Can the ritzy North Shore of Lake Tahoe, along Lakeshore Boulevard, somehow qualify as a “low-income community” under Nevada and federal law?

The question arises when comparing the remarks of a lobbyist for the “New Markets Job Act” — approved in 2013 by Nevada lawmakers and Gov. Brian Sandoval — with state records filed by the lobbyist’s employer.

Advantage Capital Partners Director Ryan Brennan had been asked by a senate committee chairman how ACP would invest the tax credits it would receive under SB 357, touted as the “New Markets Job Act.”

“Our business model,” testified Brennan, “has been to open an office and immediately staff it with full-time lenders in the communities in which we want to invest.”

However, the communities in which ACP was seeking to invest, under SB 357, are federally designated “low-income communities.”

But ACP has only one registered office in the state of Nevada, a $17-million-plus mansion at 869 Lakeshore Blvd., Incline Village.

And the ACP website shows only one employee listed under its Nevada office: ACP President Steven Stull.

The personal property of Mr. Stull, the impressive mansion also serves as the ACP Nevada office and is currently valued at $17,207,483, according to Zillow, the online real estate and rental marketplace.

Monthly rental at the 869 Lakeshore Blvd. residence — a possibility, apparently, since Stull also lists home addresses in Georgia, Louisiana and California’s Napa Valley — is estimated by Zillow at $77,826.

According to Washoe County records, Steven and Claire Stull purchased the “breathtaking property,” as Zillow described it, for $11,875,000 in February 2013 from the Bluth Trust of Charles P. and Cynthia Bluth, former owners of the Cal-Nevada Resort.

Advantage Capital Partners, of which Steven Stull is president, is a major national player in the government-subsidized "New Markets Tax Credit" industry — by first, lobbying enabling legislation into law, and then monetizing the opportunities opened by that legislation.

At the federal level, a NMTC law was first passed in 2000 and has been continuously reauthorized since then, issuing more than $17 billion in federal tax credits, ostensibly to incentivize business investment and job-creation in low-income U.S. communities.

While participating at the federal level, Advantage Capital has, in more than a dozen states, led lobbying efforts to create state-government-subsidized NMTC programs.

Thus, while the "Nevada New Markets Job Act" was sponsored and introduced in Nevada's 2013 Legislature by State Sen. Michael Roberson, at the time Republican minority leader, the primary advocate and public face answering lawmakers’ questions about the proposal was ACP Director Ryan Brennan.

The Nevada legislation — like that introduced in multiple American state legislatures — was designed to allow certain private firms designated as “qualified community development entities,” or "CDEs," to take control of more than one hundred million dollars-worth of state tax credits.

Once packaged by CDE firms such as Advantage Capital Partners into bond-like financial instruments, those tax credits can be purchased by insurance firms from the CDEs at a discount and used to lower their Nevada taxes.

Having monetized the state tax credits, the CDEs are obligated to, for a given number of years (seven), keep at least 85 percent of the nominal value of the tax credits invested in qualified low-income-community businesses.

Critics of these programs argue that they unnecessarily and excessively enrich the CDE middlemen.

Most lenders to small business, such as banks, borrow money and then lend it to their customers. The money they use must be repaid.

The CDEs in the Nevada program sell, or monetize, the state tax credits allocated to them to get the funds with which they make many loans and some actual investments. Essentially, therefore, that capital is effectively a grant from the state.

When they make loans that their customers repay, they eventually keep the capital left over. They are not obligated to return any capital to the state, as banks would be required to return capital to their lenders.

This means that the private profits from such “public-private,” or corporatist, state and federal programs can be enormous.

In Nevada, the New Markets Tax Credit bill sponsored by then-Senate Minority Leader Michael Roberson in 2013 created $200 million of “allocation authority” for the program, with a 58 percent tax credit assigned to the “qualified equity investments.”

Thus, the fiscal impact to the taxpayers of Nevada is $116 million (58 percent of $200 million). After the CDEs loan that amount out and then get it back in repayments, sizable amounts will be left in CDE pockets, while the remainder will be divvied up between insurance companies, consultants and lawyers.

While the CDEs regularly produce reports asserting that state tax revenue from the CDEs’ NMTC clients more than make up for the tax credits’ cost to the states, that is not what state audits from around the country show.

The seven CDEs participating in Nevada’s NMTC program have also, over the last 14 years, participated in the federal New Markets Tax Credit program, beginning in 2002. Notably, such participation was a requirement written into the legislation setting up the Nevada program. Although Nevada banks have been making loans to small businesses for years, Roberson’s legislation made them ineligible to apply for the state subsidy at the base of the New Markets Tax Credit scheme.

Since 2002, according to data from the federal Community Development Financial Institutions agency website, the seven Nevada-participating CDEs have been allocated federal tax credits totaling over $2.7 billion. Because the federal NMTC tax credit is 39 percent, over $1 billion of the $2.7 billion was monetized into funds controlled by these seven CDEs.

To the extent that those federally sourced funds were loaned out and then paid back to the CDEs, those funds — originally the property of taxpayers — had been transferred into the ownership of the CDE firms.  

While the exact dimensions of the funds thus transferred through the federal or state NMTC programs depends upon the individual deals struck by the CDEs, the transfer of public wealth to these firms appears almost certainly to have been massive.

This would suggest an answer to the question of how exactly Mr. Stull can afford such luxurious accommodations for his Nevada office: He and Advantage Capital have been promoting similar government-subsidized “public-private” programs nationally for more than 20 years.

Multiple question of fairness and state fiduciary responsibility have arisen during the course of Nevada Journal’s examination of the 2013 “Nevada New Markets Job Act.” Such as: Are the NMTC programs ultimately fair to taxpayers? Was SB 357 fair to other firms that lend to Nevada small businesses, such as commercial banks and others?

Finally, do Advantage Capital Partners and other CDEs operating with these taxpayer subsidies demonstrate such great venture-capitalist skills that the cost to Nevada taxpayers is worth it?

Nevada Journal will examine those questions in upcoming installments of this series.

Steven Miller is managing editor of Nevada Journal and senior vice president at the Nevada Policy Research Institute