RENO, Nev. (AP) — Apple should be open in downtown Reno by now.
Local economic development officials should be driving potential clients past Apple's receiving center on Evans Avenue, pointing to it as an example of Northern Nevada's ability to draw the best-of-the-best in high-tech.
Apple's warehouse and office space should be staffed, readying to receive the $1 billion worth of computer equipment the company will be installing in its data center east of Reno over the next decade.
The downtown revitalization expected to accompany Apple's arrival should be occurring.
Instead, the dirt lot on Evans Avenue in a part of downtown better known for its homelessness and prostitution problems is still an empty dirt lot.
The construction permits pulled to build Apple's warehouse have expired.
And the businessmen who signed the agreement for Apple to move into their Tessera tourism improvement district 18 months ago are scrambling to keep it alive as the company hunts for a better real estate deal that will keep their tax breaks intact.
Still, as Apple remains silent, both city officials and the Tessera developers say it's too early to sound the deal's death knell.
"We expect that the agreements between the parties will be honored and not interfered with," said Steve Polikalas, who represents the Tessera district, a distressed 10-block area roughly bounded by Interstate 80, Virginia Street, Fourth Street and Valley Road that is eligible for sales tax incentives to redevelop.
Details on exactly why Apple hasn't moved forward with its receiving center in downtown Reno remain unclear. But the broader picture described in interviews with local officials and businesspeople indicate the company developed concerns with the original terms of the agreement to move into the Tessera district.
Complicating the issue is the fact that Cupertino, Calif.-based Apple is a behemoth of a company, with many executives in charge of approving and finalizing the real estate terms, making it difficult for either the city or the developers to know exactly whom to negotiate with.
"It's our understanding that they have concerns they need to work out," said Assistant City Manager Bill Thomas. "They came to us and asked what are the alternatives."
Indeed, Apple's strategy for coming to northern Nevada seems to be to do it as cheaply as possible.
The company extracted from local and state officials one of the largest tax incentive packages ever awarded in Nevada to open both a data center and the receiving center in downtown. The $89 million value of the incentive package includes nearly zeroing out its sales tax liability on $1 billion worth of computer server equipment. Apple also will see 85 percent of its personal property tax abated over the next 10 years.
Key to the sales tax break, however, is the ability to ship the computer equipment to a storefront inside a tourism improvement district. Under Nevada law, state officials can exempt a company from all but 2 percent of its 7.5 percent sales tax obligation. But if Apple opens a receiving center within such a district, it can whittle that remaining 2 percent down to 0.5 percent.
For $1 billion in computer equipment, that is potentially $15 million in savings for Apple over 10 years.
Steve Hill, the state's economic development czar who helped broker the overall tax incentive package, said Apple needs a real estate deal that will "pencil out" in relation to the tax break it would get for moving into downtown Reno.
"The last time I talked to Apple, they had looked at every potential property inside (Tessera), and none of that seemed to work for them," Hill said. "At the time, they were indefinite on what the next step would be.
"They need it to work for them and their bottom line, and they're struggling to make that pencil."
Apple did not respond to a request for comment.
Thomas said the only other option for Apple to retain its sales tax break would be to explore property within one of the city's other two tourism improvement districts — one surrounding Cabela's near Verdi and the other surrounding Aces Ballpark east of downtown.
But Thomas said there is little the city can do to make something happen. It's up to Apple to negotiate with the owners of the property within those districts, whether it's Tessera or the other two.
"We're in no position to compel either side to work together," Thomas said. "At the end of the day, the city wants Apple here. What does it take to make that happen? That's between Apple and Tessera."
Meanwhile, city officials and local observers have remained flummoxed by the lack of progress, as well as the silence from Apple, which has always remained secretive in its dealings.
Last year, after the Reno City Council approved the tax incentive deal in July, the project seemed to be moving full speed ahead. The city expedited both building and site improvement permits for Evans Avenue lot.
The project's developer, United Construction, applied for the permits last year and paid for one extension. But those permits expired Oct. 15. They can only be revived if the company pays an extension fee before Feb. 25.
"They haven't been specific about what the deal is," Thomas said. "Just that something isn't working out."
If the project ultimately falls through, many in the community will be disappointed. The city is hoping Apple will be the start of the revitalization it has been working on for the district between downtown and the university.
"I'm hopeful it'll still happen," Councilman Dwight Dortch said. "It's a pretty big hit for them to take to lose those tax breaks. But it doesn't seem like they are real motivated to get it done. From our standpoint, we'd really like to have them down there."
Information from: Reno Gazette-Journal, http://www.rgj.com
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