‘Green’ construction bill put local government tax collections in the red

How come unintended consequences are almost always bad?

The sponsor of the feel-good “green” construction bill of 2005 says she never anticipated that giving a tax break for companies that try to save energy and water in their construction might cost local governments $900 million.

Even after an effort by the 2007 Legislature to limit the property and sales tax breaks for gaming companies and developers — the big beneficiaries of the green bill — the loss to local governments approaches $500 million.

Clark County Commissioner Chris Giunchigliani was in the Legislature when she introduced Assembly Bill 385, which “makes various changes relating to energy, conservation, construction and renovation and creates incentives and standards for green buildings.”

“I had no idea the hotels were going to jump on board,” she said this week. “There was no way I dreamed it was going to take off the way it did.”

The testimony of an MGM Mirage lobbyist, saying the company supported the bill because it had a 27-million-square-foot project in the works, was a clue that apparently slipped by legislators, including Giunchigliani.

Wondering how this mess came about, I went back and read the minutes of the 2005 hearings on the bill.

What began as AB 385 (and evolved into AB 3 in the special session) had no discussion about what the fiscal impact on local governments might be after granting a tax abatement of up to 50 percent in property taxes for companies building “green.”

The bill was described as creating a model for green building, using the Leadership in Energy and Environmental Design (LEED) green building rating system.

But in the hearings, not one lawmaker asked what the tax abatement might do to property tax revenues shared by cities, counties, schools and police. Nobody. With the global warming scare, everyone was eager to jump on the green bandwagon, Democrats and Republicans alike.

Giunchigliani said she worked for two days with more than 40 representatives, including local governments, regarding possible amendments. But nobody talked about what might happen if big construction projects went green.

The bill was introduced March 24, 2005, had its first hearing April 4 and passed the Assembly unanimously May 25. The Legislature was to end June 5, yet this complex bill’s first hearing in the Senate was May 31.

That’s the hearing where Jon Wellinghoff, then lobbyist for MGM Mirage, said the gaming company supported the bill. The minutes quoted him as saying, “We are in the process of considering construction of facilities totaling 27 million square feet and we are interested in moving forward as quickly as possible. With LEED as a direction, we can be off and running much more quickly.”

He was talking about Project CityCenter, the 18- million-square-foot behemoth project now under way. Construction began in June 2006 (a year after the 2005 session) but planning had been in the works for 20 months before that. The MGM Mirage and Mandalay merger was announced in June 2004.

Wellinghoff’s brief comments should have been a clue to legislators that this bill benefited the gaming industry.

The 32-page bill was held hostage at the end of the 2005 session and only passed as AB 3 during the special session afterward.

Legislators in 2007 tried to fix the bill, which by then was looking like a $900 million windfall for the gaming industry rather than a boost for environmentalists. But even after the 2007 fix, calculations by Jeremy Aguero of Applied Analysis estimated the loss to local governments around the state in sales and property taxes is $471 million over 15 years.

The beneficiaries: Project CityCenter, Fontainebleau Las Vegas, Molasky Corporate Center, Echelon Place, Wynn Encore, Palazzo Resort and the World Jewelry Center.

I doubt that many of those who voted on the bill in the mad dash to end the session even realized the “incentives” in the title were savings in sales and property taxes.

The green bill reaffirms my belief that 120-day limits on the Legislative session don’t work. I’d rather they take more time and do it right.

What should have been good legislation is going to be remembered as one more time the big boys caught a break.

Jane Ann Morrison’s column appears Monday, Thursday and Saturday. E-mail her at Jane@reviewjournal.com or call (702) 383-0275.