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July 28, 2015

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Construction industry: Raise taxes for job growth

Building Jobs Coalition says plan would restore work lost during recession

The Nevada construction industry is urging state lawmakers to increase tax revenue and stop raiding existing funds to better finance infrastructure projects and create 100,000 jobs.

The Building Jobs Coalition released a white paper ahead of the start of the Nevada Legislature in February. The coalition of construction groups, labor unions, architects and other professionals in construction said its proposals would go a long way to restoring the 90,000 construction jobs lost statewide since late 2006. That’s more than half of its workforce, and the industry employees account for one of every three unemployed, the report said.

None of that includes the tens of thousands of jobs lost in design, engineering, planning and support industries, the group said.

Coalition members are optimistic their recommendations will get strong consideration in the Nevada Legislature and hope at least some of their proposals emerge. That will be a difficult hurdle as the state deals with a $3 billion deficit and opposition from Gov. Brian Sandoval on tax increases.

“If we were able to create 100,000 jobs, that would stabilize the economy and tax base and get us through this recession,” said Steve Holloway, executive vice president of Associated General Contractors of Las Vegas, one group in the coalition. “If we don’t do anything about jobs, we will be right back for a special session at the end of the year.”

The study echoed that, saying an essential part of Nevada’s economic recovery is an investment in the state’s roads and highways; schools and universities; sewer and flood control infrastructure; and government facilities.

“It’s vitally important that Nevada not only stop the diversion of money away from these programs but also find ways to accelerate their construction,” the report said.

The group outlined a strategy it says would create 27,000 jobs in the next couple of years and more than 105,000 over the long term. The first would generate $1.58 billion in wages and combined would generate more than $6.1 billion.

The No. 1 priority proposed is the creation of a jobs fund — a dedicated revenue source for capital projects, the study said. It called for taking property taxes diverted from local governments in 2009 to capital programs that can’t be diverted for state or local operations.

In 2007, the state took money from local governments and Las Vegas Convention and Visitors Authority to build portion of the sate highway projects recommended by a blue-ribbon task force. In 2009, the state drained its own capital improvement accounts and took more local money to avoid state layoffs, the study said.

“Now, neither the state nor local governments have the infrastructure financing they need to offset even the wear and tear on existing infrastructure much less the projects in the development pipeline.”

The state could supplement that fund with other revenue, including a one-quarter of 1 percent sales tax; a 10-cent property tax levy or infrastructure surcharge imposed on all licensed vehicles. Combined, that could create a $100 million a year fund that enables the issuance of more than $1 billion in bonds, the study said.

The study called for indexing the motor vehicle fuel tax to inflation and putting the additional funds into local infrastructure programs. With the exception of Washoe County, that fuel tax is a flat amount per gallon but with fuel economy improved on vehicles, that has generate less revenue.

By doing so, $400 million in additional bonding would be created for transportation projects during the next three years and $1.8 billion through 2020, the study said.

The group called for requiring state and local governments to dedicate annual spending to properly maintain infrastructure. The group said the Legislature allocated $43 million in capital projects for major maintenance for the Nevada System of Higher Education, which isn’t enough to keep up with depreciation.

The group said Henderson depreciates its roads at $107 million every two years, but is spending only $57 million. The same is true for Clark County and North Las Vegas.

“The fact that the largest government entities in Nevada appear to be consistently underfund major maintenance is a significant issue and a disservice to taxpayers,” the report said.

The report was written by consulting group Applied Analysis of Las Vegas and its principal, Jeremy Aguero, said he thinks many of the proposals are doable in the Legislature even though raising tax revenue will be a challenge.

“We know that doing nothing isn’t an option,” Aguero said. “There are companies that won’t be here a year from now if they don’t.”

The report detailed some longer-term strategies to create jobs:

• Require state and local governments with maintenance crews that do some construction to use the private sector to provide those services when possible for design and construction projects.

• Prohibit interest earnings within funds for water, sewer and other capital projects from being used for operations.

• Issue a bond to pay for $2.1 billion in transmission lines to carry renewable energy by imposing a charge on power users.

• Require the state to produce a rolling five-year capital improvement plan as is done by local governments.

• Prohibit the use of capital funds in the state and local government budgets for operating expenses, including payroll.

• Spend more than $5 million a year on economic development. That includes addition money on marketing, infrastructure and training.

• Restructure state economic incentives to focus more on existing employee training rather than reduced tax payments to new and expanding businesses over the next five to seven years. It also suggests a tiered program rewarding those companies that providing more jobs and higher paying jobs.

• Create an economic incentive program for businesses that attract their suppliers to Nevada.

• Make 20 percent of university system funding competitive based on economic development outcomes.

• Create a job corps for people receiving unemployment insurance benefits for longer than 20 weeks.

• Modify the Millennium Scholarship to offset tuition costs for students concentrating in science, technology, engineering and mathematics who remain in Nevada.

• Create aggressive tax credits for startup companies in research and development similar to Utah’s Centers of Excellence Program.

• Create a modified business tax credit of up to 10 percent of total liability for any business that invests in a small business involved in research and development within the state.

• Establish a World Trade Center at UNLV or UNR and a state international trade and diplomacy office designed to focus on connecting Nevada industries to international markets. The group calls for creating an aggressive tax incentive for business exporting goods and services to emerging markets.

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