Increase in property tax steps closer

Monday, April 26, 1999 | 10:43 a.m.

CARSON CITY -- A 20-year-old law that has limited the tax rate local governments can charge Nevada property owners is in jeopardy.

A taxpayer revolt, which started in California in the late 1970s and spread to Nevada and other states, prompted the Legislature in 1979 to cap the property tax rate at $3.64 for each $100 of assessed valuation.

That rate has remained untouched, until this year. Senate Bill 476, halfway through the Legislature, would lift that limit in seven rural counties.

If passed the bill would permit counties to increase their property tax rates by as much as 40 cents, to $4.04 per $100 of assessed valuation. In many cases, the assessed value of property in the counties has declined because of the depressed state of mining.

That has left local officials short of money needed to run government and pay debt.

Currently of the $3.64 maximum tax rate, 75 cents is earmarked for schools and the state gets another 15 cents. County school districts also get another piece of the rate to retire bonds needed to build schools. The remainder is then divided among the counties, towns and other local special districts.

SB476 has the endorsement of county and city officials and from the Nevada Taxpayers Association, an organization that serves as a watchdog on government spending.

"We're not anti-tax," Carole Vilardo, the association's executive director, said. "There is a telling need. We've got major problems in the rural counties."

The bill would define which counties may raise their property tax rates as those in which the combined tax rate was $3.50 or more per $100 of assessed valuation last June. Cities or towns in Elko, Lander, Lincoln, Mineral, Nye, Pershing and White Pine counties would be eligible.

Clark and other counties fell under the $3.50 cutoff last year. Tax rates in those counties would be permitted to exceed the $3.64 rate only if the state raises its present share of 15 cents on the property tax rate, and then only by the amount of the state's increase.

Vilardo thinks it may be seven to 10 years before Clark County needs to exceed the $3.64 rate. Because of growth in the Las Vegas Valley and an accompanying rise in the value of property, the present tax rate is bringing in more money, in contrast to the rural areas.

Clark County also would have to put a property tax increase to the voters, because of a resolution the Clark County Commission adopted in 1997 requiring such a vote.

Guy Hobbs, a financial consultant and member of a special state tax study committee, told legislators last week he knew "the sensitivity" of the $3.64 tax rate. But rural counties, he said, have few ways to raise money.

Still, some legislators fretted that SB476 would be just the beginning.

"This scares the devil out of me," Assemblyman Harry Mortenson, D-Las Vegas, told fellow members of the Assembly Taxation Committee on Thursday. "You are going to open the floodgates," he said.

"If the tax rate goes up, you do more damage," Mortenson said. "People may move out" of the county, compounding the problem.

Committee Chairman David Goldwater, D-Las Vegas, also had some misgivings. He wondered whether the seven counties have raised other available taxes, such as the sales tax, to tide them through their financial crunches, rather than changing the law on property tax.

There is no base to raise much money from other taxes, Robert Hadfield, executive director of the Nevada Association of Counties, told the committee. "We're at a point of diminishing returns."

Many of the local governments will not boost their property taxes if they are allowed, Assemblyman Roy Neighbors, D-Tonopah, said. But the Nye County legislator said the bill would give them a much-needed option.

The issue dates to 1979, Vilardo said, when the state promised to give up its $1.36 share of the property tax rate in an attempt to avert a tax revolt, sparked by California's Proposition 13, that was sweeping the country. A property tax-cutting voter initiative, Question 6, failed in Nevada but had enough support for legislators to act.

The maximum levy was established at $3.64. The Legislature enacted the tax shift in 1981 to make governments more reliant on sales and other taxes, rather than the property tax.

Then in 1983 the state Legislature raised the schools' share of the rate from 50 cents to 75 cents. And through the years the state started to take a share of the property tax until it reached its present 15 cents.

Vilardo said that "usurped" 40 cents that belonged to local governments. To make matters worse, the state required local governments to provide certain services but never gave them the money to do so.

Vilardo said endorsing the removal of the $3.64 cap in certain cases "is not something you like to do," but it's necessary to help in rural Nevada.

Hobbs and Hadfield both said this potential tax increase is "not a panacea" for the problems of local government. For instance, Hadfield said, the additional 40 cent property tax increase will raise only about $400,000 a year in Mineral County.

Hadfield thinks the bill has a good chance of getting out of the Taxation Committee and on to the floor of the Assembly. But he said it could be amended to accept a suggestion from Lucille Lusk of Nevada Concerned Citizens that any rate that exceeds the $3.64 must be approved by the voters.

And if approved by the Assembly, it's uncertain what Gov. Kenny Guinn will do. Pete Ernaut, Guinn's chief of staff, says the administration is taking a look at the bill but no decision has been made whether to approve it.