Energy Office seeks greater tax-break role

By David McGrath Schwartz

Wednesday, May 19, 2010 | 2 a.m.

The Nevada Energy Office is seeking broad authority to grant property tax breaks to commercial buildings that meet certain environmental standards, a power that legislators and local governments fear could lead to millions in additional lost tax revenue for local governments.

The state has proposed allowing the energy director power to waive conditions to qualify for tax rebates of up to 35 percent for 10 years if “the failure to waive the requirement would produce an unjust result.” Currently, the director can only waive requirements — including application deadlines and energy efficiency standards — on a very limited basis.

Legislators are skeptical of the request.

“This brings me great concern,” said Assemblywoman Marilyn Kirkpatrick, D-North Las Vegas. “We don’t want people to keep extending the application for years and years and years. Then, a bunch of projects apply all at once. We can’t afford that loss in revenue.”

The tax breaks have been controversial since their passage in the final days of the 2005 Legislature. Lawmakers claimed they were caught off guard by the size of the tax breaks developers, including MGM Mirage and Las Vegas Sands, were able to receive under the new law.

For example, MGM Mirage’s CityCenter project is estimated to save $3.4 million in property taxes this year; Sands received a $1.6 million tax break on its Palazzo project last year and is projected to receive a similar break this year.

Sean Sever, a spokesman for the Energy Office, said the proposed change isn’t that significant. The economy, he said, has made it difficult for some projects to meet the deadline to submit an application 120 days after getting local government approval or certification from a green building council.

“We don’t think it is a major change,” Sever said. “We are just trying to allow for some flexibility for applicants that have trouble meeting the deadline due to unforeseen circumstances.”

He said a couple of businesses have contacted the office with concerns they would not meet that deadline, though he would not identify them. Sever said the office would not relax the other eligibility requirements or rating criteria.

“It will just allow (the Energy Office) to accept applications from project owners who have met all of the other requirements but have had some kind of delay due to the economy,” Sever said.

That’s not how the original authors of the bill read the proposed change, however.

“I think we need to be very cautious,” said Assemblywoman Debbie Smith, D-Sparks, who with Kirkpatrick worked on a 2007 bill to remedy what were seen as the excesses of the 2005 legislation. “That was a hard piece of legislation, but one that included everyone at the table.”

To make this big a change in the law now, would require “a pretty compelling reason for me,” she said.

The legislation was the brainchild of former Democratic Assemblywoman Chris Giunchigliani, now a county commissioner, who introduced a bill to grant up to a 50 percent property tax break and 50 percent break on the sales tax for construction materials on projects that met certain environmental benchmarks.

After the bill passed, casino companies and major developers jumped on the new law — a development that Giunchigliani said she never anticipated — and state and local governments found themselves facing the prospect of losing hundreds of millions of dollars in tax revenue.

In their 2007 overhaul, Smith and Kirkpatrick sought to limit the loss of tax revenue, while avoiding lawsuits from developers and casino companies that had started applying for the tax breaks.

Some projects, such as City-Center, qualified for more generous pre-2007 tax breaks. Future green projects can qualify for 25 percent to 35 percent property tax breaks for five to 10 years.

The green building tax break refunded $1.8 million in property tax last fiscal year, according to a document provided by Clark County. The refund total is expected to jump to $5.4 million for the current fiscal year as more projects come online, including CityCenter, a building owned by Irwin Molasky and two Lexus dealerships in Clark County, according to the official estimates. CityCenter’s tax break will be $3.4 million this fiscal year.