The state Tax Commission today voted unanimously (with one member abstaining) to ask the state Taxation Department to investigate the Las Vegas Monorail, with an eye toward whether the monorail’s exemption from state sales tax is justified. Tax Commissioner George Kelesis publicly questioned whether the monorail should enjoy the exemption, since millions were paid to a for-profit company to manage the system, which runs from the MGM Grand to the Sahara, with several stops in between.

During a hearing at the Grant Sawyer State Office Building, commissioners heard testimony from Taxation Department Director Charles Chinnock, who said the monorail received no special treatment when it was granted tax-exempt status in 2003. Factors in the decision included the fact that the monorail was governed by a non-profit company, dubbed the Las Vegas Monorail Co., and that there were no objections from the Regional Transportation Commission.

Then again, the non-profit Las Vegas Monorail Corp. contracted (for millions in fees) with the for-profit Transit Systems Management, a partnership of the late Bob Broadbent and Cam Walker. Transit Systems Management actually ran the system, but the non-profit status allowed Broadbent and Walker to get $653 million in tax-exempt state bonds with which to build the system. (Neither man committed much personal wealth to the venture.) And the Regional Transportation Commission at the time was run by Jacob Snow, a former Broadbent employee at McCarran International Airport, who replaced a pointedly anti-monorail Kurt Weinrich at the helm of the RTC.

Senior Deputy Attorney General Greg Zunino, who actually wrote the memo that advised the Taxation Department to grant the tax-exempt status, said he was initially skeptical of the monorail’s application to avoid taxes, since it only carries tourists to and from hotels and the convention center. But he said he was persuaded that it had a public benefit, in that it eased congestion and improved air quality. “I viewed this project as having great potential to serve the Las Vegas community,” he said.

But under questioning from Kelesis, Zunino admitted he didn’t even know Transit Management Systems existed when he wrote his memo, and that a $23 million payment to the company could be a way to funnel money to private profit, which is not allowed under the state’s law allowing charities to avoid sales taxes. He said he didn’t delve too deeply into the corporate structure, because the state’s Department of Business and Industry and Board of Finance (headed by Gov. Kenny Guinn) had already granted the monorail’s request to use tax-exempt state bonds.

“My thought process, these particular issues had already been hashed out, so I did not delive into these particular issues in detail,” Zunino said.

Although Kelesis tried to persuade the board to set a hearing considering revoking the monorail’s tax-exempt status, Jones Vargas attorney Jim Wadhams, representing the monorail, objected. First, Wadhams said, an investigation has to be conducted so the monorail will be able to defend itself from specific charges at a revocation hearing. And the commission, Wadhams argued, cannot both investigate and hold a hearing to revoke the status. Kelesis ultimately agreed, asking the department to investigate.

So, to sum: The very same Taxation Department that may have wrongly granted tax-exempt status to what was essentially a casino shuttle run by a for-profit company owned by two heavily juiced players will investigate … itself. We predict an acquittal, but we’re cynical that way. The report should be ready for the Tax Commission’s November meeting. Will the monorail have reason to give thanks? Stay tuned.