A GASB 77 Tale of Two States

October 25, 2017

With new government financial reports arriving daily, we’ve been busy collecting GASB 77 subsidy data and posting it in our new Subsidy Tracker 2 database.

We are also taking note of trends and contrasts in transparency reporting. One of the most interesting contrasts involves the reporting of passive loss data by the States of Washington and Nevada.  GASB 77 requires each governmental entity to report on the tax losses it incurs as the result of abatement actions of other governments.

Both Washington and Nevada operate state-level abatement programs that deprive local governments of tax revenue. But the two states couldn’t be more different in their willingness to disclose the magnitude of those losses to local government bodies.

In late summer, we reviewed the Comprehensive Annual Financial Reports (CAFRs) of some of the early reporting counties and cities in Washington. We were disturbed to read in three of them (Snohomish County, King County, and the city of Everett, home to Boeing’s largest US plant ) similar language informing readers that while the state’s tax abatements for aerospace companies and data center operators was causing them to lose tax revenues, the state was unable to calculate the local losses incurred. While these three noted the problem, none of the dozen other local government CAFRs from the State of Washington reported any passive losses from state-operated incentive programs.

In nearby Nevada we encountered a very different story. Last month, Nevada’s State Controller released a detailed 4-page document listing all of the local government tax losses caused by abatements from state incentive programs. The document is very well organized, broken down by county, governmental entity within the county and reports losses attributable to five different programs (Aviation, Data Centers, Renewable Energy, Standard and Tesla). The level of detail is incredible, as they report losses as low as $4! The report also includes losses to schools as well as library, fire and water districts.

Here are a few highlights of the Nevada report:

  • All told, local governments in Nevada lost more than $105 million as a result of state abatement programs.
  • Nevada’s public schools accounted for nearly $61 million, 58% of total losses.
  • Subsidies to a single company, Tesla, cost local governments $68.7 million last year, nearly two-thirds of total losses incurred by local governments. One single school district, Storey County Schools (near Reno), incurred $36.7 million of revenue losses due solely to Tesla subsidies.
  • State-administered subsidy programs for data centers cost local governments in the state more than $10 million in Fiscal 2017.

Washington State’s 2017 CAFR will be out soon. We are looking forward to evaluating the quality of its GASB 77 reporting. We also look forward to seeing whether local governments in Nevada include the information so helpfully provided them by their State Controller.