State Treasurer Posts Alternate Nevada State Budget

Disclosure note: From time to time, I serve as treasurer for various political campaigns. I served as campaign treasurer for Dan Schwartz last year.

Nevada Treasurer Dan Schwartz has proposed a budget plan for the state that increases spending 4.6% over the next two years. This stands directly opposed to Governor Brian Sandoval’s proposed state budget that increases spending over 12%, and would require over a billion in tax hikes on Nevadans instead of tourists. This comes on the heels of major state tax hikes, mostly on residents, in 2003 and 2009.

You can read about it in today’s Review Journal, though you have to tolerate the biased reporting, in which the 4.6% spending hike is “conservative” and the 12%+ spending hike is “moderate”. It makes you wonder what the reporter would label an attempt to reduce the size and scope of government!

Setting Nevadans Up For A Massive Tax Hike – again!

In preparation for the upcoming budget wars lets take a look at Nevada’s welfare rolls from the pre-recession levels, through the 2007-09 recession, and during the recovery from 2009 through FY 2015. The picture from below (from the Nevada Division of Welfare site tells the story:
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This is the TANF caseloads from 2006 through 2015. TANF is the new acronym for welfare (Temporary Assistance for Needy Families). In 2007 the caseload was 17,712. At the end of the recession the caseload was 22,556 (a 27% increase). That’s a lot, but it was a tough recession – fine. But then look what happened after the recession ended. The Caseload in FY2015 skyrocketed to 35,576 – double the 2007 prerecession levels and 58% higher than the caseload at the end of the recession. Something has gone seriously awry. And it is not that the population has grown. The welfare recipients per 1,000 in NV population ballooned from 6.62 to 12.57. Simply astounding. Remember that when they want another billion in tax revenues to pay for it, including dozens of millions in advertising the welfare expansion to attract potential recipients. Some ad agency out there will do quite well!

The next data point is TANF Medicaid recipients. In 2007 there were 63,008 TANF Medicaid recipients, 23.56 per 1000 Nevada residents. In FY 2015 this number has exploded to 271,967, or 96.12 per 1,000 Nevada residents. The 2015 caseload is more than 4 times the 2007 caseload. Simply out of control.

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The next data point is CHAP (Child Health Assurance Program) recipients. In 2007 there were 28,674 recipients or 10.72 per 1000 Nevadans. In 2015 there is an astonishing 226,816 recipients or 80.26 per 1000 Nevadans. That is an nearly eight fold increase. Are we trying to build the dependency capital of the world?

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The next data point is Food Stamps. In 2007 there were 119,596 Nevadans on food stamps or 44.71 per 1000 Nevadans. In 2015 the caseload shot up to 375,506 or 133.46 per 1000 Nevadans. OMG what are we doing in Nevada. Here is the chart.

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And finally take a look at what they have done with Medicaid – by law, we can’t even institute a simple co-pay to promote responsible consumption. Simply outrageous!

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That is enough for now. It is quite sobering. Remember this when they demand that our taxes be raised by a billion dollars. This is the same crap they pulled in the lead up to the 2003 legislative session. That year was a record tax and spend hike, but set Nevada up to have the most difficult economic recovery of any state in the nation.

Guy Hobbs on the new taxpayer-funded stadium

I asked preeminent government finance expert Guy Hobbs, a Ward 2 constituent, for his thoughts on this week’s new plan to give taxpayer funds to the Findley/Cordish group:

Based upon the presentation made by staff at this week’s City Council meeting, it would appear that the following points summarize the revised funding proposal for the proposed soccer stadium:

  • The City will cash-fund on and off-site work for the stadium. Previously an amount of $14 million was identified for this, though it was not a comprehensive accounting for all expected site work. It is expected that this amount will be greater than the $14 million.
  • The City will “pre-pay” the developer for community events to be held in the stadium. The amount identified is $20 to $25 million.
  • The City will share in TIF revenues generated from stadium operations.
  • The City will use $20 million in STAR bond proceeds to fund the building of a parking garage to serve the stadium and other nearby development. The developer will have access to the parking garage for an estimated 90+ events days.
  • The City will use $3 million per year of room tax collection commissions to bond for up to $50.7 million in projects; roughly half of which would be used to fund an estimated five park projects and the remainder to fund “community access” to the stadium.

As I understood the direction from the City Council at a previous meeting, staff and the developer team was to bring back a funding plan for the proposed stadium that does not include the use of public money to fund the construction of the stadium.   The proposal as described above has shifted direct support of stadium construction using public funds, as was previously proposed, to an approach that somewhat less directly supports the construction with public funds. It still, however, commits public funds to support the stadium construction.

It is very clear that the donation or contribution of the land by the City is a use of public resources to enable stadium development. It is also clear that the use of the $14+ million to fund on and off-site costs is a use of public money. Attempts will likely be made to characterize the use of these funds as something akin to “normal costs to promote economic development”. However, these are still very real costs being funded by public monies.

