Is Colorado Springs finally emerging from its long economic funk? Are we at last moving forward into the broad, sunlit uplands that Winston Churchill believed awaited England once Nazi Germany was vanquished?
It took England decades to shake off the wounds of war, shed its colonial empire, restructure social and political institutions and build a modern economy. Churchill won the war, but Margaret Thatcher won the peace.
There’s a sense among local business and political leaders that a recovering economy will cure all our ills. Sales tax receipts will climb, enabling the city to restore funding for infrastructure and parks, and newly prosperous voters will obligingly vote to tax themselves (or fee themselves) to pay for potholes and flood control.
We’ll drive happily down our sparkling, newly resurfaced boulevards, gambol in our pristine parkland, watch our home values explode and celebrate diversity, civility and prosperity.
Or maybe not.
As Robin Respaut reported in a recent Reuters story, Reno’s extraordinary growth in the past several years has created a host of problems for that resurgent Nevada city, thanks to Mike Kazmierski.
As some may recall, Colonel Kaz was kicked to the curb here in 2011, after serving as president and CEO of the Colorado Springs Regional Economic Development Corporation since 2005. The EDC board had gotten tired of the blunt-spoken Kazmierski, who soon moved on and took a new job as president and CEO of the Economic Development Authority of Western Nevada (EDAWN).
When Kaz rode into Reno, that town was in shambles. Unemployment stood at 14.2 percent and property values had fallen by 58 percent as the recession had hollowed out the city’s employment base.
Kaz got to work, and Reno exploded. Apple, Amazon and a host of other firms located facilities in the Reno-Sparks area.
But the big news came last year when EDAWN and Kazmierski hit the eco-devo jackpot of jackpots as Tesla chose Reno for its massive “gigafactory.”
“During 2014,” Kazmierski told 400 local business people at a January event in Reno, “34 companies moved to Reno, 4,200 jobs were created, and unemployment dropped to 6.4 percent.”
That may be just the beginning. Tesla alone may create 22,500 direct and indirect jobs and bring close to $1 billion in annual revenues to area businesses.
Although Nevada is a low-tax state by any measure, its tax structure is extraordinarily regressive.
[/pullquote]Tesla chose Nevada for a variety of reasons. Its location in the high desert will allow Tesla to power the plant with solar energy and Reno is close to Tesla’s California assembly plant. But EDAWN may have beaten competitors in Texas, New Mexico and California by offering a rich feast of incentives and tax breaks.
Nevada doesn’t levy corporate or individual income taxes. In addition, the state agreed to a 40 percent reduction in other taxes for Tesla, which may cost the state as much as $1.3 billion during the next 20 years. Property taxes are capped at $3.64 per $100 of assessed valuation, which is fixed at 30 percent of market value. The state collects a 6.75 percent sales tax, while Reno has to get by with a 1.1 percent sales levy.
So although Nevada is a low-tax state by any measure, its tax structure is extraordinarily regressive. Absent income taxes, the state relies on casino taxes, hotel room taxes and mineral severance payments to pay the bills.
Those cows no longer give much milk. In Reno, collections from the 13 percent room tax declined from $43 million in 2006-07 to an estimated $32 million in 2014-15. The city’s finances are in sad shape, with $226 million in unfunded pension liabilities, $40 million in workers comp liabilities and $534 million in long-term debt.
The new boom generates costs up front, and not enough revenue to pay for it. Public schools are crowded and dilapidated, city infrastructure is deteriorated and the casino industry is fading.
Reno’s problems may be ours in a few years, but we have the financial capacity to rebuild, repair and reinvent. We’ve always had it, but our tax- and debt-averse voters seem to prefer low debt, low taxes and economic stagnation to slightly higher debt/taxes and a booming economy.
But who knows?
Maybe we’ll be Reno without the casinos — booming, crowded and shabby. Maybe we’ll yield to the entreaties of recreational marijuana magnates, who positively yearn to be taxed. And maybe we’ll join TA, Taxophobes Anonymous, and leave our parsimonious past behind.
Roll on, sunlit uplands!