Senate puts 'green' building tax breaks on hold

The Nevada Senate passed an emergency measure Wednesday putting tax breaks they created for environmentally efficient buildings on hold.

Fiscal experts say no one anticipated the amount of money those tax breaks would cost when they approved AB3 of the 2005 special session.

Sponsor Chris Giunchigliani said at the time the idea was to reward businesses which build to Leadership in Energy and Environmental Design (LEED) standards.

The law allows those projects to escape all but the base 2 percent of sales tax they would otherwise pay on building materials and fittings. And it gives them a break of up to 50 percent of the property taxes they would pay for up to 10 years.

Only this year when the CityCenter project in Las Vegas announced it would try to qualify for the tax breaks did the impact become clear.

State Budget Director Andrew Clinger said that $7 billion project alone could cost the state millions in revenue.

The state is hit financially because both the Local School Support portion of the sales tax and the property taxes forgiven under the "green building" law come out of school district budgets. And under state law, any shortfall in school funding must be made up by the state.

State and legislative fiscal experts are still calculating the potential impact but preliminary estimates are CityCenter would cost the state more than $39 million in sales tax revenue alone. It would cost local governments, which receive the same amount of sales tax as the schools, the same.

And CityCenter isn't the only project in the works.

The Fontainebleau, Palazzo and Echelon Place have all qualified for the exemptions. Added to CityCenter, those projects would cost the state an estimated $84.77 million in sales tax revenue.

In addition to that, however, the property tax breaks granted in AB3 would cost millions more.

Saying the state has to act immediately, Sen. Randolph Townsend, R-Reno, introduced SB567 Wednesday to suspend the tax breaks while lawmakers take a more careful look at their impact.

He said encouraging more environmentally efficient construction was a good goal, which he still supports, but that the realities of the state's needs must also be considered.

He promised that the hearings on the issue would be open and consider all sides. And he said the tax breaks will not be eliminated.

"This is not a repeal; it is a suspension," he told the Senate.

Sen. Bob Coffin, D-Las Vegas, opposed the suspension, saying it would send a bad message to businesses coming to Nevada.

"A measure like this does more to undo economic development than anything else we could do," he said.

"It's going to send the message that we change course for conflicting reasons," Coffin added.

He said no one knows how many businesses have decided to build an energy-efficient building because of the tax breaks.

Coffin, however, was joined only by Sen. Terry Care, D-Las Vegas, as the Senate passed SB567 19-2 as an emergency measure.

The bill goes to the Assembly for discussion today.



• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.