EDITORIAL: ‘Innovation Zones’ and economic diversification

Gov. Steve Sisolak has everyone’s attention with his controversial proposal to allow tech companies to establish their own city-like “zones” in Nevada as a means of economic development. The reaction ran the gamut, with some fearing the plan could lead to dystopian private governments that exist under their own rules and others hailing it as an innovative, futuristic approach to diversifying the economy.

No bill has yet been introduced at the Legislature, so the details remain unknown. But the proposal is designed to accommodate Blockchains LLC, which owns 67,000 acres of land in sparsely populated Storey County outside Carson City. The company has announced that it hopes to build a smart city on the property based on blockchain technology, which is the record-keeping mechanism behind Bitcoin.

Gov. Sisolak has already filled in some of the blanks regarding his “innovation zone” vision. To qualify, companies would have to own vast tracts of undeveloped land and agree to invest at least $1 billion over a decade. The companies would pay taxes and additional fees, while the “zones” would be governed by a three-member panel appointed by the governor but later elected by residents. The area would be granted increasing autonomy as time went by in terms of providing public services such as schools.

The concept is designed to replace the taxpayer handouts and abatements that characterize so much of what passes as economic development in the Silver State. Nevada’s tourism industry — the state’s meal ticket — was particularly hard hit during the pandemic, and Gov. Sisolak insists that unusual solutions will be required to lift the state out of the trenches.

“As we’ve learned in the past,” he told CitiesToday, “an emergency requires us to throw out the tried-and-true, discard the ‘How We’ve Always Done It’ manual and move on. ... I just ask that all involved understand that the end goal is a massive economic development investment in Nevada, and a chance to set down a marker that Nevada is the blockchain technology center of the world.”

Critics immediately accused the governor of kowtowing to Big Tech. Others worried about water issues. The Storey County Commission quickly opposed the proposal. No doubt the risk of unintended consequences is great. We’ll await the specifics — a bill should soon drop in Carson City.

The governor deserves credit for recognizing that traditional diversification efforts have fallen short. It doesn’t help that Gov. Sisolak and his Democratic cohorts in the Legislature seem intent on beefing up the state’s regulatory apparatus, California-style. Perhaps a more productive step would be to simply foster a friendly tax and regulatory environment for all entrepreneurs and job creators rather than to offer special dispensation to a favored few.