I discussed Nevada’s green building property tax abatement in a post last week, but on Wednesday the state Senate suspended the program, citing a $110 million revenue shortfall through fiscal 2009. While only one building (the Patagonia Distribution Center) has received the abatement, sixty-seven Nevada developments, including two billion dollar projects in Las Vegas (the MGM Mirage and Fountain Blue) have registered under LEED. Clark County Manager Virginia Valentine stated that “[i]t’s a very difficult thing for us to estimate. Depending on how much of an incentive we are offering, it could have a very serious negative impact to our revenues.” Thirty-six of those projects are for-profit and taxable; the Patagonia project earned the full fifty percent, ten-year abatement (worth $80,000 to the developer each year). Officials plan to reevaluate the program during the rest of the legislative session, which closes at the end of June.
This a setback for proponents of tax-driven green building incentive programs. Few states other than Nevada offer similar abatements (Maryland allows counties to award property tax reductions at their discretion while Oregon’s program provides a tax credit equivalent to thirty-five percent of the green building premium) and Nevada’s program seemed poised to take off after Patagonia earned its abatement last month. On the other hand, if states are concerned with revenue shortfalls in this context, it’s a sign that these incentives are, in fact, encouraging a significant number of developers to implement sustainable construction practices. Moreover, it might also encourage states and municipalities to consider density bonuses (which provide added value over the lifetime of the building rather than a fixed time period) as an alternative incentive to tax abatements. Regardless, it will be extremely instructive to observe how the Nevada legislature deals with this important issue over the next two months before the end of its session.
- Revenue-Preserving Plan Suspends Nevada’s Green Tax Breaks (LV Sun)
- Patagonia Earns Property Tax Abatement (gbNYC)