“There is no sincerer love than the love of food.” – George Bernard Shaw
It’s that time again, where we gather with family and friends and stuff ourselves until we are uncomfortably full. The holiday season is upon us; time for food, festivities, merriment, federal lands discussions, tax packages, and campaign contributions. Given the nature of the season, and how busy everyone is, we thought we’d keep it light for you this month. Just a quick overview of a few issues facing NAIOP, with a much longer, more in depth write-up on each topic to follow. You didn’t think we’d let you off the hook that easy did you?
On Tuesday, November 21, 2017, along with Jay Heller, we attended the Las Vegas Metro Chamber of Commerce’s Eggs & Issues breakfast, featuring Congressman Ruben Kihuen (D-NV) as the keynote speaker. Upon the conclusion of the breakfast portion, we joined the Congressman for a round-table discussion about Nevada’s role in Washington and some of our concerns regarding things like I-11 and infrastructure. Immediately after our first discussion, we joined the Congressman again, along with Congresswoman Dina Titus (D-NV) and House Minority Whip Steny Hoyer (D-MD), Tina Quigley of the RTC and other stakeholders for a more in depth round table discussion centered on infrastructure, transportation, job growth, and diversifying our economy. Jay was able to engage in conversation with the Representatives and stakeholders to discuss the infrastructure bank and federally held land along Interstate 15. While spending almost four hours with a bunch of politicians is generally never high on anyone’s list (apart from Jon and I), the face-time Jay got and the ability to raise his concerns and ask them questions, was invaluable. With NAIOP having a federal arm and a connected Nevada chapter, the power of your voice will only continue to grow.
In addition to the round-table meetings, we have continued to meet with the City of Henderson and Clark County regarding federal lands along I-15 and how we can be involved in the process of expanding the disposal boundaries for additional commercial development. The City of Henderson and Clark County are working together in order to see this happen at the federal level. At the current rate, it seems an act of Congress will actually be faster than amending the current draft of the Resource Management Plan. As mentioned above, Jay had a captive audience of Congressional Leadership, the Nevada delegation, and primary stakeholders who showed a great deal of interest in this issue, as they understand the need to diversify Nevada’s economy beyond just tourism and gaming.
When it comes to infrastructure, no one group is more keenly aware of the dire need than NAIOP. The ability to speak with stakeholders and members of Congress about the passage of AB 399 and creating the state’s first infrastructure bank for both utilities and transportation was key. As we look for ways to fund our infrastructure bank, we need our federal delegation and legislators to be aware of its existence for a future time when and if federal funds become available. They will be our first voices as we, as a state, apply for funds. This issue ties into the federal lands discussion as well, as we will need the infrastructure if we are to successfully build on the I-15 corridor.
As everyone is aware, we now have two competing federal tax bills; one proposed by the Senate and one by the House of Representatives. While there is so much information to digest in these bills, we thought it important to highlight items that could impact NAIOP’s members. When huge tax issues come up, Jon and I work with Shareholder Marvin Kirsner to bolster our research and analysis. As a bonus, Marvin tells us when we’re nuts, which may as well be a second job for the poor guy. Regarding the competing bills, Marvin noted:
Although we still do not have the language of the Senate bill (only the committee’s summary), it looks like the Senate bill would be far less advantageous to commercial real estate projects.
The Senate bill incentivizes businesses which pay wages to employees, focusing on job creation, where the House bill’s focus is to encourage investment in capital. Since the commercial real estate industry is more capital than labor intensive, the House bill skews more in favor the real estate industry. The House bill’s focus on capital is demonstrated in the formula used to allow an active partner to use the favorable tax rate on more than 30% of his share of the income. The formula takes into consideration the partnership’s return on capital assets, reduced by interest expense. The greater the investment in capital, and the lower the interest expense, the larger the share of income that would be taxed at the 25% tax rate.
This analysis is subject to change, since the Senate has not yet released its legislative language. The process is moving very fast, and we do not know what a compromise deal might look like in a House-Senate Conference agreement.
As promised, or threatened (however you choose to look at it), Jon and I will have lengthier articles in the near future that dissect these issues even further. Certainly, some late nights seasoned with plenty of wine and a not insignificant amount of cursing (in the most cheerful spirit, of course!) is in the offing. In the meantime, we hope you all enjoyed your Thanksgiving holiday and have very Happy Holidays.
Looking forward to hearing everyone’s New Year’s resolutions.
Jon & Kerrie
Jonathan P. Leleu, Shareholder
Kerrie Kramer, Assistant Director
***Please note this article was written on Monday, November 27, 2017, and since that time, the Senate has passed its version of the tax reform bill, with pages of hand-written edits. Both houses will now take their bills to conference committee for further negotiation and reconciliation, to come up with one complete piece of legislation. Once we have it fully digested, we will distribute a summary.