Advocacy group questions Nevada's 'corporate welfare'

CARSON CITY - State-issued bonds that promote more business activity in Nevada are about to quadruple in dollar amount, and a citizens' advocacy group says it's time to see whether such "corporate welfare" is justified.

Questions about the benefit of the state Industrial Development Revenue Bond program have been raised by the Progressive Leadership Alliance of Nevada, a citizens advocacy group.

"We don't want to have a blanket condemnation of corporate welfare," says PLAN's Bob Fulkerson. "We just want to ensure the public is getting a favorable return."

Businesses that go through a detailed application process to qualify for the state-issued bonds, known as IDBs, wind up with funds for startup or expansion projects, and are able to redeem the bonds out of their revenue at a low interest rate.

State law says the idea is to help businesses and to create new jobs in the process, broadening the state's casino-dependent economy.

Investors like to buy the bonds because they get a break on federal taxes that otherwise would be due on interest the bonds earn. And the state isn't at risk because it has no obligation to pony up money for the investors if a business venture fails.

Since 1982, the program has generated nearly $200 million in IDBs.

Now, in one deal, the bond amount could more than quadruple to $850 million.

The state Board of Finance, chaired by Gov. Kenny Guinn, is considering whether to issue $650 million in the development bonds for a major Las Vegas monorail project linking various Strip resorts and the Convention Center.

The tax-free bond issue would be for a project that's different than the earlier business expansion deals, and it would be the largest ever granted in Nevada.

But the development bonds for the monorail project would be issued under the same state law that governs the earlier business expansion projects. Like the earlier bonds, the monorail bonds wouldn't obligate any state funds or count against the state's limit on bonded indebtedness.

Still, Fulkerson says a legislative review of the development bond program is especially important now because voters will be asked in November to give still more breaks to business.

Question 1 on the ballot seeks to change the Nevada Constitution to allow state funds to be invested in public-private partnerships and corporations.

"Until we can figure out how to responsibly manage the corporate welfare we already have, it's not a good idea to give out more," he says.

Assemblywoman Barbara Buckley, D-Las Vegas, part of the Assembly leadership team, was asked by Fulkerson to look into the bonds. She says a review might be warranted.

"It's always a good idea to routinely examine programs to assess whether they're a success, and to get a cost-benefit analysis," Buckley said.

"If the analysis shows the economy has been diversified and there are more jobs, we might conclude it's a success. But if we learn it isn't, then maybe we should explore it further," Buckley adds.

Chas Horsey, the state official who for years has overseen industrial development bond deals, said there's no question about the program's success - and it's not fair to describe the program as "corporate welfare."

"There are a lot of risks involved. This involves a major commitment on the part of the private sector," he says.

"The days are long gone when the private sector and the public sector don't cooperate," he adds. "To entice a company to Nevada, we need to show that our government is proactive, creating a positive business environment - and this does that."

A table provided by the state Department of Business and Industry, which handles the development bond program, shows that the nearly $200 million in bonds issued since 1982 helped to create about 4,700 jobs.

Sydney Wickliffe, Department of Business and Industry director, says the monorail project might result in only a few hundred more jobs. But she adds that it's too simplistic to just count up the number of new workers.

Wickliffe adds that Gov. Guinn has emphasized economic development efforts that draw in businesses that offer good-paying jobs instead of something that's simply labor-intensive.

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