CARSON CITY, Nev. (MyNews4.com & KRNV) -- One of Governor Sandoval's key economic initiatives in the last legislative session is facing a legal challenge.
A non-profit group that sees itself as Libertarian filed a lawsuit on Wednesday to stop the Governor's Office of Economic Development from providing incentives to entice new businesses to the state.
The incentives are provided through the state's Catalyst Fund, which was created during the 2011 legislative session. It is a tool for economic development.
But an attorney who filed the lawsuit argues that Nevada's Constitution prohibits the state from providing loans, gifts or credit to private companies, meaning the state's Catalyst Fund would be unconstitutional.
Joseph Becker, Chief Legal Counsel and Director for the Center for Justice and Constitutional Litigation, made the lawsuit known in a news conference at the District Courthouse in Carson City. "It's not the government's role to pick winners and losers in a free economy, but that's what's going on here in Nevada."
The suit was filed on behalf of Mike Little, a self-described entrepreneur, who is raising capital to create an alternative-energy company. Little says he is forced to compete against a company like SolarCity, which received a commitment from the Governor's Office of Economic Development to receive $1.2 million dollars from the Catalyst Fund.
The commitment came after the company agreed to expand its operations to Nevada. The company plans to bring hundreds of jobs and create new tax revenues for the state.
But Becker and Little say the incentives create an unfair advantage. "So all my entrepreneurial efforts, somebody can just go get a million or a million and a half dollars from the government and replicate what I do and I'm out in the cold," said Little
"It's not only unjust to make a business owner subsidize his competitors, it's bad economics and as I say, it's unconstitutional," said Becker.
To get around the state's Constitution, lawmakers set up the Catalyst Fund so the state would not be dispersing the funds, granting that authority to the Regional Development authorities. In 2013, an amendment changed that to allow cities and counties to disburse the funds, not the state.
"There's a serious circumvention thing going on here and we don't think that because the government is hiring another government to do something they are prohibited from doing that that makes it constitutional," said Becker.
Nevada's Attorney General has weighed in on this issue, but it was back in 2012. The opinion notes the state's Constitution does not prohibit local governments from disbursing these types of funds.
While the Governor's office is not named in the lawsuit, we tried to talk with the Governor, but were referred to the Attorney General's office.