Homebuilders worry as lawmakers search for revenue

By Buck Wargo

Friday, March 6, 2009 | 2 a.m.

Although the slowdown in the economy has curtailed housing and commercial construction, the development industry is guarding against any proposed legislation in Carson City that will hinder new projects when the recovery begins.

The homebuilding industry is monitoring more than 200 bills and a variety of issues that affect it from water to construction defects, said Irene Porter, executive director of the Southern Nevada Home Builders Association.

“When the housing industry gets back to work again, we want to make sure we contain the cost as much as possible so people are able to afford a house,” Porter said.

There is a big concern that local governments — with the support of the state — may raise fees for building homes as a way to generate revenue, a move that they believe could hinder the industry from making a comeback. Lawmakers have also looked at development fees in the past, but have (always) been sensitive about hurting the industry, she said.

“I think if it is to the point of hurting the housing industry, they are conscious of that and back off,” she said.

Homebuilders haven’t been involved in crafting legislation to reduce foreclosures, but the industry is supportive of any federal and state measures that stem that problem, Porter said.

Competition from foreclosures has forced many builders to the sidelines or to drastically cut prices.

Meanwhile, construction-defect legislation is a never-ending battle pitting trial lawyers and contractors and others in the housing industry against each other. The Senate Judiciary Committee is holding a workshop to get input from consumers and others, Porter said.

“We are always worried that it can get worse if it can,” Porter said. “The way the law is now, it is too expensive, and people have to wait forever to get repairs.”

The local Associated General Contractors is tracking about 200 bills, and there are several others that are draft requests that may move forward, said Steve Holloway, the chapter’s executive director. There are different dynamics this year because of the Democratic majority in the Senate for the first time since the early 1990s, the state budget crisis and the push for taxation to generate additional revenue, Holloway said.

“We are very concerned, of course, with the end game on taxation,” Holloway said. “We do not want to see industry-specific taxes. We are concerned that legislators would like to see a tax shift because they feel the counties receive too much from property and sales taxes and would like to see some of that money go to the state.”

If local governments got less money, they would turn to the construction industry for more revenue, Holloway said.

“It would slow down development,” Holloway said. “Any development, whether it is residential or commercial, has to pencil out so the more it costs, the less likely it is to pencil out and less likely to get built. No one is going to put in a new warehouse if they don’t have a reasonable return on the investment.”

That was echoed by John Ramous, the government affairs chairman of the local National Association of Industrial and Office Properties. He said what happens with taxes is a crucial issue to the industry because of what’s happening with the state’s financial woes.

“Everybody is trying to get a chunk on the tax side, but a lot of businesses are hurting along with the municipal and state governments,” Ramous said. “ ‘Everything is open for negotiations’ is how we look at it and that makes our job more difficult. We know the times are hard, and we don’t know what areas they are going to look at.”

The budget woes at the local government level are prompting increases in license and other business fees and continues to spread, Ramous said. The construction and development industries have helped fuel economic growth and that must be protected, he said.

“From an overall membership, we do want to make sure we are not negatively impacting growth of the industry whether it is through taxes and fees,” Ramous said. “We want to make sure we are competitive with other economies (in the region). It can have long-term impacts.

One bill the construction industry has been supporting is changing the state’s lien laws to promote more work, Holloway said. The way the law reads now, lenders who make construction loans before the projects start are at the top of the list.

But lenders who make loans after projects start are not given any priority with liens if loans can’t be repaid, Holloway said. By giving them a priority, that will encourage more loans and spur construction amid the current slowdown.

The proposed law is getting backing from lenders and the construction industry, Holloway said.

“It would hopefully make it easier for banks to make loans on construction projects,” Holloway said.

“We have reached a point where most projects don’t have just one lender and you end up going back after the project has started.”