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July 5, 2015

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Sandoval’s resolve on taxes to be tested by Lake Mead issue

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Steve Marcus

An access shaft is shown during construction of the the Southern Nevada Water Authority’s “third straw” at Lake Mead Tuesday, May 10, 2011. The $700 million project will ensure the steady flow of water to the Las Vegas Valley.

Third Straw Construction

A rig of explosives is lifted by a crane during construction of the the Southern Nevada Water Authority's Launch slideshow »
Brian Sandoval

Brian Sandoval

Ed Goedhart

Ed Goedhart

CARSON CITY — Gov. Brian Sandoval has said extending a tax set to expire is the same as a tax increase. That position could soon be tested by the mother of all “juiced” Nevada issues — water.

Senate Bill 432 would lift a sunset on a quarter-cent sales tax passed by voters in 1998 to pay for water and sewage infrastructure, including the “third straw” into Lake Mead.

As the bill works its way through the Legislature, Sandoval faces a tough choice — appease the collective power of Nevada’s establishment or keep his promise not to raise taxes.

Shoring up the Las Vegas Valley’s drinking water supply is an issue that typically has known no partisan boundaries in this desert state. Elected officials have shown great deference to the Southern Nevada Water Authority when it comes to policies it says are necessary to keep water flowing to taps.

The authority is advocating for the bill with the combined might of the Las Vegas Chamber of Commerce, Nevada Resort Association, union-affiliated and nonunion construction trade groups, and the state’s largest labor union. All those groups signed a letter of support.

Despite that formidable list, the bill passed the state Senate 14-7, barely reaching the two-thirds majority necessary for a tax or fee increase.

The bill is pending in the Assembly, where anti-tax Republicans are signaling that they consider it to be a tax increase.

The authority and other advocates are framing it as anything but.

Still, the fact that it requires a two-thirds majority for passage seems to decide it.

“I look at it as a tax increase,” said Assemblyman Ed Goedhart, R-Amargosa Valley, a vocal tax opponent. “If you’re lifting the sunset on the quarter percent (tax) for the (Southern Nevada Water Authority), you’re doing the same thing as lifting the sunset on taxes passed last session.”

Those sunset provisions have become a line in the sand drawn by Sandoval and Republican lawmakers.

Approving the water infrastructure tax while opposing extension of taxes passed last regular session would be inconsistent, Goedhart said.

Sandoval has won plaudits from conservatives for sticking with his campaign pledge not to raise taxes and not to extend levies passed by lawmakers in 2009 to help fund the budget. He has said extending a tax is the same as a tax increase.

Democrats, who want to raise $1.2 billion to reduce the spending cuts called for in Sandoval’s budget, are increasingly frustrated that Republican lawmakers are following Sandoval’s lead, and appear unwilling to negotiate.

They have tried to pressure Republicans to support them by highlighting cuts in K-12 schools, higher education and social services.

Groups such as the Chamber of Commerce and gaming have expressed concern about cuts in education, but have been careful not to directly criticize Sandoval.

But the future of water is another matter, one that affects the ability of Las Vegas to flourish.

SB432, which has gone almost unnoticed beyond the walls of the Legislature, represents a new test of Sandoval’s resolve.

Voters approved the quarter-cent tax with 72 percent of the vote. The tax was supposed to expire once it raised $2.3 billion, or in 2025, whichever came first.

The tax has raised $823 million. The sunset needs to be lifted to complete the third intake into Lake Mead without raising water rates, authority officials said.

The authority will issue about $400 million in bonds next year to pay for the project over 40 years, and lifting the sunset would allow it to get cheaper financing.

Water “rates are going to go up substantially if we don’t have this (tax) as a revenue stream,” said Phil Speight, the authority’s deputy general manager, who estimated 30 percent of the tax is being paid by tourists.

Authority spokesman JC Davis said water rates could increase about $60 a year if the bill doesn’t pass.

Business groups have twice lobbied Sandoval about the bill, but remain uncertain what he will do if and when the Assembly passes the bill, according to sources.

A source close to the administration said Sandoval is evaluating his options.

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