Rules for tax break debated

CARSON CITY -- Southern Nevada officials, including representatives of the Clark County School District, said Wednesday that a liberal interpretation of who should be eligible for a sales tax break for "green construction" projects would cost them millions used to provide public services.

Walt Rulffes, superintendant of the school district, who testified from Las Vegas at a Tax Department hearing on implementation of new rules for green construction tax breaks, said a liberal definition of who is eligible for the break would cost the school district $82 million in local school support taxes over four years.

Public education probably would suffer with any such reduction, he said.

Sabra Smith-Newby, representing Clark County, said the sales tax abatement, if granted to several major development projects under way in Southern Nevada, would cost local governments nearly $128 million over four years, according to an analysis done for the local governments.

The loss of revenues would affect every type of local government service from parks and roads to animal control, she said.

The new regulations were to have been implemented by Sept. 1, but state officials and lawmakers are struggling to agree on appropriate language.

The purpose of the green legislation, first passed by the Legislature in 2005, is to encourage energy efficiency. The projects must follow the LEED, or Leadership in Energy and Environmental Design, standards, to obtain the sales tax exemption as well as a separate property tax break. While the sales tax break was eliminated for all but a few projects, the new legislation provides for a property tax break for all projects who qualify under LEED.

Smith-Newby said the county supports narrowly defining which projects should be eligible for the breaks.

But Sen. Randolph Townsend, R-Reno, objected to the idea of a more narrow definition. He also took some exception to the comments, calling them "political speeches."

A definition that gives state officials latitude to determine who is eligible is the right way to go because of the complexity of the different financial arrangements used for the mostly multi-billion dollar projects affected by the law, Townsend said.

Local governments have a duty to express their concerns, he said. "But there is a bigger picture here than just one little city, one little county or this state," he said. "I think it's about the kind of investment that comes to this state that makes us who we are."

Townsend, who was involved in the drafting of the new green legislation that eliminated the sales tax break on construction for all but a handful of Clark County development projects, said he would oppose an amendment proposed by the city of Henderson to more narrowly define who was eligible for the break.

During a June 1 floor vote on Assembly Bill 621, Townsend said the legislation eliminated sales tax breaks for all buildings except for the CityCenter project being built by MGM/Mirage; Fontainebleau; the Venetian's Lido/Palazzo Resorts projects; the Molasky Corporate Center; the Echelon Place project by Boyd Gaming, and the Panorama Towers project. All are in Clark County.

As chairman of the Legislative Commission which has to approve any regulation implementing AB621 of the 2007 session, Townsend said a narrow definition would merely lead to lawsuits.

Townsend said he favors language developed by the state Office of Energy defining who is eligible for the tax break. The more liberal requirements would allow tax breaks for some preconstruction work, including demolition.

Dino DiCianno, executive director of the Tax Department, said he, too, could support the proposed language from the Energy Office.

Attorney Les Lo Baugh, an attorney representing Harrah's and the $2.8 billion Fontainebleau project, which is expected to get the tax break, said he too thought the Energy Office definition was a positive one his clients could support.

Assemblywoman Debbie Smith, D-Sparks, who also worked on the green legislation, said the latest proposed definition from the Energy Office on who would get the tax break is an improvement because it has clear definitions.

"I'm still committed to making sure we have everything clearly defined," she said. "That we have regulations that establish a policy that is about good policy, not about who it allows in and who it excludes."