Senate bill much-needed road map

Jeremy Aguero

Friday, May 14, 2010 | 3 a.m.

In late February, the Nevada Legislature met in a special session for the 26th time. The session, which lasted seven days, centered on solutions to Nevada’s growing budget deficit. The state’s shortfalls, however, were not the only matter taken up by the Legislature. In the early hours of the session’s final day, the Senate and Assembly passed Senate Bill 5 with a supermajority in both chambers.

Ostensibly a job-creation bill, SB5 not only acknowledged the economic underpinnings of the current fiscal crisis, but it may very well provide a road map for getting tens of thousands of construction workers, design professionals and tradesmen back to work.

SB5 was actually fairly simple in its design. Southern Nevada has a road construction program that is funded, in part, by a voter-approved sales tax of a quarter of a percent. Half of that sales tax was scheduled to sunset (i.e., expire) on June 30, 2028, or after $1.7 billion was raised. Based on current projections, that sales tax would have hit the $1.7 billion mark about 2023, limiting our ability to borrow or bond against these funds.

In turn, the number of road construction projects the Regional Transportation Commission could undertake was also limited. SB5 lifts the sales tax sunset, and in doing so will generate more than $1 billion in funding for road projects throughout the Las Vegas Valley. It will also put thousands of construction workers back to work.

Critics of SB5 characterize it as a tax increase, a violation of the public will or both. Although SB5 does not increase the sales tax rate, it does set aside a reduction in the tax rate that would have otherwise occurred.

Additionally, ballot Question 10, which was the genesis of the transportation sales tax in question in 2002, specifically states that half of the transportation sales tax would terminate “unless extended by a vote of the people.” Respecting that the political ramifications of SB5 may be the subject of future debate, its economics are likely to be the source of immediate relief with little, if any, incremental cost borne by the taxpayer before 2023.

Importantly, similar fiscal strategies could be deployed to accelerate other infrastructure investments, helping shrink Nevada’s unemployment roll that stands at more than 180,000 people today.

During the special session, the Legislature also considered allowing school districts to use a similar strategy that would have freed up more than $500 million that the Clark County School District would have used for retrofitting, remodeling and restructuring aging schools in inner-city neighborhoods.

Southern Nevada is going to have to build water infrastructure that will require an extension of the 0.25 percent sales tax dedicated to those projects. There are several other variations on the same theme.

Fiscal controls, such as revenue sunsets, are an essential element of a sound capital program at any level of government. They keep the public sector accountable for past performance before moving forward with the next round of infrastructure investments. That said, they should not be misconstrued as having any bearing whatsoever on the infrastructure investments needed to sustain our community into the future.

This difference creates an opportunity exploited by SB5. Where there is asymmetry between the current capital program sunset dates (or other limiting factors) and the infrastructure needs of the community, realignment can free up additional capital in the near term, accelerate needed infrastructure projects and put construction workers back on the job.

Perhaps most important, this strategy might very well save taxpayers money not only by lowering unemployment insurance payments, but also by building infrastructure projects when the cost of construction labor, materials and financing are comparably low.

Jeremy Aguero is principal analyst at Applied Analysis