Another STAR Fleecing of Nevadans

That Great Nevadan corporate giveaway, otherwise know as the Sales Tax Anticipated Revenue (STAR) bond, is once again preparing to fleece taxpayers and shaft local businesses who play by the rules. And, as an added bonus this time, we have the Reno Gazette-Journal's editorial board supporting the move, albeit grudgingly, with the asinine "well, 25% of something is better than 100% of nothing" argument.

Foolish us, we always thought STAR bonds, which allow developers to keep 75% of the sales tax generated for 20 years, were originally designed for projects that actually promoted real tourism, not oversized shopping malls. But much like Cabela's managed to snooker Reno with its ludicrous claim of drawing millions of completely new visitors solely because they could now, we guess, buy a duck blind in person, Sparks is falling for the same spiel from the Legend's project.

What's so laughable about this special treatment is how little economic thought apparently goes into government's decision.

First off, the main argument (perpetuated by the RGJ's board) is that somehow every dime spent in these retail projects is newfound money. Money, and tax dollars, that wouldn't exist because, you know, there aren't any other retail stores or restaurants in town. This is the same story always put forward by sports teams whenever owners want the public to foot the bill for a new stadium. They come up with some huge economic benefit, calculated on ticket sales and surrounding expenditures, and say "See all that what we bring you."

But the dirty little secret is this is just a reallocation of money. When a family decides to spend their Friday night out at the game, it's almost always at the expense of going to the movies or a Chuck E. Cheese, this isn't new money generated by the stadium. It is just entertainment dollars spent somewhere else.

In any given population there is a finite amount of money to be spent. Adding more choices, doesn't increase the amount spent. Trust us, with personal savings in the negative, consumers aren't hoarding cash just so they can spend it at a new designer store in town. Nor will a multitude of monied Sacramento and Bay Area denizens be making a special trip to visit stores they already have. Increases in sales figures have more to do with population growth and economic conditions than choice (especially in a market this size). If those elements are positive, a company is going to move in no matter what because of the profit motive.

The other factor is just plain old fairness. Why should Cabela's, Legend's, etc. be allowed to retain sales tax for their own expenditures when it is illegal for every other business in Nevada? This is equivalent to a 5.5% price advantage for STAR projects. An advantage that, safe to say, probably isn't passed along to consumers.

How do you think small business owners like Todd and Jeanine Morgan, who have sunk everything into running Big Apple Pizza and Subs (and were featured in a Sunday RGJ article on how local restaurants are suffering), feel turning over every cent of sales tax when a huge corporation gets to use three-quarters of it for themselves? Or the Sportsman's Warehouse on Kietzke that played by the rules.

Finally, there is the other economic benefit that is always touted -- job creation. While true, there will be hundreds of new jobs with these projects, what kind are we really talking about? It's not manufacturing, skilled services or professional salaries, it's that low man on the totem pole -- retail sales. Twenty hours a week at $8.50 per isn't going to put someone in a Reno house or make a hill of beans in the region's overall economic outlook. Plus, one needs to factor in any possible job losses by like businesses unable to compete with the special STAR treatment.

Yet somehow with our roads crumbling, budgets exploding and revenues dropping the good folks in our government see fit to say goodbye to millions of sales tax dollars (which area consumers still have to pay) all so the Truckee Meadows can have another Chili's, Lane Bryant and Sunglass Station (yes, those are actual Legend's tenants). But, hey, there will be a Hot Dog Hall of Fame.