One city hesitates; another speeds up

Jeffrey Libby

Friday, Jan. 4, 2002 | 5 a.m.

With two tax committees meeting to find ways of increasing state revenue -- possibly at the expense of cities -- fast-growing Henderson and North Las Vegas are taking different paths to prepare.

Henderson is slowing to a trot, sitting on its past successes, and North Las Vegas is galloping on, hoping to build its first master-planned community with an enviable address.

Since 1995, both cities have more than doubled their populations. The rapid growth means that state funding levels -- set every two years -- continually lag behind the cities' true needs dictated by their current populations.

With the threat of new cuts in funding that is already spread thin, Henderson officials have decided to put off development of 6,200 mostly federally owned acres.

Officials argue that today they cannot make growth pay for itself. So if the 2003 Legislature is going to thin revenue streams further, they say they want to know before making commitments to any new, large-scale developments.

But in North Las Vegas, officials are aggressively pursuing plans that will build new homes on 1,900 acres. Mayor Michael Montandon said his city cannot afford to delay.

"We need it badly," he said. Meanwhile, legislators will have to balance requests for help from the two thriving cities with the needs of faltering school districts, northern counties hard-hit by mine closures and older cities with flat growth but growing maintenance bills.

They will hear initial recommendations from a governor-appointed task force on taxation and from a legislative interim tax committee this fall.

The legislative committee, formed last year, is a remake of an interim committee that studied similar tax issues after the 1999 session. It's a committee Montandon said he was very familiar with when he committed North Las Vegas to the 1,900-acre development.

The state's economic outlook in 2002, however, is not as favorable as it was in 1999, and that could force the state to look more covetously at revenues it has traditionally passed on to cities. Understanding that, Henderson Mayor Jim Gibson said his city staff will brief the committees "to let them know what it takes to run local governments."

Montandon, for his part, said he'll continue to work closely with Henderson to ensure that additional gains in "tax equity" are made for Henderson and North Las Vegas.

In the 2001 Legislature, Henderson, led by Assembly Speaker Richard Perkins, D-Henderson, was able to gain about $4.3 million in annual revenues by convincing other legislators that a 1997 modification of the state consolidated tax formula unfairly stripped fast-growing communities of revenue.

Henderson's gain came from the pockets of other Southern Nevada municipalities. Las Vegas and Clark County were the hardest hit. But even with those gains, Henderson officials said they are still in the hole from 1997 modifications to the state consolidated tax formula that "de-incentivized" growth.

For that reason, and not so much because of the slowing economy, city officials say they have put off for 18 months development of 6,200 acres southwest of the city line. The land is planned as an eventual gateway to the city from Interstate 15.

In North Las Vegas, however, city planners say plans first broached 11 years ago to develop 7,500 acres in the northwest part of town could not wait any longer.

On the most practical level, establishing utilities on the first 1,900 acres planned for development will be relatively inexpensive. During the nearly decade of planning, Las Vegas grew north to the western border of the 7,500-acre parcel, bringing the utilities with it.

The 6,200 acres in Henderson are more remote -- stranded off I-15 in the southwestern end of the Las Vegas Valley -- so bringing services to them would be considerably more expensive, officials said.

But on a symbolic level, too, North Las Vegas needs its master-planned community much more than Henderson.

North Las Vegas hopes to shake its image as a backwater town, much as Henderson did in the 1980s with the development of Green Valley, said Jacque Risner, North Las Vegas director of community development.

"We'll provide executive level houses -- $300,000 and up -- something we've not had in North Las Vegas before," Risner said. "So when our residents move up the ladder, they can stay in North Las Vegas."

Henderson, on the other hand, has built several nameplate master-planned communities since the success of Green Valley, including the 5,000-acre Anthem development and the 1,300-acre Seven Hills.

In October, in fact, a $52,500 marketing study concluded that despite the cooling economy, Henderson would have no problem developing more of the same on the 6,200 acres southwest of town.

But Henderson officials chose not to.

"We made the decision to temper, or pace, our growth, certainly until we can find a way so that growth in this area is not done at the expense of existing residents," Bonnie Rinaldi, Henderson assistant city manager, said.

So how then, can North Las Vegas be planning to provide some of the best homes and services it has ever provided while Henderson says it cannot afford to maintain even the status quo? The answer, in large part, is the share of property taxes the state doles out to each city, Rinaldi said.

In 1981, the state shifted from a tax system based on property values to one based on retail sales revenues. The new laws gave cities with more standing debt a larger cut of property taxes collected by the state. The new rules also capped the amount that cities could increase property taxes.

At the time, Henderson had very little debt. North Las Vegas, by contrast, had more debt than even Las Vegas. So today, while the city of North Las Vegas receives $1.20 for every $100 of assessed property value, according to state formulas, the city of Henderson gets just 71 cents. The city of Las Vegas receives $1.07.

In other words, for every $1 of assessed valuation, the state allows North Las Vegas to collect 70 percent more than it does Henderson. That disparity means that although Henderson had an assessed valuation of $5.05 billion in 2001, 145 percent larger than North Las Vegas' $2.06 billion assessed valuation, Henderson received only 45 percent more property tax revenue to put toward city services. Henderson took in $35.8 million to North Las Vegas' $24.7 million. As of 2001, Henderson had about 198,000 residents to North Las Vegas' 131,000.

Risner agreed that the difference in the two cities' ability to tax property owners has an effect on how comfortably each city can expand while still providing adequate services.

But it is only part of the story. Through the state consolidated tax, Henderson made up ground lost with property taxes. Henderson now receives about $48 million from the state while North Las Vegas gets just a little less than half of that -- $23 million.

Risner also said that the inevitable need to maintain city infrastructure as it ages means growth will never pay for growth -- no matter how efficiently a city operates.

"There's never enough for police and parks and all the wonderful things we want," Risner said.

But through "excellent development agreements," Risner said, and planning that dates back to the 1980s, North Las Vegas will still be able to come close to meeting those desires as it develops the 1,900 acres. Houses should start going up by next fall, she said.

A final development agreement is not expected until Jan. 16, Risner said, but in preliminary documents, the developer has agreed to build fire stations and will donate money toward the development of parks. Most streets and utilities would be paid for by the districts that will use them. Upkeep, however, will be the city's responsibility.

Henderson officials also have worked out similar deals with developers. But even after developer Del Webb provided land and $2.7 million to build and equip a fire station in its Anthem development, the city had difficulty coming up with funding to staff the station.

They blame that lack of funding on state tax distribution changes made in 1997, saying revenues no longer keep pace with growth. In 2005, however, those inequities should be eliminated, due to a compromise reached in the Legislature last summer.

But with the state hurting for revenues, there is talk of reviving another plan to divert more revenues from motor vehicle taxes away from cities to the state, said Assemblyman David Parks, D-Las Vegas, chairman of the legislative interim tax committee.

Another issue to address, Parks said, will be the faltering fiscal health of the state's school districts, as well as a number of northern counties struggling through recent mine closures. The needs of other municipalities with no growth but plenty of aging infrastructure to maintain also will have to be considered, he said.

Parks said it helps the state to have growing communities like Henderson and North Las Vegas.

"But there are finite revenues to be generated, so to give something to Henderson means having to take from someone else," Parks said.

"The best thing overall may be to scuttle the tax formula and come up with a new one," he said.

With the entire tax formula up for discussion, city officials looking to map their future are in a difficult spot.

"We don't know what will be on the table," Gibson said.

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