Developers snipe at higher property taxes for businesses

Kevin Rademacher

Friday, April 15, 2005 | 10:49 a.m.

In a discussion that focused on rising costs facing their industry, a panel of local developers took some shots at the Nevada Legislature's recent decision to saddle businesses with higher property taxes than the residential owners.

"The difficulty with this ... is that the residential component stays flat," Tim Snow, president of Thomas & Mack Development Group, said on Thursday at a meeting of the National Association of Industrial and Office Properties Southern Nevada Chapter.

"When legislators need extra money they increase the business side," he added. "As a homeowner, this is great. The problem is the commercial side."

This month lawmakers finalized a plan that caps property tax increases at 3 percent for owner-occupied property and 8 percent for all other property. The plan, while an improvement over early versions that would have based commercial increases on formulas or rolling averages, has been blasted by business groups as a split tax roll.

Ralph Murphy, executive vice president with Marnell Properties, said the good news was that state lawmakers did not pass a plan similar to California's Proposition 13. Such a plan has been proposed and would likely roll back property taxes to 2003 levels and limit increases to 2 percent annually.

Murphy said California's current economic crisis can be traced back to Proposition 13.

Rod Martin, vice president for Majestic Realty Co., said a Proposition 13 plan would probably spark a rise in impact fees as a means to recover lost revenue.

"In California, you hear horror stories about impact fees," he said. "Those are largely because of Prop. 13."

In addition to property taxes, the developers also pointed to rising costs for everything from steel to land.

Snow said a flexible space building in 2003 could be built for about $24 a square foot. Today, the same building is $33 a square foot.

"That really concerns me," he said. "That's coupled with the fact that the cost of money is increasing."

Jeff LaPour, president of LaPour Partners, said that his company has similar projects going up in Las Vegas and in Phoenix.

"It's $2 to $3 a square foot less in Phoenix," he said. "It makes you wonder how in two markets that are so similar ... there can be so much of a disparity."

Not all the news was bad, however.

Snow also said that rental rates on office space were on the rise as new product was being absorbed at a healthy rate.

Martin conceded that developers tend to be pessimistic, and said that despite changing circumstances the market would likely continue to grow.

"I'm a believer in the free market," he said. "The market figures out a way to make things work."

One way to make it work is shifting product types, the panel said, pointing to new mixed-use, high-density projects. The group agreed that some current industrial areas -- such as Industrial Road near the Las Vegas Strip -- are likely candidates for redevelopment.

"It's not going to be industrial ever again," LaPour said.

Martin agreed.

"When you look at the city and its core, is that where industrial should be?" Martin said. "The answer is no."

Industrial developments, the panel agreed, could look to escape the valley all together in favor of areas such as Kingman in Northern Arizona. The panel dismissed the option of Pahrump, citing needed highway expansion efforts and municipal service improvements.

"Down to Kingman, I think, is honestly a viable alternative," Martin said. "We are going to have to get out of the valley here."