace those jobs with higher-paying jobs that give people a chance to enjoy better living conditions, then our community will lose talent and youth as they leave for those better-paying jobs. Any high school or community college graduate can find a living-wage job right here in our community, and that was not the case even five years ago. If we chose to not invest in the jobs of the future by incentivizing their creation, we will not provide this state the opportunity to move to the next level.”
Tiffiany Howard, a UNLV professor and recent Congressional Black Caucus Foundation senior research fellow, is the lead author of the study aimed at identifying ways banks can help support and invest in Black entrepreneurs.