Lawsuit claims catalyst fund violates constitution
February 20, 2014
A program that brought a new technology company to Carson Valley is being challenged as unconstitutional in a lawsuit filed Wednesday.
Gov. Brian Sandoval says the $10 million Catalyst Fund he persuaded lawmakers to approve in 2011 is a key to attracting and expanding businesses that will grow Nevada's economy.
This year, one of the first businesses to benefit from the program, Cristek, opened its doors in Minden. The company will receive a $200,000 incentive from the catalyst fund.
The Nevada Policy Research Institute filed the lawsuit on behalf of engineer Michael Little, who is attempting to create a business that turns organic matter in the state's landfills into energy. It charges that while Little is on his own fighting an uphill battle to create a green business, the Governor's Office of Economic Development is handing his competition, SolarCity, a $1.2 million subsidy.
Joe Becker, director of NPRI's Center for Justice and Constitutional Litigation, said that subsidy clearly violates Article 8 of the Nevada Constitution, which states, "The state shall not donate or loan money or its credit, subscribe to or be interested in the stock of any company, association or corporation except corporations formed for educational or charitable purposes."
"It's not the government's role to pick winners and losers in the economy," Becker said at a news conference at the Carson City Courthouse.
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He said the governor and Legislature "tried to circumvent the Constitution by routing the money through local subdivisions."
The system runs the money through regional development authorities in the state and local governments, which supporters of the process say gets around the constitutional bar because the state isn't giving the money directly to private businesses.
Becker said that doesn't work because GOED still picks the winners, and even the local political subdivisions see the money as state funding for the businesses.
"When we talk to political subdivisions, they say they just pass the money through for the state," he said.
Little said he talked to the governor's office, GOED Director Steve Hill and numerous other officials about his company, Landfill Alternative.
Becker said Little didn't file an application for Catalyst money because "it seemed clear to him" the decision had already been made about who was going to get the cash.
"Subsidies from state government to private businesses are unconstitutional and directly harm both taxpayers and competing businesses," Becker said. "Having a so-called regional development authority or local government give money it received from the state to a private business doesn't change the fact that state taxpayer dollars are going to private businesses, in violation of Nevada's Constitution."
The lawsuit asks the court to block GOED from handing out any of the Catalyst Fund money.
Little says he is an engineer who has worked more than a decade developing a process to turn organic landfill trash into a fuel that burns as hot as coal. He says his goal is to eventually sell the processing plants to communities that own the landfills.
Those landfills are a huge potential energy resource for the communities that own them, a resource that can and should be developed, he said.
State officials and the Attorney General's Office hadn't had a chance Wednesday to review the lawsuit.