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August 23, 2014

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Green’ tax breaks will bite Clark County

CARSON CITY - The Legislature's pending revision to its "green" building law, meant to take the sting out of huge tax breaks for businesses that put up environmentally friendly buildings, is still going to cost Clark County dearly.

An analyst for the county projects the loss at $300 million over 10 years if the revised law passes in the final days of this session.

"We're struggling to fund enough public defenders, family services, we have detention overcrowding," Clark County Manager Virginia Valentine said Friday. "We may have more money than other Nevada communities, but we also have more needs."

Losses of that size not only would seriously crimp county programs but could even undermine the green building initiative itself. Local governments rely on property taxes from new buildings to cover the costs of additional public services those projects require.

Faced with the prospect that the taxes will not pay for the added services, one lawmaker suggested that the county might slow its rate of approving new projects.

Valentine said property owners have a right to develop their property and she doubted the county would move to limit growth. But she added that the county would "look at the impact of these projects as a whole on our ability to provide services."

Even some closely associated with green building expressed dismay about the bill because of the effect it could have on county governments.

"Did anyone look at the fiscal impact of this?" said a leading advocate of green building, who spoke on condition of anonymity.

The answer to that question was no two years ago, when the Legislature approved the original green building law. It granted property tax breaks of up to 50 percent for as many as 10 years to developers that built to certain green standards. Developers also could apply for a 50 percent reduction in sales tax on green building materials.

Looking back on that law this year, sponsors of the legislation said they underestimated the financial costs to the state because they did not expect so many developers to take part.

As it turned out, large builders realized how much money they could save and began applying for the tax breaks. Major casinos led the way.

Earlier this year, the loss of state tax dollars for just seven projects, six of them in Clark County, was estimated at close to $1 billion over 10 years. During testimony as the Legislature debated revising the law, legislators said one project planned to spend $38 million to obtain green certification, which would net $100 million in tax breaks. They refused to identify the project .

Armed with legal opinions saying the Legislature could amend the law as it saw fit, lawmakers last month advocated lowering the tax breaks to a maximum of 8 percent a year.

Casinos struck back, however, with one lobbyist declaring that "there will be a war" in the courts over the new law if the Legislature makes such steep cuts.

Legislators backed down. The version being considered would eliminate sales tax breaks for future projects but issue property tax breaks of 25 percent to 35 percent each year for 10 years.

According to Mike Alastuey, a lobbyist for Clark County, the revised bill would cut the county's loss by two-fifths - roughly. But it would still cost the county about $30 million a year for 10 years, said Alastuey, a former assistant county manager and the former head of finance for the Clark County School District.

That estimate is based on current plans, however, and does not include projects introduced in the future. (Roughly 80 building projects in Nevada are currently listed with the U.S. Green Building Council, one of the first steps taken as a builder begins planning a green project.)

The losses to the state treasury are much smaller than the county's because of changes in state formulas. The state's share of the loss shifts from 45 percent to about 10 percent.

With just two days left in the legislative session, the bill must still gain approval from both houses of the Legislature. But there's no doubt a new law will be in place by midnight Monday.

If not, the old law, with the 50 percent property tax and sales tax breaks, goes back into effect.

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