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December 19, 2014

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GOVERNMENT:

Duo target tax breaks to attract businesses

Assemblywomen suspect they sap needed revenue, which the state then must make up

Beyond the Sun

The dynamic duo that two years ago fought to scale back the green building tax breaks are gearing up for what could be an even bigger war, one that will pit the Legislature against Clark County and city halls across the state.

The legislators are questioning tax breaks and other favors local governments give businesses in the name of attracting development. Assemblywomen Marilyn Kirkpatrick, D-Las Vegas, and Debbie Smith, D-Sparks, worry that many of the breaks unnecessarily deprive government of vital revenue.

“Local governments are not happy with us right now,” said Kirkpatrick, who carries her findings around in a 2-inch thick binder. She said taxpayers might be better served if the state were to lay down guidelines for local governments to bring uniformity to the way tax abatements and other development tools are used.

As an example of the arrangements they question, Kirkpatrick referred to Las Vegas’ recent sale of taxpayer-owned land to the redeveloper of the Lady Luck. The City Council agreed to sell downtown land to the owners of the Lady Luck for about $25 million despite appraisals of $52 million to $60.8 million. The cut-rate sale came despite the city’s own consultant arguing that the incentive was not necessary.

“We just don’t want to be giving away the farm,” Kirkpatrick said. “We need a clear picture of what we’re giving away, what’s working and what revenues we’re not collecting as a result.”

To that end, she and Smith will introduce a bill in the 2009 Legislature to “make various changes” regarding sales tax and revenue bonds.

They have also asked the Legislative Counsel Bureau, the research arm of the Legislature, for an in-depth examination of tax exemptions written into state law.

The duo’s efforts stem from a eureka moment they had after the 2007 legislative session, Smith said. During the four months of the session, during which they went toe-to-toe against casino lobbyists, they learned just how much casinos and other businesses stood to “earn” in tax rebates as a result of constructing more energy efficient and environmentally friendly buildings. In the case of the $9.2 billion CityCenter project, for instance, it was estimated that for every $1 put into green construction, the developer reaped up to $3 in tax rebates.

“It made us start thinking about what else is out there that we don’t necessarily have a good handle on,” said Smith, reached Tuesday at the Democratic National Convention in Denver. “What can we do to improve the abatement and exemption system so that we make sure it’s the best policy?”

The green-tax debacle of 2007 brought to light another unintended backlash to sales tax exemptions, Smith said. Nevada’s public schools are funded, in large part, by sales taxes. When that revenue lags, the state is required by law to make up the public school system’s shortfall.

Yet neither schools nor the state has any say in decisions of the local municipalities that can grant sales tax exemptions to developers and businesses.

“And I think we need to look at that, we need to link the decisions of those governments to the entities that are impacted by those decisions,” Smith said.

The state’s $1 billion budget deficit is spurring this push.

If local governments are spending or giving up taxpayer dollars on business incentives, that’s money the state is often asked to make up, Smith and Kirkpatrick said.

The same rationale is behind Kirkpatrick’s plan to try to pass a bill that would prevent local governments and any other state-funded entity from hiring professionals to lobby state government for them.

Lobbyists are as common in Carson City during the legislative session as are slots in a Vegas convenience store.

Kirkpatrick argues that local governments don’t need to hire outside lobbyists because they have their own lobbyists on their staffs.

“My whole thing is, I want to know what the lobbyists are doing to earn their pay,” she said. “Do governments really need to spend $10,000 or $5,000 a month on someone when the Legislature is not in session?”

She cited a report by the Nevada Policy Research Institute that said local governments and other similarly state-funded entities in Nevada spent $7.9 million in 2007 on lobbyists.

“And that’s just the tip of the iceberg,” Kirkpatrick said.

Kirkpatrick added that organizations such as the Nevada League of Cities and the Nevada Association of Counties also lobby for local governments.

Additionally, Kirkpatrick noted, a state law enacted in 2007 allows counties to introduce only four pieces of legislation, and cities two pieces, per session. “So do they really need all those lobbyists up there (Carson City)?”

Clark County Manager Virginia Valentine said much of the work lobbyists do in Carson City is “defensive,” meaning they must keep track of bills other people introduce and work to defeat them if they run counter to their clients’ interests. She said county lobbyists tracked “about 1,000 bills” whose enactment could have affected Clark County during the 2007 legislative session.

At least one lobbyist thinks the Kirkpatrick and Smith examination is “good government.” While defending his role as a lobbyist for the Nevada Higher Education System because of his “specialized knowledge of all things regarding the Legislature, including the policies, process and players,” Josh Griffin said he understands what Kirkpatrick is trying to do.

