“The state Assembly voted overwhelmingly in favor of the deal Saturday, after a four-day special session in Carson City,” the Associated Press reported. “Lawmakers learned last week that Chinese billionaire Jia Yueting was backing the secretive California-based company, which employs some former Tesla Motors executives, and that Faraday plans to bring 4,500 direct jobs to Nevada.”

High hopes

Four bills cementing the deal headed to Gov. Brian Sandoval — a booster of the plan — who swiftly signed them at a short Capitol ceremony. “The Republican governor said he’s excited about the prospect of young Nevadans getting well-paid jobs at the $1 billion plant in North Las Vegas,” the Sacramento Bee reported. “The factory is expected to employ 4,500 workers and create another 9,000 indirect jobs. Sandoval said Nevada’s proud of its casino and mining industry, but wants to keep up with the industries of the future.”

A package deal

Although Nevada’s package of incentives helped the state’s candidacy, Faraday officials — including former Tesla heavyweights — cautioned that other factors combined to put it ahead of the pack. Dag Reckhorn, the company’s vice president of global manufacturing and ex-manufacturing director for the Tesla Model S, told the Los Angeles Times that “Nevada gave us the best overall deal. It’s still close to the West Coast, we have Highway 15. It’s good for our supply chain — getting parts in and out of the plant.”

Reinforcing Faraday’s reputation for closely-guarded confidentiality, neither Reckhorn nor any other representative let slip any details on California’s losing bid — if any. “Company officials declined to say whether California offered similar incentives or where they were considering building, citing a nondisclosure agreement,” noted the Times. “A spokesman for Gov. Jerry Brown’s Office of Business and Economic Development declined to comment.”

Winning on water

But one detail of the delicate negotiations carried out during the Legislature’s special session could hint at what took place behind the scenes. Of the four bills it took to smooth the way for Faraday, fully half involved the company’s access to Nevada water. In what was characterized by Reno Public Radio as a “compromise,” legislators agreed that the state would “supply Faraday with groundwater quickly without tampering with existing water law.” The deal bringing Tesla to northern Nevada — at a site distant from Faraday’s southern Nevada location — wound its way through the Nevada Legislature in half the time as the current raft of agreements, according to the network.

Some lawmakers cautioned against placing too much faith in Faraday’s viability. Expectations have been anchored around promises by the company to field electric cars on American roads by 2020, with construction beginning on the North Las Vegas plant next month, according to Jalopnik.

U.S. Senator Harry Reid, D-Nev.

Physically injured and in his 75th year, Senate Democratic Leader Harry Reid, D-Nev., has opted against seeking reelection in 2016. Victim of a debilitating self-inflicted injury involving an exercise band, the Congressional titan has not only cleared an unexpected path for a political shakeup in Nevada. He has also touched off a consequential political contrast between Democrats in the Silver State and the Golden State — and Republicans on either side of the state line.

With Sen. Barbara Boxer, D-Calif., also retiring, California Democrats face a much different path through 2016 than Nevada Democrats. California Republicans, meanwhile, also face a starkly different path than their Nevada compatriots. For that reason, members of both parties were likely to pay extra attention to events taking place in both states.

Feast and famine

CA Attorney General Kamala Harris

In California, Democrats have a deep bench and great resilience. Already, they have comfortably handled the impending loss over the next few election cycles of Sen. Boxer and Gov. Jerry Brown. With remarkable efficiency, leading Democrats waiting in the wings have sorted out their ambitions among themselves, preventing potentially divisive and draining primary-season conflicts. While Attorney General Kamala Harris laid swift claim to the race to replace Boxer, her presumptive rivals chose differently. Former L.A. Mayor Antonio Villaraigosa passed on challenging Harris, tacitly reserving the option to instead challenge Lt. Gov. Gavin Newsom, who announced his intention to run in Brown’s wake. Tom Steyer, meanwhile, a billionaire activist and prominent political funder, stepped away entirely from making any kind of campaign commitment of his own.

In Nevada, by contrast, Reid’s departure is set to leave a gaping hole. A Democratic candidate with Reid’s stature and popularity, who is capable of stepping into his seat, will not be as readily available. Though Democrats enjoy a substantial bench of potential candidates, Reid’s chosen favorite, former state Attorney General Catherine Cortez Masto, likely will face a challenge from Dina Titus — the state’s lone Congressional Representative — that could upend Nevada Democrats’ complex political pecking order.

Given that Reid barely survived his last political campaign for re-election, Democrats now confront a problem unimaginable next door in California: who to succeed Reid in a state where, as the Los Angeles Times put it, the outgoing Senator “was indispensable in helping turn Nevada from a Republican stronghold into a competitive state that Democrat Barack Obama carried twice.”

Rare opportunities

Nevada Republicans, meanwhile, have still not recovered from Harry Reid’s 2010 victory over Sharron Angle, one of that year’s insurgent Tea Party candidates. State Republicans fretted than Angle’s relative inexperience and uncoached utterances cost her dearly. Many Democrats adopted the same view. In the end, Angle managed to net 45 percent of the vote, but a loss was a loss — one the Nevada GOP do not want to repeat.

This time around, with Reid out, the dynamic has changed radically. Once down and out, Nevada Republicans have suddenly found themselves in a position the envy of the California GOP. Golden State Republicans have no equivalent to Gov. Brian Sandoval, who has not announced any move to replace Reid but boasts a formidable base of built-in support.

“If Sandoval entered the Senate race,” the Times reported, “he would be a commanding front-runner. A former federal judge who stepped down to run for governor in 2010 — when he beat Reid’s son, Rory — he is enormously popular, having won reelection in November with nearly 70 percent support.”

If he runs, Sandoval could establish a model of great interest to the California GOP. Sandoval, seen as an idiosyncratic moderate, could notch a coveted win for centrist Republicans in a blue state. Although relatively unpopular with the national party’s East Coast conservatives, a presumptive victory in the Nevada senate race — during a presidential election year — would put pressure on California Republicans to field similar candidates in the big races coming their way in 2016 and 2018.

This is Part II in a series of stories about Nevada’s economic strategy. To read the first installment, click here.

In September, Nevada Gov. Brian Sandoval delivered the Republican Party’s weekly address. In the video, which lasted less than six minutes, Sandoval blasted the Obama administration’s handling of the economic recovery and touted Nevada’s approach.

Sandoval, elaborating on how dire the economic situation in Nevada was when he took office in early 2011, said that “mere survival” was not good enough for his state. He said that he ordered all new regulations be frozen until they could be reviewed; cut spending by hundreds of millions of dollars; balanced Nevada’s budget; merged and eliminated state agencies; and extended tax exemptions for businesses. (Sandoval, working with a Democrat-controlled state legislature, later agreed to extend some taxes that had been set to expire.)

In the video, Sandoval pointed out that Nevada had experienced 31 months of economic growth and had the second strongest decline in unemployment in the nation. He also claimed that a wide array of businesses now had plans to move to Nevada.

“When it comes to growing jobs, it is my responsibility to leave no stone unturned when it comes to getting Nevada working again,” he added.

So what exactly are those plans?

Selling Nevada

Nevada’s pitch to firms interested in expanding or relocating to the state is simple. The state has some of the lowest taxes in America. California's top income tax rate is 13.3 percent; Nevada has no state income tax.

Nevada's regulations are limited. Given the state’s size, working with government is quick and easy (California businesses often complain about how long routine approvals take). Some firms — though certainly not all — are coaxed with even more tax incentives. And Las Vegas — known for its tourism, as well as the benefits that come with being a large metropolitan area — has always been a major selling point.

A patchwork assortment of agencies remains tasked with selling that message to firms that might want to expand or grow in Nevada.

At the top is the Governor’s Office of Economic Development. Historically, the lieutenant governor was tasked with running economic development in Nevada, but 2011 legislation centralized power in the governor’s office by creating the OED.

Sandoval has aggressively courted major companies since. In early 2012, he announced the state would attempt to create 50,000 jobs by 2014. Apple and Starbucks have both moved parts of their business to Nevada as a result of negotiations handled primarily through the OED. (Apple received a large tax break.)

