Las Vegas Sun

March 28, 2024

Tax breaks doled out without thought; now we pay

CARSON CITY - Nevada's state income is $110 million below expectations in part because the Legislature acted myopically two years ago, approving tax breaks for environmentally friendly companies without estimating the revenue loss to the state.

Instead of demanding analysis, the Legislature jumped at the idea of rewarding companies for building to "green" standards, lawmakers acknowledged this week.

Now, with the state facing lower revenue , legislators want to curtail the state's tax breaks. But those revisions will come after the fact.

"It's our understanding, from our people up there, this sort of got slipped through at the last session," said Jeff Weiler, Clark County School District chief financial officer. "Not a lot of people had the opportunity to point these things out."

The School District has a keen interest in the lost revenue because the money was supposed to go to education. But under a law adopted in the 1970s, education will not suffer because the state will make up the difference.

So the School District will get its money, but the state will have to cut other programs to compensate.

Observers say the green construction episode is typical of business in Carson City. State government has not kept pace with changes in Nevada, which is home to enormous wealth and expertise in the private sector but less so on the public side.

The Legislature has a small research staff that is stretched thin. Legislators meet for four months every other year and are under a deadline to complete their work. The combination often makes analysis and careful deliberation difficult.

Chris Giunchigliani was a member of the Assembly in 2005 and author of Assembly Bill 3, the green construction bill. It passed both houses unanimously during a special session that June.

The bill gives property tax abatements of 35 percent to 50 percent to corporations for five to 10 years, if they construct buildings that meet strict energy efficiency standards.

Now a Clark County commissioner, Giunchigliani said this week "we had no idea, really, if this would work as an incentive."

"It's obviously working very well," she added. "And while I'm pleased with that, we have to look at our state's budgetary constraints and not eliminate it, but maybe step it down a bit."

If left unchanged, school and state analysts said, the law could end up costing Nevada hundreds of millions of dollars over the next 10 years.

Weiler said it is hard to predict how many projects have applied for the tax abatements. But based on major projects under way, he calculated that unless the program is revised, it could cost $700 million to $900 million over the decade.

The state budget projections were revealed Tuesday morning during a meeting of the Economic Forum. According to the latest projections, state revenue will be far below November estimates. The numbers are about $21 million less in 2007, $40 million less in 2008 and $48 million less in 2009.

During the forum, little was mentioned about the effect of the green-building tax abatements.

Susi Combs, incentive coordinator of the Nevada Commission on Economic Development, said although the official guidelines for the tax abatements have been in place only since September, 13 projects are registered with the state energy office; more than a dozen more are expected to register.

The first project to finish and obtain its certification for meeting the green standards, known as LEED or Leadership in Energy and Environmental Design, certification, is a 171,000-square-foot, $15.5 million Patagonia distribution warehouse in Reno.

Without abatements, that building would net about $175,000 a year in property taxes. It's tax abatement has not been worked out, according to a Washoe County assessor's office spokesman.

Sen. Randolph Townsend, R-Reno, carries great influence on energy issues in Carson City. He would not comment Tuesday when asked whether the state would be forced to scale back its LEED incentive program.

What's almost certain, however, is that Senate Bill 437, which asks for similar LEED-based tax abatements for homebuilders , is not going to make it through this legislative session. Supported by the Nevada Home Builders Association, the bill was a reaction to Giunchigliani's tax abatement program for commercial buildings.

Sun reporters J. Patrick Coolican and Emily Richmond contributed to this story.

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