Court challenge likely on property tax plan

Kirsten Searer

Monday, April 4, 2005 | 10:46 a.m.

Assembly Bill 489, passed Friday in the Legislature, was a historic restructur' ng of the state's property tax system. It would:

CARSON CITY -- It's done.

Sure, the new plan to give property tax relief doesn't please everyone. Businesses say it puts a burden on them; Senate Minority Leader Dina Titus argues it doesn't do enough for the "little guy."

Yes, it likely will end up challenged in court.

And no, it might not be enough to stave off a constitutional amendment similar to California's Proposition 13.

But there was an obvious sense of relief Friday in the legislative building. Both houses overwhelmingly passed Assembly Bill 489, giving tax breaks this year to all property owners.

"We have just solved the most pressing crisis facing our state," Assembly Speaker Richard Perkins, D-Henderson, told members of his house. "You can all be proud that you represented your constituents well."

The plan caps property tax increases for homeowners by 3 percent a year and caps other properties' increases at 8 percent.

Legislators also made it easier for small businesses to get property tax breaks, and they capped taxes on low-income rental properties at 3 percent.

Gov. Kenny Guinn immediately pledged to sign the bill, praising legislators for coming up with a solution on time to help property owners with this year's taxes.

"I don't think any bill can be perfect," he said. "But this is much, much better."

It was a long, twisting road from last summer, when Clark County Assessor Mark Schofield pointed out that home values could spike high enough that people couldn't afford their property taxes. He proposed a straight, 6-percent cap on assessed values.

But after hours of sometimes tedious testimony on how property tax cuts would affect bonds, schools, and rural governments in economic slumps, legislators settled on a "hybrid" plan.

It gives a little to everyone -- businesses, homeowners, renters.

"This deal is kind of the essence of political compromise," said University of Nevada, Reno political science professor Eric Herzik. "No one group got everything they wanted, all groups will feel some pain and no group walks away without contributing."

Legislators hope their solution will stave off a Proposition 13-style constitutional amendment, which Assemblywoman Sharron Angle, R-Reno, said she plans to push in 2006.

The question remains how much this bill will change over time. Legislators said they hope the general structure for tax relief passed Friday will be a long-term blueprint, and the bill calls for a study between sessions on long-term solutions.

While lawmakers largely put off the debate over how to tax businesses versus homes in their short-term solution, the idea of a so-called split roll could cause more problems as legislators talk about a constitutional amendment.

Some, including Guinn, said they weren't happy with the way businesses are treated in the current plan. His problems with the deal mirrored those of some others: That by giving hardship exemptions to homeowners, the state could be effectively treating some property owners differently than others.

The state constitution now requires all properties to be taxed in a "uniform and equal" way.

Legislators such as Perkins argue that the state did treat properties uniformly, but used a provision in the constitution to give a hardship exemption to homeowners.

Others, such as Nevada Taxpayers Association president Carole Vilardo, said legislators might have problems convincing a court that a 3 percent increase in taxes is a "hardship."

"The best we can hope for," said Titus, D-Las Vegas, "is the court will be sympathetic to tax relief and that there's not enough time to challenge it."

Lt. Gov. Lorraine Hunt said she worries that the provisions for small businesses will just trigger more paperwork, and that apartment owners won't pass along savings to renters.

"We all have a preferable plan in our minds," said Hunt, who also said she wished the plan would have treated all properties the same.

Local governments and school districts sweated through several ideas, especially an idea to freeze tax levels, but said they could live with this one.

"Every scenario produced substantial revenue cuts," said Clark County lobbyist Mike Alestuey. "This is one of those."

Many ideas for constitutional amendments are floating around the building, from ways to tax vacation homes differently to ideas to allowing counties to have more control over how they tax to a split roll.

When asked if the amendments could be the real battle this session, Assembly Majority Leader Barbara Buckley, D-Las Vegas, said, "oh, yeah."

Opinions still vary on a true split roll. Perkins said he didn't have a feel yet for how the debate would go. Assemblywoman Chris Giunchigliani, D-Las Vegas, said she would like to explore the idea.

Buckley said she thinks there would be support to treat land speculators differently in the constitution than other property owners. They are, she said, some of the cause of rising property values.

The idea would likely face trouble in the Senate, where Taxation Committee Chairman Mike McGinness, R-Fallon, said he would oppose a long-term split roll.

Some businesses, meanwhile, would rather work within the structure approved Friday.

"Interestingly enough, they've shown there is no need for a constitutional amendment long-term," said Sam McMullen, a lobbyist for some business interests, including the Las Vegas Chamber of Commerce.

Assembly Minority Leader Lynn Hettrick, R-Garderville, said he hopes to implement some of the ideas from the current tax plan into the constitution. It would maintain a fair tax structure and assure property owners that they have constitutionally protected caps, he said.

And, with constitutional guarantees, voters might be less likely to vote for a Proposition 13 bill, Hettrick said.

Angle, a potential candidate for Rep. Jim Gibbons' congressional seat, promises that one thing that is sure is she will bring up the Proposition 13 amendment in 2006.

The issue has shown broad support in polls of Nevadans, but the bill passed Friday helps her cause, Angle said.

"It's probably the best thing they could have done for Proposition 13," said Angle, who was the only legislator to vote against the measure. "The people understand this is different."

Angle said her amendment probably will roll back values to 2003 levels and tax 1 percent of the value of the home. That tax amount can only go up 2 percent a year, she said.

"It's pretty easy," she said. "That's why the people are so eager to get onto this."

But legislators from both sides of the aisle are already indicating they will put up a fight. Rolling back assessment values four or five years could mean losses of more than a 35 percent in revenues, Hettrick said.

"It'll break 13 counties virtually instantly," he said.

Senate Majority Leader Bill Raggio, R-Reno, said Friday he hoped the deal legislators cut will head off a Proposition 13 initiative. Raggio pointed out that California has had difficulties with its tax structure ever since.

"Ask the business people who walked out of California if it was a good thing for them," he said.