In addition to attracting outside states, the OED focuses on attracting workers to some of Nevada’s core industries like gaming and tourism, as well as mining. The office is also pushing to expand the small tech industry in southern Nevada, along with logistics and transportation industries.

“They’re making a big push for drones as a way to diversify,” University of Nevada, Las Vegas political science professor David Damore told CalWatchdog. (The U.S. military currently has a major drone base located outside of Las Vegas.)

But the OED is only part of the economic strategy. Nevada also relies on regional agencies to draw businesses on a smaller scale. Their efforts, though less individually significant, add up.

“You have the local agencies that are able to make connections with smaller firms who are looking at a specific area,” added Eric Herzik, a political science professor at the University of Nevada.

This system — the OED focusing on major companies and regional agencies drawing smaller firms — is generally effective. Damore noted, however, rural agencies in Northern Nevada often compete among themselves and can have trouble attracting business.

“The problem they really have is just scale. There are so few people out there; it’s hard to get people to say they’ll invest in a county with 700 people,” Damore explained.

But others, such as the Las Vegas Global Economic Alliance, have had more success. Earlier this year, for example, they approved a set of incentives that could bring more than 1,000 jobs to southern Nevada. For a state with less than 3 million residents, the numbers could have an impact.

Leaving California

The array of agencies pitching the Silver State’s benefits has an unexpected ally: California.

The Golden State has long maintained a tougher climate for businesses, relying on its natural benefits to justify the expense of doing business in the state. Nevada has long tried to capitalize on that fact.

But late last year, Nevada’s advantages became significantly clearer. California voters approved a series of measures that raised taxes throughout the state. Proposition 30 raises about $6 billion in annual revenues through a regressive sales tax hike and a progressive tax hike on the wealthiest Californians. Proposition 39 closed tax loopholes for multi-state businesses that operate in California, raising taxes about $1 billion a year.

Though a majority of Californians supported the propositions, not all did — particularly businesses and some of the state’s wealthier residents.

Despite its welcoming tax and regulatory climates, Nevada still faces many deficiencies in quality of life that make it a hard sell. It lags in education, health care and — though it’s a subjective measure — weather.

Which begs the question: Just how effective has Nevada’s economic campaign been?

Check back tomorrow for third and final part of the series, where CalWatchdog investigates some of the results of the changes implemented in Nevada — and what that means for California.

Brown, in a statement, said, “Today, California reaffirmed its longstanding partnership with the state of Nevada to protect and enhance the beauty of Lake Tahoe.”

Nevada Gov. Mark Sandoval, in the same statement, said that the bill is just part of California and Nevada’s long tradition of working together on issues related to Lake Tahoe.

“Lake Tahoe truly is the Jewel of the Sierra and with the signing of this law both states can continue to ensure the protection of the environment and help enhance the economy of the region,” Sandoval said.

Beyond the friendly statements, though, was a gritty political battle. The Los Angeles Times explained the basic contours:

Almost as long as California and Nevada have shared Lake Tahoe’s pricey shoreline, the two states have harbored competing visions of how best to prosper from the region’s stunning natural beauty while preserving the lake’s deep-azure color and remarkable clarity.

At times, the disputes have flared into what Joanne Marchetta, executive director of the Tahoe Regional Planning Agency, describes as a ‘red-hot crucible for debate and dissonance.

Earlier, CalWatchdog explained how, as California veered further to the left, a rift grew between the two states about how to handle development. The changing relationship prompted an interstate political battle:

 […]As time passed, officials in Nevada grew impatient with California’s approach to the pact. Nevada wasn’t angry about a specific incident; rather, the problem was about broader issues surrounding development. Nevada officials, who were inherently more skeptical of overregulation than officials in California, wanted the interstate agency that makes decisions about development to take economic considerations into account. California didn’t.

This caused a major rift between the two states, and Nevada threatened to pull out of the agreement with its more liberal neighbor. In fact, Nevada threatened to do so over half a dozen times. In 2010, the frustration reached a boiling point, and it appeared that Nevada was finally going to walk away from the agency—and develop its side of Tahoe however it wanted.

For Nevada, the threat was perfectly timed.

