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Tax breaks for big corporations drawing new look in Nevada

July 26, 2019
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FILE - In this Sept. 4, 2014, file photo, Nevada Gov. Brian Sandoval, left, Steve Hill, executive director of the governor's office of Economic Development, and Elon Musk, Chairman and CEO of Tesla, laugh while answering reporters' questions on the steps of the capitol building in Carson City, Nev., after a press conference announcing that Nevada had been selected as the site for the Tesla Battery Gigafactory. Sen. Dean Heller, R-Nev., is behind Hill and Musk. Nearly two-thirds of companies granted tax breaks by a government office empowered in 2011 to attract businesses, jobs and investment to Nevada have failed to meet at least one application benchmark. (Tim Dunn/The Reno Gazette-Journal via AP, File)
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FILE - In this Sept. 4, 2014, file photo, Nevada Gov. Brian Sandoval, left, Steve Hill, executive director of the governor's office of Economic Development, and Elon Musk, Chairman and CEO of Tesla, laugh while answering reporters' questions on the steps of the capitol building in Carson City, Nev., after a press conference announcing that Nevada had been selected as the site for the Tesla Battery Gigafactory. Sen. Dean Heller, R-Nev., is behind Hill and Musk. Nearly two-thirds of companies granted tax breaks by a government office empowered in 2011 to attract businesses, jobs and investment to Nevada have failed to meet at least one application benchmark. (Tim Dunn/The Reno Gazette-Journal via AP, File)

RENO, Nev. (AP) — It was a different time.

That’s what Nevada lawmakers say when asked about massive, recession-era tax breaks approved for companies such as Tesla, Amazon and Apple.

It’s also what legislators tend to say when defending new efforts to rein in incentives now that the state has rebounded from the downturn.

As the economy booms, fueling an affordable housing crisis, Democrats in Carson City have found it increasingly hard to justify showering subsidies on multibillion-dollar corporations.

They fear some companies already aided by the state have inflated employee salaries and double-dipped in the pool of taxpayer handouts, even while failing to provide promised economic benefits.

A Reno Gazette Journal analysis of public records shows they’re right.

Since 2011, the Governor’s Office of Economic Development, or GOED, has directed billions of dollars in tax breaks toward businesses that pledged to bring new jobs and investment to Nevada.

But audits by state tax officials reveal that recipient companies generated, at most, 80 percent of the jobs and less than 30 percent of the capital investment promised on their tax break applications.

Nearly two-thirds of applications approved by the agency failed to meet at least one benchmark set to collect an abatement, according to a Gazette Journal analysis of GOED documents dating to 2009.

The newspaper found more than two dozen non-compliant businesses were audited by state tax officials and billed for incentives they had already collected.

But another two dozen were granted multiple rounds of incentives from the state, including some that were flagged for non-compliance.

The analysis found 37 percent of Nevada’s 284 tax abatement applications did not offer employees the statewide average wage.

At least 22 companies fell short of capital investment requirements calling for companies to spend between $250,000 and $1 million in the state.

Fifty-one companies failed to create the minimum number of new jobs needed to collect an abatement.

Biennial GOED reports show that since late 2009, state officials agreed to forgo more than $393 million in future sales, use and property taxes in a bid to attract or retain companies.

In exchange, companies said they would create about 19,900 high-paying jobs and at least $7.1 billion in new capital investment.

A GOED report released in January said companies under-delivered on investment in each of the past nine years, and came up short on promised jobs in all but one year.

Auditors found that companies actually delivered 15,732 jobs and $1.9 billion in investment, far less than contractually agreed-upon totals.

Prior to a law passed in 2017, GOED was allowed to approve tax abatements for companies that met two of four major wage, job creation, employee health insurance and capital investment criteria spelled out in state law.

Applicants today are supposed to meet three of the four standards, but the agency’s incentive application form still only asks for two.

Agency spokesman Keith Paul said GOED ensures submissions comply with the law, even if the paperwork hadn’t changed.

He said officials have clawed back tax breaks from every company that did not meet state benchmarks. The agency did not provide specifics about those claw-backs.

The Gazette Journal found that GOED pays a premium for new jobs.

The agency’s latest report to lawmakers shows it was prepared to grant abatements of $88,611 for every job that companies said they would create through abatements over the past 10 years. That’s about $31,600 more than the state’s median household income.

One of the main drivers of the sky-high abatement-per-job total is eBay, which was approved for more than $13.6 million in tax breaks to create a total of two jobs as part of a data center expansion in Las Vegas.

Apple, as part of its arrival in Washoe County, received almost $1.6 million in tax breaks for every job created at its Reno warehouse. The average wage paid to the warehouse’s 35 workers was $25 per hour.

Lawmakers have questioned the impact such subsidies can have on state and local government tax revenues, and about double-dipping.

Amonix, a California-based solar panel manufacturer, received $2.9 million in state-approved tax abatements after promising more than 600 new jobs and $35.6 million in capital investment. The company closed its North Las Vegas solar plant less than a year after a second round of tax breaks. In the end, it produced about half of the jobs and investment it promised in Nevada.

Scientific Games, a multibillion-dollar Las Vegas-based slot machine maker, was approved for five separate tax break packages totaling more than $2 million in taxpayer dollars since 2015.

Switch, a Las Vegas-based data company, won four separate abatements totaling more than $54.7 million, or almost $693,000 for each of the 79 jobs the company pledged to create.

Tesla, by far the highest-profile recipient of state subsidies, has fallen about $1 billion short of the capital investment it once projected to bring to Nevada, according to independent auditors.

Work on Tesla’s sprawling Gigafactory outside Sparks has provided about 2,200 fewer jobs than economic analysts originally predicted, but auditors found the electric automaker far exceeded the $26-per-hour average employee wage agreed upon in its 2014 incentive deal.

Top Nevada Democrats, including Gov. Steve Sisolak, agree the state needs to review and revise its approach to tax breaks.

Assembly Bill 400, sponsored by Assemblywoman Teresa Benitez-Thompson, D-Reno, faced stiff resistance from GOED but passed with near-unanimous support and was signed into law last month.

It aims to stop double-dipping and limit GOED’s ability to give away tax dollars that are supposed to benefit school districts.

Sisolak vetoed Assembly Bill 444, which would have created a legislative committee to oversee GOED. The governor said the oversight panel would be redundant.

Two weeks later, he told GOED board members he intends to begin his own review of agency abatements.

In a statement, GOED said it welcomed the re-examination.

“Tax incentives are a tool that must be wielded with care,” Paul, the agency spokesman, wrote in an email to the Gazette Journal. “We look forward to working with the governor’s office on reshaping GOED and its priorities so they better fit the current economic landscape.”

GOED reformers plan to revive their push for an agency oversight board in 2021, the newspaper said.

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Information from: Reno Gazette-Journal, http://www.rgj.com

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