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With economic incentives and ad campaigns, Nevada goes prospecting for California businesses.

“Go West,” is the timeworn advice to fortune-seekers. For California companies, it might be better to go east — to Nevada.

Famous for its casinos, legalized prostitution and quickie marriages and divorces, Nevada is sprucing up its image as a business-friendly state that doesn’t tax corporate and personal income, inventory or gross receipts.

The makeover comes primarily at California’s expense. The Golden State has been skewered in a series of advertising campaigns that shine a glaring light on the high workers’ compensation fees, energy bills and labor laws that make it difficult for businesses in California.

On March 17, three days prior to launching a $3.5 million campaign, Las Vegas Mayor Oscar B. Goodman stood in the rain in a navy pinstriped suit and tossed peanut bags to office workers in the middle of downtown Los Angeles. His transportation was a blue double-decker bus covered with the slogan: “Stop working for peanuts. Take your act to Las Vegas.”

“I’m trying to create an intellectual marketplace down there [in Las Vegas],” Goodman said.

Somer Hollingsworth, chief executive officer of the Nevada Development Authority, a non-profit organization that tries to attract non-gaming business to southern Nevada, spearheaded the peanut campaign. He estimated that from 2002 to 2007, companies new to southern Nevada will generate $592.7 million in wages and $100 million in sales, property and payroll taxes. “We have to diversify this economy,” Hollingsworth said.

Another marketing initiative, started in 2003 by a consortium of Nevada trade groups and budgeted at roughly $600,000 per year, took potshots at California Gov. Arnold Schwarzenegger and the state’s bear mascot. Mocking Schwarzenegger’s action flicks such as “The Terminator,” the punch line asked, “Will your business be terminated?” Another tag line teased that California’s cost of living had become so prohibitive that even the bear on the state flag had decamped to Nevada. A billboard hoisted above a busy intersection at Hollywood Boulevard and Vine Street explained that the bear was “found doing business in Nevada.”

“There is not a perception out there that we’re a dynamic business climate,” said Julie Ardito, spokeswoman for the Economic Development Authority of Western Nevada, which helped pay for the campaign.

This story first appeared in the March 22, 2006 issue of WWD. Subscribe Today.

Nevada has momentum. Sixty-five companies, ranging from software makers InfoGenesis and PC-Doctor Inc. to confectioner Kimmie Candy Co., have moved to Nevada from California in the last two years, Ardito said.

Nevada trade groups said the state attracts companies in technology, life sciences, industrial manufacturing and construction, rather than in the fashion and apparel industry. That’s because the biggest challenge for designers and clothing manufacturers is finding workers in Nevada with expertise in design, pattern making, brand management and production.

Still, there are qualified people who work on costumes for casino shows. Lauren Molasky, the 22-year-old designer behind contemporary label Lauren Jane, said she had great response to ads for people to make samples and patterns in Las Vegas, but she was looking to fill only two positions. Still, Molasky said, living in Las Vegas “separates me from all the Los Angeles-based designers.”

North of Las Vegas in Reno, the talent pool is smaller, said John Kirsch, ceo of outdoor clothier Sportif USA. “When it comes to the traditional garment design, obviously, there is not a lot of depth in Reno,” he said. Still, Sportif, which moved to Reno from the San Fernando Valley in 1971 and owns a factory in Sri Lanka, won’t return to California. “We draw very little from the L.A. market,” Kirsch said.

Scott Szybala, president of Skagen Designs Ltd., said it has been difficult to hire “creative people” to design and market its Danish design-inspired watches, eyewear and soon-to-be-introduced leather briefcases and handbags. “We’re still hopeful,” Szybala said. Nonetheless, after relocating to Reno from Long Island, N.Y., in 1990, Skagen saw a trade-off in tax benefits, a lower cost of living and central location to cities such as San Francisco and Salt Lake City, he said.

Patagonia Inc. in 1996 moved distribution operations to Reno from its headquarters in Ventura, Calif., for better access to fishing, hiking and the Sierra Mountains as well as low construction costs and tax benefits, said Dave Abeloe, the outdoor company’s distribution center director. Patagonia saved “millions” after the relocation, he said.

The proximity to California’s metropoli benefits Nevada. It takes four hours to drive to Reno from San Francisco and five hours to Las Vegas from Los Angeles. Many Californians cross the border to ski, gamble, shop at outlet malls and dine at world-class restaurants. Southern California publications, including L.A. Weekly, are stuffed with ads for performances by Cirque du Soleil and other entertainment in Sin City.

“The biggest, most important market to Vegas is Los Angeles,” said Jeff Wagner, president of public relations firm Wagner/Junker Agency in Hollywood, which plans to open an office in Las Vegas by July.

California, with one of the world’s largest economies, isn’t exactly running scared from its much smaller neighbor, but at local and state levels, it has started to fight back.

“If you’re a serious business, perhaps Las Vegas is the last place where you want to go to,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., criticizing Nevada’s largest city for its relatively undeveloped transportation system and reliance on entertainment.

Schwarzenegger launched a counterattack against Nevada in 2004 with a national initiative stating: “California wants your business.” The governor posed for photos as head of “Arnold’s Moving Co.” to help firms relocate from Las Vegas to the Golden State.

But Schwarzenegger can’t change economic realities. “Nevada tries to steal California’s lunch,” said Stephen M. Miller, chairman of the economics department at the University of Nevada at Las Vegas. “Most of our growth is fueled by Southern Californians coming here and cashing in their home equity,” he said.

Diann Tonnesen, a real estate agent in Henderson, Nev., outside Las Vegas, said Californians make up 60 percent of her clients. “A lot of them are in their 50s, not retired yet, but getting ready to retire,” she said.

According to the National Association of Realtors, the median price for a single-family home in 2005 was $304,700 in Las Vegas and $349,900 in Reno. In comparison, the median price was $529,000 in the Los Angeles metropolitan area, including Long Beach, and $715,700 in the San Francisco Bay area.

Las Vegas is home to the country’s third-largest convention center. MAGIC International began showing there in 1989 after a decade in the Los Angeles Convention Center because it needed more space. Ernae Mothershed, a spokeswoman for MAGIC in Woodland Hills, Calif., said the show has doubled in size since its first production in Las Vegas. Each show (there are two a year) generates $145.4 million in non-gaming revenue.

It’s no surprise that entrepreneurs like Ivan Kane chase the more than 50 million tourists who visit Nevada each year. “People are coming to spend money,” said the owner of Los Angeles burlesque nightclub Ivan Kane’s Forty Deuce, which expanded to Las Vegas in November 2004. “In my line of business, it’s a fantastic thing,” Kane said.

Retailers also flock to Las Vegas. Juicy Couture, based in Los Angeles, opened its first boutique there. Even some luxury brands, including shoe label Giuseppe Zanotti, preferred Las Vegas’ Strip over Beverly Hills’ Rodeo Drive for their retail debut on the West Coast. Levi Strauss & Co. said it chose Las Vegas as the site for its 18th freestanding store because the city is becoming a major shopping destination. “It’s the new Beverly Hills experience for some people,” said Levi’s spokeswoman Amy Jasmer.

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