The Nevada Board of Economic Development on Wednesday endorsed a deal negotiated by the state to lure Apple Inc. to Reno with $89 million in tax breaks, though the action was largely for show since the panel lacked the authority to change the agreement.
Gov. Brian Sandoval called the deal a “win” for the state and said Apple’s commitment to northern Nevada will generate interest from more businesses to come to the state.
A state law approved last year gives the economic development agency’s executive director wide discretion to negotiate deals with companies that meet certain criteria.
“If we had not implemented that statute we would not have Apple here,” said Steve Hill, head of the Governor’s Office of Economic Development who began negotiating with the Cupertino, Calif.-based high tech firm in February.
Apple plans to build a 350-acre data center east of Sparks to house servers. After construction, the company said the facility will employ at least 35 full-time workers with an hourly wage of $25, as well as up to 200 contract workers.
The company also said it will build a purchasing and business center in a blighted area near downtown Reno. Analysts estimate the projects will bring about $340 million in economic activity to the area over the next decade.
Washoe County and the city of Reno agreed to their share of the tax abatements in June. In Washoe County, Apple will get an 85 percent break on its personal property taxes, while Reno pledged 75 percent of its share of sales taxes to the company for a downtown business center.
In exchange for the tax breaks, Apple pledged to invest $1 billion in the region over 10 years. The agreement contains options to extend the abatements for two, 10-year periods provided the company meets certain benchmarks for continued investment in the region.
Hill said once the local governments signed off on the deal, the agreement was essentially cast in stone because the company met all the other requirements to qualify for the abatements.
But some board members, while endorsing the Apple deal, raised concerns over the process and the unprecedented power bestowed upon the executive director.
Secretary of State Ross Miller questioned whether it was in the state’s best interest to concede possible abatements for up to 30 years, and whether safeguards were in place to ensure Apple holds up its end of the bargain.
The Apple agreement does contain “claw-back” provisions making the company responsible for the abated taxes if investment and hiring targets are not met. In the first four years, the company promised a $400 million investment in the region.
Hill also stressed that other states and communities were vying for the Apple project, and many of those can boast of having no sales tax or pledged lifetime tax abatements to try to lure the company.
Sandoval noted that data centers were identified in the state economic development plan as a targeted industry to pursue to diversify Nevada’s economy. To succeed, “these are the deals we’re going to have to make,” he said.
Nevada’s agreement with Apple was the first negotiated under the new state law giving the executive director power to act without prior board approval.
After Wednesday’s meeting, Sandoval said the process and the statute “will definitely be a topic in the future,” adding it likely will be discussed during next year’s legislative session.