“Clearly in these difficult budget times, when you’re talking about public money, you have to have these kinds of discussions,” said Griffin, a former state assemblyman who in 2007 lobbied for both Clark County and the higher education system. He remains on the payroll of the higher education system, which paid his firm, Griffin Crowley Group, $230,000 from September 2005 through Aug. 31, 2008.

Griffin added that he doubts any lobbyist would testify against Kirkpatrick’s bill. “I’d hope the people who hire us would do that,” he said.

In fact, higher education Chancellor Jim Rogers said outside lobbyists “understand the Legislature far better than anybody in the system, because they represent a whole bunch of different clients.”

He added that full-time employees of the higher education system who lobby “do all right as long as they’re pitching our product.” But it helps to have a lobbyist who works for and understands other interests.

“We use them to tell us what are going to be the upcoming issues, what’s going to be lined up, and let’s talk to legislators about those things,” Rogers said, adding that he uses them to “participate” in the writing of his weekly memos, used since mid-summer to rip into the governor while shedding light on how state budget cuts could affect education.

Another lobbyist, who spoke on the condition of anonymity, expressed shock at Kirkpatrick’s idea. The lobbyist wondered whether it “would even be legal” given the fact that local governments also hire outside auditors, accountants and lawyers to handle matters, even if they have those professionals on staff.

Kirkpatrick said other professionals hired by local governments are also on her radar.

“But we’ve got to start somewhere, and right now it’s with lobbyists,” she said. “Right now, those are the ones I believe are being paid the most.”

One former legislator who will not be upset if outside lobbyists go away is Clark County Commissioner Chris Giunchigliani.

“I don’t think we need to spend on lobbying,” she said. “We can do just as well with our staff or elected officials. We have talented staff here; we have a governmental affairs department. Why are we hiring outside to lobby for us?”

The lobbyist restriction has some early support from several state lawmakers.

Sen. Bob Beers, a Las Vegas Republican, said, “On any given day, half the lobbyists in Carson City are from government ... with their credit cards out.”

He sees the growth of publicly funded lobbyists as a natural outcome of Nevada’s having maintained an iron grip on the formation and operation of local government.

“And so you have lots of lobbyists up there when they want to get something changed,” he said.

He’s not against banning these hired guns, he added, but only “if it goes hand in hand with giving (local governments) more self determination. That sounds like a good idea to me.”

Which means Beers isn’t so sure he’d go along with tightening the screws on local government’s ability to offer tax and other incentives to businesses they are trying to woo.

“It seems conflicting that, on one hand, we’re going to limit lobbying abilities ... but then you’re going to come behind and second guess all the decisions they’ve made in granting tax incentives in order to increase taxable sales.”

Sen. Terry Care, a Las Vegas Democrat, applauded Kirkpatrick’s lobbying initiative, saying it’s “something I’ve pondered for some time.”

“Why should a taxpayer see his or her dollars lobby for a position that he or she may not agree with?” he said.

And what if, he wondered, a lobbyist hired by a government has a conflict with that government? Last session, for instance, Griffin was hired by both Clark County and MGM Mirage. Over time, the two came to loggerheads, with MGM Mirage pitching to keep its green-tax rebates and the county arguing to decrease them.

There is other evidence that Kirkpatrick’s lobbyist idea could get broad-based support. The Senate Legislative Operations and Elections Committee, chaired by Republican Sen. Barb Cegavske of Las Vegas, has asked for a similar bill to be drafted. The difference is that Cegavske’s bill would restrict the hiring of lobbyists by “state agencies,” not local governments.

Cegavske said Wednesday that she and other legislators “don’t want any taxpayer dollars spent on lobbyists.”

“What we believe is that we need people who actually know the information to come to committees and tell us,” she said. “We don’t want somebody just trying to get something through for a client and they don’t understand the information.”

Care added that he would be “very interested” to see what Smith and Kirkpatrick’s research reveals about incentives and tax exemptions or rebates awarded by local governments.

“One thing I know about those two, they’re very thorough, so I’ll certainly be paying attention to what they say.”

Kirkpatrick hopes local governments pay attention, too.

Flipping through her binder, she points to empty folders designated to hold information from Elko, Ely, Fallon and a host of other local governments. She sent all of them copies of a letter on July 15 asking for information about how they award incentives and how much they have awarded. Most have not responded.

“I just hope they know, when it comes time to start talking about this, those that haven’t participated are not going to be asked to the table for their opinion,” she said.

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