The Las Vegas Redevelopment Agency currently finds itself locked in a court battle with the Culinary Union. The lawsuit is the result of a recent vote by Las Vegas city officials to exclude two referenda items proposed by Culinary from the June ballot. The two ballot initiatives would require (1) voter approval for all lease-purchase agreements by the city, and (2) a revocation of the city's redevelopment plan and voter approval for all future redevelopment projects.
City officials decided that these ballot initiatives were "legally defective" because they would take power away from the LVRDA – even though the legal process of qualifying the initiatives had been satisfied. Culinary responded by bringing the lawsuit that's currently before the Nevada Supreme Court.
Now, the very merits of the LVRDA have come under debate. Culinary Union research director Chris Bohner rightly recognizes that, "The redevelopment agency is taking a skim off the top of the property taxes that would be going to the schools, the police and these other entities." The Nevada Policy Research Institute has highlighted that fact at length. Redevelopment agencies in Nevada are essentially corporate welfare schemes that allow local officials to take money away from legitimate government services in order to give it to their friends in real estate development.
City officials contend that downtown development would not have occurred in Las Vegas without the provision of such subsidies. They also claim that the tax revenue diverted away from other government services to the LVRDA would not exist if the LVRDA were not deploying taxpayer subsidies to lure development downtown. Development that results from the subsidies, they claim, boosts property values and, hence, leads to an increase in property-tax revenue.
As evidence, city officials point to two specific developments receiving subsidies from the LVRDA: the World Market Center and Allure Condominiums. They argue that both properties pay much more in property taxes, now that they are home to completed projects, than they did in 2005 when the lots were vacant.
This argument is extremely misleading. In examining the fiscal impact of the subsidies, one cannot look at the property taxes paid by two parcels in isolation. More than half of the property taxes paid by all property owners within the redevelopment zone are currently diverted to the LVRDA to provide corporate welfare incentives – and to fund government projects like a proposed $267 million city-hall monument to the mayor. While these two newly developed parcels now pay more in property taxes to fund local government services, this does not offset the fact that less of the property taxes paid by all other parcels is going to fund government services. Indeed, more than half of the taxes paid by the majority of property owners in the redevelopment zone are being used to pay for that new development.
Moreover, because many homeowners within the redevelopment zone are low-income families, this diversion of property-tax dollars to large-scale real-estate developers amounts to a regressive wealth transfer.
Bill Robinson, an economics professor at UNLV, recently noted that a successful redevelopment plan should "create actual market opportunities for businesses so that they don't have to sell the business on the idea of being there. The businesses look at what's going on and are automatically attracted to it."
Robinson is right on the money by pointing to the creation of "market opportunities." Of course, the redevelopment model used by the LVRDA is inherently anti-market as it is driven by the arbitrary decision of government officials to bestow artificial advantages onto certain businesses. Instead of encouraging private development, this method creates a disincentive for developers to invest in the redevelopment zone if they cannot receive taxpayer subsidies. To do so, they would be forced to subsidize their competition. Often, this recognition can lead to rent-seeking behavior and corruption.
NPRI recently released an in-depth study that critiques the redevelopment model used by the LVRDA and other redevelopment agencies in Nevada. The study shows that while urban revitalization is often a worthwhile goal, the methods used by redevelopment agencies in Nevada unnecessarily burden taxpayers – especially low-income families – and can foster corruption. The study shows how the goal of redevelopment can be accomplished without such adverse consequences.
In light of the indefensible and controversial claims recently asserted by the LVRDA, evidence grows even stronger for the reforms recommended by NPRI. Policymakers at state and local levels should give those reforms serious consideration.
Geoffrey Lawrence is a fiscal policy analyst at the Nevada Policy Research Institute.