After Nevada threatened to pull out, California took their considerations more seriously. To the environmentalists that often influence Brown and the Democrat’s policy thinking, it was better to capitulate on some demands throughout the lake, rather than allowing the Nevada side to become an economic free-for-all.

After negotiations between the two states, Sandoval got most of what he wanted from Brown. An environmental activist told the Los Angeles Times that environmental interests “got rolled” by Nevada’s maneuvering.

And so the bill was signed into law.

Naturally, any politician signing a bill will declare a victory. But Brown’s hand was forced, and the pact’s new conditions were far from optimal (from his view). It was, no doubt, a loss for Brown. Perhaps that’s why he signed the bill on a Saturday, typically the slowest news day of the week.

By John Seiler

California Republicans are gathering this weekend for their convention in Burbank. For inspiration, they should look to what is happening in neighboring states.

Two years ago, Republicans nominated for governor Susana Martinez in New Mexico and Brian Sandoval in New Mexico. Both favored cutting government and reducing taxes. Both won.

Last week, Texas Republicans nominated Ted Cruz for U.S. Senate. He also favors cutting government and reducing taxes. He’s a favorite to beat the Democratic nominee, Paul Sadler, in November.

Contrast that with the two Republican Latinos on the California statewide ballot in 2010. Abel Maldonado, the sitting lieutenant governor, was wiped out by Democrat Gavin Newsom. And Mike Villines was defeated for insurance commissioner by an outright socialist, Dave Jones (who’s sending the California insurance industry to his locker).

Both Maldonado and Villines started out with promising careers. Then they sold out to Gov. Arnold Schwarzenegger on the record $13 billion tax increase of 2009. Maldonado’s reward from Arnold was an appointment as lieutenant governor, then the passage of the Top Two system for elections, which supposedly favored “moderates” like him. Thanks to Top Two, Maldo now is facing incumbent Democrat Lois Capps in the 25th U.S. Congressional District. He likely will lose. So all the selling out to Arnold will have meant nothing.

Of course, the pundits and Arnold keep saying “moderates” like Maldo and Villines are the key to attracting Latinos to vote Republican. Then why is the opposite tactic — running conservatives — working in neighboring states?

Cruz control

Cruz’s case is instructive. The typically clueless GOP establishment opposed him. Reported FoxNews, “Gov. Rick Perry and much of the rest of the Republican establishment lined up to endorse [primary opponent David] Dewhurst for their party’s nomination….”

According to Lubbock Online, Dewhurst, the sitting lieutenant governor, “also had a $200 million personal fortune he could dip into and did, loaning his Senate campaign at least $24.5 million.” Dewhurst outspent Cruz by three-to-one. So Dewhurst was a typical moneybags moderate the Republican establishment adores, like Meg Whitman and Carly Fiorina in California, or Mitt Romney for president.

But Cruz was strongly supported by the Lone Star State’s Tea Party activists. Lubbock Online wrote, “Cruz has a fiery stage presence that made Tea Party supporters across the state swoon, and received millions from national, conservative organizations which targeted Dewhurst as too moderate.”

Cruz also was backed by my favorite, Sarah Palin. On this video of her post-election comments, Palin points out that Dewhurst spent his money on the usual losing Republican consultants. But Cruz listened to the people.

According to critics, the Tea Party is supposed to be a bunch of cracker racists who hate Latinos and blacks. But in Texas, the Tea Partiers provide the electricity that put the candidate on Cruz control.

In other words, Cruz is an anti-Maldonado and anti-Villines. Of course, if Cruz gets elected, we’ll have to wait to see what he actually does in office. But his political stances certainly are what’s needed, and what voters crave to endorse.

Even the liberal Atlantic magazine has noticed how Cruz exemplifies how Tea Party candidates are winning:

“Time and again, the Tea Party has been declared moribund, splintered, and ineffective. And time and again, it has pulled off surprising upsets. The insurgent conservative moment won a significant victory Tuesday in Texas, where attorney Ted Cruz scored a stunning 13-point win over David Dewhurst in a Republican primary for the state’s open U.S. Senate seat. The margin of victory exceeded even recent polls that showed Cruz leading by around 10 points.”