A new element of the proposal is the willingness on the part of the City to build a parking garage to support the stadium. At an estimated 90+ days of use by the stadium, and an estimated cost of $20 million, it can easily be said that the City is funding direct benefit to the stadium of at least one-fourth of the cost of the garage. However, since this project was not identified as necessary until the stadium became the justification, it can be more appropriately characterized as $20 million in contributed capital to the stadium. Bear in mind, too, that parking for the stadium has been a heavily criticized part of the overall plan. This structure – as undersized as it may be for the stadium – is still a necessary part of the overall stadium project (or it is otherwise unworkable). Thus, the public funds spent to build it are contributions to the overall stadium project. Efforts may be made to couch the parking garage as a facility needed for all occupants of Symphony Park. However, it is the stadium that will be the direct beneficiary, and it is the stadium that is the justification for its need.

It should be added that providing use of the parking garage will provide direct financial benefit to the stadium operators, in that the revenue from parking will inure to the stadium. Unless the City plans on charging the stadium for use of the facility, this offers the operators enhanced revenue potential. Thus, the publicly funded parking garage becomes another way of channeling revenue to the stadium.

The most perplexing and concerning element of the new plan is the suggestion that the City will issue bonds to fund not only legitimate park-related capital projects, but will also use bond proceeds to pre-pay rent for the facility. It should be noted here that one of the presentation slides indicates that “cash, (and) some bonds” will be used to fund this community access. However, the only funds that are specifically identified in the presentation are bond proceeds. This leaves the reader to wonder whether, beyond the bond proceeds, there is also intent to fund additional community access with other cash not disclosed in the presentation.

The use of bond funds to pay for community access, or facility rent, is highly questionable. First, the City is already donating land and site preparation dollars to the project and can easily command access to the facility for those contributions alone. Second, using bond proceeds to fund an operating expense – which is what facility rental would normally be – is highly inappropriate and financially imprudent. Bonds are issued to acquire capital assets, and rent is not a capital asset. It would appear that what is really happening here is a contribution of bond proceeds to help construct the project in exchange for “other” considerations. If this is the case, it is identical to the prior proposal to use City bonds to fund a portion of the construction of the stadium and, thus, a direct use of public funds to build the stadium (albeit in a lesser amount).

It is also concerning that the City would dilute the borrowing power of the $3 million in room tax collection commissions by apportioning any of it to the stadium (which seems to be in direction violation of the direction it received from the City Council). If the City is truly committed to parks and other eligible projects (per the room tax interlocal agreement), it would actually maximize the building and refurbishing of parks. Tying up half of the $3 million per year for 30 years to fund the stadium certainly inhibits the City’s ability to deliver parks facilities that are desperately needed.

Interestingly, when the bond funds and the cost of the parking garage are considered together, the City is still contributing $40 to $45 million in public funds to the construction of the stadium project. When the values of the land and site costs are added, the level of public support rises dramatically.

Mexican Taxing and Spending

Mexico, in recent years, has featured one of the smallest federal governments in the world. In addition to being notable for its relatively small size, Mexico also derived a bigger piece of its federal taxes from “consumption taxes” (a national sales tax) than income taxes.

January 1, 2014, the federal Mexican government made some adjustments in tax law… they increased the national sales tax (to 16%) and decreased a handful of other taxes…  they created their first ever capital gains tax… several other measures.

As a result, the Mexican federal government has new income. Yesterday, President Nieto announced what he plans for the federal government to do with this new funding – massive transportation improvements, including a replacement for the world’s busiest airport (Mexico City), increasing capacity of the rail and road system, and doubling the capacity of Mexican ports to receive and ship cargo.

Mexico moved away from trade isolationism enforced by tariffs to actively engaging with world commerce about 30 years ago. Here’s a comprehensive look at the changing face of commercial competition along the Pacific coast from five years ago.

From Beavers To Chihuahuas

Members of the Las Vegas City Council have been offered a taxpayer-paid trip to Portland, OR to visit a MLS game there, and learn how Portland has benefited from its city-owned stadium. I thought it might be cheaper to research the topic online.

The MLS team in Portland plays at Providence Stadium, which was built in 1926 with private funds. The city of Portland bought it in 1966 for $2-million – about $15-million in today’s inflation-adjusted dollars. It was the home of the Portland Beavers, Oregon’s Triple-A minor league baseball team, for longer than the Stars/51s have been at Cashman Field. In 2010, after talking about finding the Beavers a new facility and converting the stadium to a soccer facility, the Portland City Council ditched the “find the Beavers a new home” part and converted the stadium, evicting the Beavers. The cast-off Beavers today have morphed into a minor league team in Texas called the El Paso Chihuahuas. Portland now has a single-A team called the HIllsboro Hops.

The conversion of the facility to soccer cost $36-million dollars, with a complicated financing scheme that seems to put most of the burden on Portland taxpayers, if you read enough about it. Inside talk at Las Vegas City Hall suggest round numbers for the proposed Cordish deal are quite a bit larger – $300-million with half paid for by Las Vegas taxpayers.

It will be interesting to see if any of the council members who make the trip come back thinking how comparatively inexpensive it would be to convert Cashman Field into a soccer stadium.

For more on the Portland MLS stadium: