by April Corbin Girnus, Nevada Current
Nevada lawmakers are considering limiting the power of the Governor’s Office of Economic Development.
The push comes roughly two months after GOED awarded $412 million in tax abatements and reimbursements over the next two decades to Tesla, which is expanding its manufacturing facilities in Northern Nevada.
That deal — effectively the third largest public subsidy package in Nevada history — required no legislative approval. That fact, coupled with the optics of giving additional tax breaks to a company already benefiting from $1.4 billion worth of them and owned by one of the richest people on the planet, drew sharp criticism from some lawmakers. But the deal was ultimately seen as inevitable because of how tax abatements are written into Nevada law.
State Sen. Dina Neal, D-North Las Vegas, in the lead up to that GOED board vote vowed to introduce legislation addressing the oversight of tax abatements in the state.
That promise now has a name: Senate Bill 394. Originally introduced as a proposal to raise the property tax without touching the state’s controversial tax cap, SB394 was gutted and replaced on a legislative deadline day with language that would limit GOED to approving tax abatement packages of $500,000 or less.
The bill passed the Senate with a 14-7 vote on April 25.
More than a decade ago, Nevada lawmakers approved the creation of GOED in hopes it could woo new businesses into the state and reverse the financial destruction left by the Great Recession. They empowered this newly minted office with the authority to directly approve tax abatement packages, and in special sessions (like in 2014 where Tesla received its $1.4 billion sweetheart deal) they wrote generous assistance packages directly into law as entitlements available to any company that qualified.
That approach needs to change, argued Neal.
We won’t sit down and give a tax abatement in order to build supportive housing, which will take care of our homelessness problem. But we’ll give $200 million, $500 million to a billionaire so he can get wealthier and not pay taxes in the state of Nevada.– State Sen. Dina Neal
Neal emphasized that she believes in continuing to diversify the economy but also believes that “economic diversification does not mean giving up your tax base.”
The state needs to reconsider the existing balance of powers between the executive and legislative branches when it comes to tax abatements, she argued. Abatements affect the state budget, which is supposed to be the purview of the legislature.
“I think the power to abate should come back to the legislature,” she said.
She added, “What we’re doing (now) is helping billionaires to basically sit and profit off of the State of Nevada without having to give anything back. Their abatements go on for 10 and 20 years.”
Neal, who successfully sponsored legislation in 2015 and 2017 to provide data, analysis and other assistance to small businesses, contended GOED should focus on incentives for small and medium-sized businesses while the legislature oversees larger deals for larger companies with bigger revenue implications for the state.
“We need to start making a statement about what we give to billionaires in the State of Nevada,” said Neal. “It’s interesting how we can give benefits to the rich but we won’t sit down and give that kind of abatement to the poor. We won’t sit down and give a tax abatement in order to build supportive housing, which will take care of our homelessness problem. But we’ll give $200 million, $500 million to a billionaire so he can get wealthier and not pay taxes in the state of Nevada.”
State Sen. Heidi Seevers Ganert (R-Reno) came to GOED’s defense, saying the office has been “tremendously successful” in diversifying Northern Nevada’s economy. Seevers Gansert was Gov. Brian Sandoval’s chief of staff when he created the office in 2011.
“The speed to which we can compete with other states is critically important,” she argued.
GOED claims Nevada has seen a 5-to-1 return on investment on the original 2014 Tesla package and projects even higher returns for the newly approved package, she said.
Seevers Gansert conceded that discussions “need to be had” regarding some of the automatic triggers for tax abatements.
State Sen. Ira Hansen of Sparks was the lone Republican to support SB394, though he did express some concern that the $500,000 limit “might be too low.”
Hansen said he supported the initial creation of GOED and the original Tesla deal because the state was “economically desperate” at the time. Comparing that time to today is “like night and day,” he said.
He said he opposes “the whole idea of allowing a separate, executive branch agency to make incredible deals with some of these people who, frankly, don’t need it to come here in the first place.”
Hansen added, “The real problem with the whole abatement idea is, somebody has to make up the difference.”
The growth of GOED
According to a report submitted to the Legislature prior to the start of the session, GOED approved $85.5 million in tax abatements during fiscal year 2022. Thirty-six companies received approval; 19 of them were for more than $500,000 in abatements.
Those abatements were tied to approximately $984 million in capital investments and 3,410 new employees with an average hourly wage of $28.38, according to the report.
GOED in an emailed statement confirmed their opposition to SB394, saying it would be “catastrophic to economic growth.”
“At a time when Nevada has a golden opportunity to attract companies looking to leave neighboring California and bring high paying jobs and millions of dollars in capital investment, this legislation would be a significant setback to Nevada which is competing directly with neighboring states to attract industry, and this would prevent us from being relevant globally,” read the office’s statement.
Gov. Joe Lombardo’s office did not respond to a request for comment. But the governor has emphasized economic development as a priority for his administration.
Having passed the Senate, SB394 is now in the hands of the Assembly, where it has been referred to the Committee on Revenue. No hearing has been scheduled.