Moderation

Yet in California, “moderation” still is supposed to sell. George Skelton, the Los Angeles Times columnist celebrated for his 50 years of reporting on the state, recently attacked state Republicans for not supporting moderates, but instead continuing to support such things as the “no tax” pledge. Basically, Skelton and others think Republicans in California would win more offices if they just embraced Democratic policies. The opposite is true.

If Republicans in California have any sense, they’ll cultivate young Latinos who are conservative or libertarian — favoring cuts in budgets and taxes. They’ll get candidates who can give a good speech, fire up a crowd. And they’ll run these candidates for local offices to get some experience, and to see which is best. Then run them statewide.

By the way, did you know that, although Latinos are a majority of the Democratic Party in California, in 2010 not a single Latino was nominated for a statewide office by the Donkey Party? Same thing this year, with Sen. Dianne Feinstein running for re-election. The Democratic Party still is ruled by three septuagenarian Anglos, Gov. Jerry Brown, Sen. Barbara Boxer and Feinstein.

With the Democrats running everything in the state, they’re going to get blamed as the state crashes into the Pacific Ocean. So…get ready.

There’s opportunity there for Republicans — if they can seize it.

Gov. Jerry “Jobs Killer” Brown quickly is replacing departed adulterer Gov. Arnold Schwarzenegger as California’s second-worst governor. (Gov. Earl Warren always will be the state’s worst governor for stuffing loyal Japanese-Americans into concentration camps during World War II.)

The Mercury writes about how the “Amazon tax” Brown signed into law destroyed one small business — which is moving to Nevada:

It wasn’t the Great Recession that killed Nick Loper’s business. It was a flick of Jerry Brown’s wrist.

When the governor signed the state’s new online-sales tax law last month, Seattle-based Amazon and other out-of-state Web retailers immediately severed ties with thousands of California affiliates, arguing the move would put them beyond the reach of the state’s taxman. Among the victims: ShoesRUs, Loper’s comparison shopping website for shoes, confronting the Livermore entrepreneur with a life-changing reboot.

After six years of growing what started as a $200-a-month business into a profitable full-time gig, Loper said he had no choice but to shutter his site, suddenly deprived of 70 percent of the commissions he’d earned sending customers to the big retailers via click-through ads on his site.

Loper then made an argument I’ve been making for years. That California, supposedly the epicenter of Internet technology, should be the last place to increase taxes on anything to do with the Internet. It’s as dumb as Michigan favoring a $10-a-gallon new gas tax.

“I always figured that in California, home to Silicon Valley and a million tech startups, they’d never pass a law like this,” said Loper, 28, who’s moving to Nevada, which has no online sales tax, to run his newest online venture, ShoeSniper

Loper never figured that Californians would elect as governor a jobs-killing, business-hating Luddite — Jerry “Jobs Killer” Brown.

The Mercury also provided a concise explanation of what these affiliates do:

Loper’s site is fairly typical of those of affiliate marketers, who set up a website about fly-fishing, say, blog about the subject to draw readers in, then hope they click on an ad for FlyFishUsa, go to that site, and buy a fly reel, generating a commission of up to 20 percent for the affiliate.

Note that Loper doesn’t have any actual, physical stock that he ships. That means moving his business to Nevada means stuffing his laptop into a backpack and getting out of Dodge.

Goodbye, Mr. Loper. And good luck in your new state, whose great new governor, Brian Sandoval, likes businesses and jobs. Here’s what Sandoval did back in January, when Brown was scheming to destroy California businesses with higher taxes and regulations:

CARSON CITY — Moments after being sworn into office Monday, Gov. Brian Sandoval signed an executive order that he said will help show prospective businesses that Nevada is a business-friendly state.

“The key is getting people back to work,” said Sandoval as he signed an order suspending any new executive branch regulations until 2012.

Sandoval said he wants to show business owners considering Nevada that the state will not impose any additional regulations or costs that would dissuade them from moving here.

“The worse thing that could happen is raising taxes in our state,” he said.

In the meantime, he wants state agencies to review regulations and rescind those that harm businesses.

July 29, 2011