Assemblywoman Debbie Smith, D-Sparks, told colleagues on the Ways and Means Committee Wednesday they need to pass AB422 to tighten the rules for local governments using STAR bonds.
Smith said the biggest change is to remove the Local School Support Tax from the sales tax breaks cities and counties can grant to businesses.
STAR bonds allow local governments to give a tax break to businesses that can show they will bring in substantial new business from out of state. Those businesses can use up to 75 percent of the sales tax revenue they collect to pay off the bonds financing construction of the business.
After the legislation was passed in 2005, school district officials discovered that those tax breaks included not only the local government's portion of the sales tax but theirs " the Local School Support Tax.
Washoe School District representative Ann Loring said the STAR bonds granted to attract Cabela's and Scheels, two major sporting goods stores, cost the school district $1.7 million in the past two years.
Mike Alonzo representing Harrah's casinos said the other parts of the bill dealing with reporting and clarifying how the STAR bonds should work aren't a problem. He said they oppose removing the Local School Support Tax from the mix since that reduces the size of the tax break local officials can give to get a business to move to Nevada.
Assembly Speaker Barbara Buckley, D-Las Vegas, said she supports economic development, "But you're doing it at the expense of schools and you're doing it with our money because the state makes this up," she said. "If you want to give up your money, OK, but not our money."
Reno Mayor Bob Cashell said the money these businesses bring is new money and that the entire sales tax should remain available. But, he said after the hearing, he doubts cities and counties can stop the bill.
The committee took no action on the measure.
Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.