Subsidies denied to Nevada power plant, publisher

David Strow

Thursday, Aug. 10, 2000 | 11:08 a.m.

An affiliate of energy giant Enron Corp. is reconsidering plans to build a $120 million power plant in North Las Vegas following the state's refusal Wednesday to give the company tax incentives.

Enron affiliate Las Vegas Cogeneration LLC sought an unusually massive tax incentive for the plant -- $10.6 million in abated property, sales and use taxes, and an additional $2.2 million in deferred taxes.

But officials of the Nevada Commission on Economic Development balked at this request, since the plant would have only employed six people, at an average hourly wage of $25.08 -- an average incentive of $1.76 million in waived taxes for each new job. Bob Shriver, executive director of the commission, estimated the state would see a return of 3 cents for each dollar in incentives.

"Frankly, if we did that, the governor would disband this commission, and rightly so," said commission Vice Chairman Berlyn Miller. Soon after, the commission voted 5-0 to deny the application, with Commissioner Peter Thomas abstaining.

Enron officials had hoped to build a "peaking power" natural gas plant at the North Las Vegas site near the intersection of Bruce Street and Alexander Road. Las Vegas Cogeneration currently operates a 54-megawatt natural gas plant there; this expansion would have expanded its capacity to 284 megawatts. Its projected price was raised through the use of the latest environmental controls, Enron officials said.

"These sort of incentives are critical for success in this project," said Ed Clark, director with Enron North America Inc., which together with Enron affiliate Southwest Power LLC owns Las Vegas Cogeneration. "It is a very efficient expansion of an existing power facility. Should we not be able to go forward with these incentives, it will be very difficult for us to make this kind of project pencil out."

"For us to give out millions of dollars for six jobs is just doesn't pencil out for us," Miller retorted.

With the rejection, Enron will now discuss building the power plant in another state, possibly California or Washington, said Enron North America Director James Gilbert.

"This would add a tremendous property tax base to North Las Vegas even with the tax incentives," Gilbert said, saying Enron's tax payments would have risen from $260,000 per year to $900,000.

Enron currently has a contract to sell power from the plant to local utility Nevada Power Co. When demand rises to levels that strain Nevada Power's supply -- a situation seen during this particularly torrid summer -- the plant supplies the extra electricity needed to cover the shortage. Power from the plant can also be provided to electric utilities throughout the West.

But granting such an incentive would have created a dangerous precedent for Nevada by compelling it to grant multimillion-dollar incentives to other electric providers, said Bob Shriver, executive director of the commission.

"(Electricity providers) are lined up out there looking at locating their facilities in Nevada," Shriver said. "If we had provided these incentives, those coming afterwards would have expected to receive the same.

"(The Enron plant) was one of the smaller ones we'd see. Most cost $200 million and above."

The commission also unanimously rejected a second, far smaller tax incentive application by Las Vegas Press, publisher of the weekly newspapers Las Vegas Business Press and Las Vegas CityLife and the monthly Las Vegas Senior Press.

Las Vegas Press was seeking incentives for a $1.5 million investment it's making in a new printing press. The company had sought a tax abatement of $78,000 on the press, which will be used to print USA Today for newspaper publisher Gannett, as well as the company's three local publications.

The commission declined to award this tax break to Las Vegas Press in April, saying the 25 jobs it would create wouldn't meet the state's average hourly wage of $14.61 -- a must for any company seeking incentives in Nevada.

That wasn't an issue Wednesday for the company, which provided new projections that showed the average wage would be $15.50 per hour.

Publisher Rod Smith had argued the incentive would make it easier for his company to bring substantial commercial printing contracts from other newspaper publishers to Nevada.

"A tax abatement would make us much more competitive," Smith said. "It's important to our ability to bring business in from outside of Nevada."

But commissioners were deterred by two factors -- one, Smith's acknowledgement that the press would be installed regardless of the incentives; and two, the fact that the printing and distribution of USA Today could be considered competitive to other newspapers in the Las Vegas area, even if the papers would also be distributed in Utah, Arizona and New Mexico.

Commissioners also wondered whether the plant would be competitive to printing operations run by other local companies, such as the plant operated by the Las Vegas Review-Journal.

The commission traditionally rejects applications if it believes they will give an advantage to a company over its local competitors. For this reason, the commission has almost always turned down incentive requests by printing companies. "The distribution of USA Today is linked to the Las Vegas area," Thomas said. "Where do you draw the line between local competition and bringing in business from outside the state?"

The commission had previously approved a tax deferral for the company. With Wednesday's denial of tax abatements, Las Vegas Press will be eligible to defer $108,000 in tax payments.

Following the two denials, the commission then faced three requests for training funds from Las Vegas-area employers -- a difficult task, given the limited pool of training funds available to the commission.

Wednesday's requests totaled more than $429,000 -- which, if granted in full, would have used up two-thirds of the commission's remaining training funds for the fiscal year ending June 30, 2001.

"That isn't enough money," said a frustrated Miller, when told just $663,000 was available.

The largest grant was sought by Providian Financial Corp., which employs 300 in a Henderson call center. The center plans to hire 300 more trainees at an average wage of $12.89 per hour; after training, the pay would increase to nearly $15 per hour, a Providian official said. The $263,000 grant would assist Providian in providing training on how to deal with customers.

Though inclined to assist Providian, commissioners said they couldn't justify handing out such a huge piece of their remaining funds to one company.

"This is almost half of the remaining balance we have left," Thomas said. "While this is a company ... that gives Las Vegas a lot of credibility, we're looking at giving away one-half of our remaining funds for the year to just about the average of the state's hourly wage."

Providian agreed to withdraw the application and to return with a smaller funding request.

Second was Avery Dennison Corp., one of the nation's largest producers of office supplies. Avery Dennison received a $278,000 tax break previously to encourage it to locate a 100-job service center in Las Vegas. Handling such functions as payroll, accounts payable and receivable and taxes for the company, the center would pay an average of $15 an hour.

Avery Dennison asked for just under $100,000 in training funds, which would be used primarily to train employees on common software such as Windows and Microsoft Word. Commissioners voted 4-1 to approve the request.

"To me, this has all the benefits I like to see in an application," Miller said, saying that the wages were attractive, and the skills provided would be easily transferable to other jobs.

A greater challenge was faced by Advance Polybag Inc., which is hiring 80 employees at a new North Las Vegas plant to manufacture logoed plastic bags. The plant will also have plastic bag recycling operations.

Miller and Thomas adamantly opposed granting the company's $67,000 training request, saying the plant's average wage of $12.74 per hour didn't justify incentives. Previously, the commission turned down the company's request for a $518,000 abatement, but granted a $198,000 tax deferral.

But the remaining commissioners were swayed by Otto Merida, the newest member of the panel.

"This is also a type of job we need in this community," Merida said. "There are a great many people in this state that cannot obtain that high level of (high-tech jobs), but can still get a very good paying job. We need to think about these people when we make our decision."

The commission voted 4-2 to grant a reduced grant of $39,000, which did not include travel expenses, for equipment trainers to be brought in from Oklahoma.

In other actions Wednesday, the commission:

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