Commercial real estate agents warn of state taxes

Monday, April 7, 2003 | 10:57 a.m.

When something happens in California that causes the cost of doing business to go up, the phones start ringing at the offices of commercial real estate professionals in Las Vegas.

"Every time a new problem becomes prevalent, the lines light up and the phones keep ringing," said Dan Doherty, senior vice president of the Industrial Division of the Las Vegas office of Colliers International. "It happened when they had their power problems and it's happening again with new workers' compensation legislation there."

Doherty told about 100 real estate professionals gathered at Colliers' Las Vegas Commercial Real Estate biannual trends breakfast Thursday that the phenomenon creates small boom periods in industrial development for Southern Nevada.

The spring trends breakfast also was sponsored by Restrepo Consulting Group LLC in association with First American Title, First National Bank of Nevada, the McDonald, Carano, Wilson law office and In Business Las Vegas, a sister publication of the Las Vegas Sun.

Somer Hollingsworth, president and chief executive officer of the Nevada Development Authority, which recruits businesses to move to Southern Nevada to diversify the local economy, said in recent public appearances that he, too, has seen an uptick in activity from California as a result of the increased costs the workers' compensation package will have on businesses.

The workers' compensation packaged signed into law by California Gov. Gray Davis last year increases workers' compensation benefits by $2.4 billion and will increase benefits of workers killed or injured on the job. Davis said it was the first increase in benefits since 1996, but California employers are still sorting through how much more it will cost to pay for the new system, implemented Jan. 1.

While Doherty and his associates stand to make money as a result of climbing costs in California, they're leery of getting too excited about a new exodus from California until Nevada's own legislative issues are resolved.

"That's why the tax package is so important right now," said panel moderator John Restrepo, principal of the Restrepo Consulting Group.

Doherty even suggested some companies with lengthy histories in Las Vegas could leave the state if a gross receipts tax is passed by the Nevada Legislature currently in session.

"(Passage of a gross receipts tax) could kill the deal," Doherty said. He named Citibank as a company that possibly could bolt. Financial institutions have been battered by numerous critics who say the banks are not paying their share of the tax burden in the public debate over how to solve the state's budget deficit problems.

A representative of Citibank could not be reached for comment.

Panelists briefly touched a variety of other development-related topics in the question-and-answer format of the panel.

Panelist Mike Mixer, senior vice president of the Land Division of Colliers, said he is concerned about the property rights of developers surrounding Red Rock Canyon National Recreation Area.

"It's scary that property rights could so quickly and easily be hampered as people get caught up in 'Save Red Rock' movements," he said. "It all requires a little more thought than that."

Panelists also said they feel commercial real estate developers aren't running out of land as quickly as previously projected.

Mixer said recent studies by area experts say developable land is available for at least another 13 years and the Bureau of Land Management has been receptive to making more land available through the auction process.