Low taxes called the best development incentive

The economic development incentives city and state governments use to entice businesses to relocate are getting new scrutiny nationwide after a closely watched court ruling.

But industrial recruiters in northern Nevada say they can offer the best incentive of all a low-tax, low-hassle business environment and don't rely heavily on tax breaks.

Incentives, which range from tax breaks to outright gifts of cash and land from some localities, came into the spotlight this autumn after the federal Court of Appeals for the Sixth District struck down a tax incentive package designed to keep a Chrysler plant in Toledo, Ohio.

The decision applies only in the states covered by that court Ohio, Kentucky, Michigan and Tennessee but it's certain to be appealed to the U.S.

Supreme Court.

The argument against the incentives: The Constitution forbids states from discriminating against one another in commerce.

Nevada offers a package of tax breaks which even industrial recruiters consider to be modest, and the state instead relies on its lowtax environment as a selling point.

"One of the first questions that comes up is what kind of incentives Nevada offers," says Tim Rubald, director of business development with the Nevada Commission on Economic Development."Our biggest incentive is our tax structure.We just don't have a lot of taxes."

Typically, he says, states that offer big incentives packages need to do so because they have big state tax burdens.

Says Lisa Plummer, director of business development at the Economic Development Authority of Western Nevada: "Taxes and ease of doing business those are much more important than incentives." Nevada abates some taxes on new plants and equipment, allows companies to defer some other taxes and provides dollars for training programs.

That's a small list in comparison with some states that have 30 or more incentive packages available.

But that doesn't mean that companies looking to locate facilities in Nevada don't ask for help.

Ron Weisinger, executive director of the Carson City-based Northern Nevada Development Authority, says the relatively small number of incentive packages available in Nevada tends to focus more attention on each of them.

And he says they often prove helpful in closing deals.

"A little thing can go a long way in helping them make that decision," he says.

But the Nevada incentives aren't available to every company that shows up.

For starters,most of the incentive packages require the employer to pay at least the average hourly wage in Nevada.

That's currently $16.49.

Then, too,minimum amounts of investment are required.A company seeking abatement of sales tax on a new plant in a metropolitan area, for instance,must invest at least $1 million.

In a rural area, the minimum is $250,000.

The requirements sometimes set minimum numbers of new employees that are required before assistance will be granted.A company that wants state help with training, for instance,must add at least 10 trainees.

At other times, Rubald says, companies take a look at the incentives packages and decide they don't want the hassle of dealing with a public agency.

Some information from a company's application the number of employees and their average wage, for instance is made public.

And any incentives package requires approval of the state's Commission on Economic Development.

That's not a slam dunk.

RR Donnelley, for instance, this month was turned away when it sought incentives to expand its printing plant at Stead.

Incentives available to new or expanding primary employers in Nevada:

* Partial abatement of the sales and use tax that's levied on the purchase of machinery and equipment.

(The state collects a 2 percent tax even if the incentive is OK'd.)

* Interest-free deferral of sales and use taxes for up to five years.

The company needs, however, to provide some kind of surety such as a bond to the state Department of Taxation to guarantee that the taxes will be paid.

* Abatement of half the personal property taxes that are levied by schools and other local governments on machinery and equipment.

The abatement can run as long as 10 years.