Revenue-Preserving Plan Suspends 'Green' Tax Breaks

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Nevada lawmakers moved swiftly Wednesday to suspend tax breaks for "green" building projects to help shrink a projected revenue shortfall that is complicating efforts to wrap up work on a nearly $7 billion state budget.

SB567, introduced in and approved by the state Senate, moved to
the Assembly for final action after Senate Commerce and Labor Chairman Randolph Townsend, R-Reno, said the breaks approved in
2005 are "starting to give us some concern" because of their big
impact on tax revenues.

Senate Minority Leader Dina Titus, D-Las Vegas, said she backed
the rapid action, but wanted the bill to be debated in the open in the closing weeks of the 2007 legislative session. Lawmakers must adjourn June 4.

Sen. Bob Coffin, D-Las Vegas, cast one of only two "no" votes
against the new measure, saying it could harm economic development
and "we effect long-term projects with short-term thinking."

The tax breaks, passed during a 1-day special legislative session in 2005, mandated up to a 50 percent property tax abatement for up to 10 years for buildings that meet "green" standards that promote energy and water conservation. It also got rid of some sales taxes for products used for green building.

State and school financial analysts say the existing tax abatement could add up to hundreds of millions of dollars in revenue. In 2005, minutes from hearings on the bill show its sponsor, former Assemblywoman Chris Giunchigliani estimated the financial impact at only about $250,000.

If Nevada schools fall short of a certain amount in property tax revenue, the state must make up the difference from its general fund.

Sales and property tax revenues already aren't growing as fast as expected, resulting in a projected $110 million revenue shortfall through the end of fiscal 2009. The shortfall was outlined Tuesday by the Nevada Economic Forum.

The tax abatement program did not go into effect until 2006, and only one building has received an abatement so far. But 36 for-profit developments are planning on going green in Nevada, according to the U.S. Green Building Council.

Clark County has received notice from MGM Mirage and Fountain Blue about their plans to build green projects worth several billion dollars.

Without a suspension of the 2005 tax breaks, Clark County Manager Virginia Valentine said their impact "could be huge."

"It's a very difficult thing for us to estimate. Depending on how much of an incentive we are offering, it could have a very serious negative impact to our revenues," Valentine said.

Two bills are before lawmakers this session that would expand that program. But with the action on SB567, their future prospects appear dim.

SB437 clarifies that the tax breaks can go to homeowners, and AB295 adds another green building rating system, Green Globes, which touts a less expensive application process and allows for looser standards for some building materials.

John Slaughter, director of management services at Washoe County, said the county is not opposing any of the new bills on green building this session, but will be taking a close look at the revenue impact.

"The analysis we are doing now is, 'Are you providing an incentive or are you providing a windfall.' If it's going to hurt the rest of our tax base, we need to take a closer look at it," Slaughter said.

At least 67 Nevada developments are registered with the U.S. Green Building Council, which is the only authorized rating system in Nevada.

Forty of those projects registered in 2006 and 2007, most in Reno and Las Vegas. Of those, at least 36 are taxable projects, according to Clark County Treasurer Laura Fitzpatrick. Others are being built by government and non-profits. The Web site allows the project applicant to keep some information confidential, including ownership.

Clark County has received notice of at least 11 projects that intend to go green. Fountain Blue is planning four projects that will cost about $1.5 billion to build. MGM Mirage's $7 billion City Center development will build seven projects green, according to Fitzpatrick.

Valentine said companies are quickly catching on.

"The list is growing, people are obviously figuring out there's a way to get an abatement. At some point it could potentially seriously erode away at our property tax revenue," Valentine said.

In April, Patagonia in Reno became the first private company to qualify for the credit. The state Economic Development Commission granted the company the full 50-percent, 10-year tax abatement for a 171,000-foot expansion to its distribution center.

That will mean a property tax break of $80,000 a year for 10 years for the company, according to John Sherman, director of finance for Washoe County.

Nevada is one of only a few states to offer a property tax break for green building. Maryland gives counties discretion on how much of a property tax break to grant green-rated buildings. Oregon offers a tax credit equal to 35 percent of the extra costs needed to build green.

The green building industry has grown from almost nonexistent in 2000 to a multibillion dollar industry, according to the U.S. Green Building Council.

To date, 11 federal agencies, 17 states including Nevada, and 53 municipalities require buildings to meet either local green standards or those set by the national council.

(Copyright 2007 by The Associated Press. All Rights Reserved.)