by April Corbin Girnus, Nevada Current

State Sen. Dina Neal wants a conversation about the use of tax abatements in Nevada. What she got last week was a parade of vigorous defense of tax abatements from a who’s who of economic development and business groups.

Neal appeared before the Assembly Revenue committee Thursday to present her Senate Bill 394, which would limit the power of the Governor’s Office of Economic Development to approving abatements of $500,000 or less. The bill passed the Senate with a 14-7 vote on April 25.

But Neal established early in the Assembly committee hearing that SB394 in its current form “is totally unworkable.”

“I don’t believe this form of the bill should be the form that exits this building,” she said.

The $500,000 cap is “super low,” she added, meant to be an extreme that triggers a conversation about whether the legislature should reconsider revoking the authority it gave GOED to approve abatements of any size. Neal vowed to tackle the issue after the agency and its board of directors unilaterally approved $330 million in tax abatements to Tesla in March.

“We were not actually a part of that conversation, nor could we get information, nor could we find out prior what was going to be the amount of that abatement,” said Neal. “All we could do was sit back and watch it happen.”

Neal urged the Assembly Revenue committee to work with her to amend SB394 into something tenable, whether that is a different abatement cap or a different approval process that more directly involves the Legislature.

“I don’t want to learn about it in the paper, that it’s happening,” said Neal, adding that she believes the input of the 63-member state legislature “bring diversity of thought and experience.”

She added, “Some people have said that the GOED board is just a rubber stamp to an already decided decision but that wouldn’t be the case in the Legislature. We don’t really rubber stamp anything.”

‘Mystical, unsubstantiated, reckless and…wrong’

Economic development leaders during SB394’s hearing defended the use of tax abatements, describing them as a necessary tool in the “competitive sport” of wooing businesses into a state.

Only moments after telling the committee that the agency he directs welcomes a conversation about Nevada’s tax abatements, GOED Executive Director Tom Burns said “just having this hearing has devastating and dire consequences.” 

“It signals to the business community locally, nationally and internationally that Nevada does not support business moving here,” said Burns, who was appointed by Gov. Joe Lombardo in January.

While Burns’s comment was sparked by the restrictive bill as written, he also defended tax abatements more generally: “The thought that companies will come to Nevada anyway without incentives is kind of mystical, unsubstantiated, reckless, and, frankly, wrong.”

Michael Brown, Burns’s predecessor under Gov. Steve Sisolak, also weighed in, telling the lawmakers, Nevada was in “fierce competition” with other states, particularly Arizona, Utah and Texas.

“Most other states have substantially more resources, more authority, and more generous programs than I had available to me in Nevada,” he said.

GOED since it was established in 2012 during the Brian Sandoval administration has approved $2.4 billion in incentives for 266 companies, according to Burns. The agency estimates that investment has generated $5.8 billion in new tax revenue, with an overall economic impact of $204 billion.

“I can tell you with 100% certainty that the Tesla truck factory in the latest expansion was set for Texas and would not have been here in Northern Nevada but for the abatements,” said Burns.

Mike Kazmierski, the outgoing CEO of the Economic Development Authority of Western Nevada (EDAWN), echoed that sentiment.

“I was here for Tesla 1,” he said, referring to the $1.3 billion deal approved by lawmakers during a special session in 2014, which also established extensive tax abatements as entitlements available to any future qualifying company. “It would not have happened without the abatements. I was here for Tesla 2. In the room, they were going to Texas, and we turned them around by offering the same abatements. Those two deals were sought after by 50 states and other counties.”

Kazmierski pushed back against the characterization of tax abatements as corporate giveaways or handouts.

“We’re one of the least incentivized states in the nation,” he said of Nevada. 

Kazmierski noted that 43 states don’t tax manufacturing equipment.

“The reality is we’re just not taxing them on something they wouldn’t be taxed on in just about any other state,” he said. “We come out ahead on our abatements… For every dollar we don’t take away from them — and again, it’s not giving, it’s just not taking away from them — our revenue at the state goes up $3.

Lawmakers weigh in

Whether you want to call tax abatements a giveaway or argue they are a “not taking” of something the state would not have received otherwise, the end result is the same, contended Assemblywoman Shondra Summers-Armstrong, D-Las Vegas. The state is not collecting revenue, which it needs to provide important services and address systemic issues.

And needs grow, particularly as the population grows.

“How do we balance rampant homelessness, mental health issues, schools that are falling apart all over the state, but we can hold up and say we have a fabulous advanced manufacturing facility at the end of a road that isn’t big enough to even handle the traffic that is going out there every day?”

Assemblyman David Orentlicher, D-Las Vegas, said he agreed with Neal that the Legislature has given too much power away to an executive agency.

He pointed to Brookings’ findings that “at least 75% of the time, typical incentives do not affect a business’s decision on where to locate and create jobs” and that often the incentives given don’t pay for themselves after increased costs of public services are factored in.

“We’re doing unnecessary incentives,” he said.

Assembly Revenue Chair Shea Backus, D-Las Vegas, referenced a 2019 bill brought forth by then-state Sen. Ben Kieckhefer, now chief of staff to Lombardo, that originally sought to eliminate GOED’s power to approve transferable tax credits but was revised to require the agency to get approval from the legislative Interim Finance Committee before issuing transferable tax credits.

Backus asked Neal if she thought that might be something to consider for SB394.

“My issue is being at the table before the decision is made, not after the decision is made and saying okay,” said Neal.

Backus also brought up a 2019 bill to create a Legislative Committee on Tax Expenditures and Incentives for Economic Development, which would have evaluated tax incentives used by the state. That bill was sponsored by Neal and passed the Legislature with bipartisan support.

Then-Gov. Steve Sisolak vetoed the bill.

“They said to me that I was going a step too far,” recalled Neal.

Republican Assemblyman P.K. O’Neill, whose district includes the Tahoe-Reno Industrial Center where the Tesla Giga Factory is located, said it was discouraging to see Neal push this conversation with only around a month left of the legislative session.

Neal responded by saying the topic of tax abatements has been “floating through the building” since the Tesla 2 package was announced in January, the day after the governor’s state-of-the-state address.

“We just didn’t have a bill to discuss,” she said.

She continued, “There are rumors swirling around this bill that we’re supposed to try and do an Oakland A’s deal. I don’t think that’s appropriate in the last 30 days of the session, but apparently we may have a seat at that table whether we want to or not.”