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Proposed economic development overhaul calls for affordable housing investment, limits on abatements

Tabitha Mueller
Tabitha Mueller
Economy & BusinessLegislature
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Assembly Majority Floor Leader Teresa Benitez-Thompson, right, speaks with Deputy Minority Whip Robin Titus, on Friday, July 31, 2020 during the first day of the 32nd Special Session of the Legislature in Carson City.

Economic development authorities pushed back against a bill Thursday that would limit the Governor's Office of Economic Development's suite of tax incentives and shift the office’s focus to addressing development inequalities.

AB449, sponsored by Assemblywoman Teresa Benitez-Thompson (D-Reno), would place the office under stricter oversight, shift the focus of the office to championing “mom and pop” businesses and generate more funding for affordable housing by requiring that businesses receiving tax incentives make payments into a state fund for affordable housing.

"We have to talk about housing at the same time that we talk about economic development," Benitez-Thompson said during a presentation to the Assembly Committee on Revenue.

It’s the latest effort by Benitez-Thompson and other legislative Democrats to improve the state’s at-times criticized collection of incentives and abatements on sales and use taxes, property taxes and payroll taxes to businesses that meet certain capital investment, job creation or minimum hourly wage targets. Most of the incentive programs were set up under former Gov. Brian Sandoval, but some Democrats (and at times, Gov. Steve Sisolak) have criticized the office for being too generous with abatements.

If economic development is working, out-of-state companies relocating to Nevada will attract more people to the state, Benitez-Thompson said. But by bringing additional workers to the state, the companies also are causing “growing pains” and contributing to a housing shortage that needs to be addressed, she added.

"It makes the most sense to me to say ‘let's land some dollars [in our affordable housing trust fund] to show the world ... that Nevada has a commitment to not only grow, but to grow well,’” she said.

The bill proposes an overhaul of existing law and would:

  • Make extending tax credits and incentives permissive, not mandatory for businesses that meet certain baseline qualifications
  • Require the GOED board to consider the number of employees a company has that are on Medicaid before awarding tax incentives
  • Require approval from the GOED board for all tax incentives; currently, the director can unilaterally approve incentives up to $250,000
  • Require that businesses receiving abatements pay 10 percent of the dollar amount of the abatement for each year it is in effect toward the Housing Division's Account for Affordable Housing, which supports the preservation and construction of affordable housing in the state and is funded through a real estate transfer tax that generates anywhere from $8 to $10 million a year (but advocates say that amount barely makes a dent in the affordable housing market)

Under the legislation, money deposited into the Account for Affordable Housing would have to be used in the county where the business is located. A business that fails to make payments to the fund would have to repay the abatement it received.

Current law holds that to be eligible for a partial abatement of personal property taxes, businesses must either make a capital investment of at least $1 million in a program at UNR, UNLV or the Desert Research Institute or invest at least $500,000 in schools within the Nevada System of Higher Education (NSHE), along with other stipulations.

The proposed legislation also would reduce the amount of capital investment needed to be eligible for an abatement to $500,000. It also would increase the average hourly wage that must be paid to employees from at least 100 percent of the statewide average hourly wage rates, about $24.41 for all occupations in the state, to at least 110 percent — and would remove the requirement to employ a certain number of full-time employees for the duration of the abatement. 

Benitez-Thompson said she was still adjusting and workshopping the proposal in regard to capital investments.

Critics of the bill said it would make Nevada less competitive for business relocations and expansion and worried that it would benefit neighboring states such as Arizona and Utah if passed.

"The level of competition among states for new jobs right now is very high, and compared to other states, our current incentives are minimal," said Jonas Peterson, president and CEO of Las Vegas Global Economic Alliance. "We do lose deals — deals that we should win —  because our incentives are simply not competitive enough. With Southern Nevada's high unemployment, now is simply not the time to reduce any of our job creation tools."

Supporters said the bill would help balance out the billions of dollars offered to corporations as abatements or subsidies and establish a more equitable economic development policy.

"Without a significant increase in available resources, it would take our state nearly a century to catch up to the current need for affordable housing," wrote J.D. Klippenstein, the state director of the nonprofit advocacy organization Faith in Action Nevada. "We cannot continue to subsidize corporate welfare while ignoring the welfare of every day Nevadans."

The Department of Business and Industry already offers tax credits for affordable housing that are not widely utilized, countered Lynn O'Mara, spokeswoman for the Northern Nevada Development Authority. She added that the affordable housing provision is redundant and would not accomplish much.

Development authorities also fought against the inclusion of Medicaid as a factor for offering abatements to companies looking to come to the state.

"When we're talking about Medicaid, my biggest complaint is that we're not treating businesses fairly," said Derek Armstrong, Henderson's director of economic development.

Thousands of Nevada workers and their dependents receive health insurance benefits through Medicaid; an analysis by The Nevada Independent found that many of those employers were awarded tax incentives or abatements by the state prior to expanding in the state.

Benitez-Thompson said that companies with more than 500 employees on Medicaid are fobbing off high costs on the state. The bill does not set any numbers or say GOED has to follow any protocols; it only says that the office should consider Medicaid usage.

"There's concern that the sky will fall and everything will dry up and go away," she said. "I don't think that's true."

The bill was heard for the first time on Thursday, but the committee did not take any action on the legislation. Friday marks the deadline for bills to pass out of their first committee.

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