Tax cap forcing cities to redo budgets

By Buck Wargo

Tuesday, April 5, 2005 | 11:05 a.m.

A property tax cap approved by the Nevada Legislature is forcing Southern Nevada's local governments to rework their budgets for the coming year.

North Las Vegas, for example, now figures it will get about $2.1 million less in property tax revenue than forecast in a preliminary budget, according to Finance Director Phil Stoeckinger.

That could prompt the city to cut back on its proposed spending increases or to draw from year-end surpluses. City Manager Gregory Rose said he will recommend the City Council go ahead with a planned tax-rate cut of 1.5 cents, which equates to 1.25 percent. The city's existing tax rate is $1.20 per $100 assessed value.

The Clark County Commission will hold a special meeting today to discuss the county's budget, which was $4.5 million last year. About a third of the county's budget comes from property taxes. Like other local governments, Clark County will lose some revenue, but an increase in sales tax revenue should make up much of the difference, County Manager Thom Reilly said.

The concern for the county government is hiring enough employees to keep up with the valley's growing needs, Reilly said.

Last year, Clark County added 70 new positions to its roster of more than 9,300. This year, the county should be able to hire about 125 new people, officials said.

That is still below the rate at which the county would need to hire -- about 200 new positions a year -- to keep pace with the growth in population, Reilly said.

"We still have tremendous needs, particularly in the area of public safety," he said.

There are 88 property tax districts with various property tax rates overseen by the Clark County Commission. They range from 2.34 cents per $100 valuation in Boulder City to 3.46 cents per $100 valuation on Mount Charleston.

Reilly and George Stevens, county finance director, said the county has no plans to change the tax rates. Stevens said the Legislature's action would mean the county would take about $70 million less next year in property taxes, but the overall revenue would still increase. The overall revenue would still increase, but instead of increasing by 28 percent over last year's level, it would go up by about 7 percent.

That translates into about $23 million in new revenue instead of $92 million, he said.

"Our property tax (revenue) is going to grow, just not by as much," he said.

The county also will see additional revenue in sales taxes. That is projected to go up by $40 million. Also, charges for services, such as building inspections and business licenses should bring in another $27 million in new revenue. Total new revenue will be about $90 million over last year's levels, county officials project.

As for Las Vegas, it should only have to make only minor adjustments in its budget, said Mark Vincent, the city's finance director.

Unlike Boulder City and North Las Vegas, Vincent said Las Vegas has no plans to lower its tax rate. The Las Vegas property tax rate is 77.92 cents for every $100 of valuation. He said the city won't be harmed by the state's tax cap plan even though the city's tax rate growth has historically been about 10 percent, Vincent said.

"We are going to have to cut costs someplace to balance the budget, but I don't think we will be cutting positions," Vincent said.

In Henderson, Mayor Jim Gibson said the state's tax cap plan is expected to cut result in revenues of $500,000 less than officials calculated in early budget drafts.

Henderson, which will release its budget April 15 ahead of a May 17 public hearing, doesn't have much of an adjustment to make because city officials were conservative in their projections, said Richard Derrick, the manager of budget and strategic management.

"We knew there would be some kind of property tax cap, and timing-wise, it is good to have this information before we finalize our budget," Derrick said. "It still contains growth, and we can still maintain services."

There are no plans for Henderson to reduce its property tax rate of 71 cents per $100 assessed value, officials said. The city has kept the same rate for 16 years, and Gibson said cutting it would reduce revenue the city needs.

Gibson said he still worries that some future state blueprint may hinder the city's ability to pay off debt, but Henderson won't be harmed by the existing plan.

"What it does to us is modest," Gibson said. "The caps are within the range we can work with. My view is that if we had to operate government on the backs of our people, it won't be worth doing."

Henderson Councilman Jack Clark agreed with Gibson that the city shouldn't cut its tax rate. Henderson needs the revenue for parks, streets and other infrastructure improvements as it continues to grow, he said.

Clark said the property tax caps passed by the Legislature will leave more money in residents' pockets and if people choose to spend that money that would translate into more sales tax revenue for the city.

In Boulder City where a tentative budget unveiled two weeks ago cut the tax rate by 10 percent, city officials are evaluating the impact from the state's tax relief plan and if part of the rate needs to be restored to meet revenue projections.

The tax relief legislation limits the maximum increase to 3 percent for homeowners and 8 percent for all other tax bills in Clark County. That cap, factoring in new construction, will limit North Las Vegas to 9.7 percent more in property tax revenue, Henderson to 7.6 percent, Las Vegas to 7.2 percent and Boulder City to 4.3 percent.

Without the caps, property tax revenue could have gone up 36.8 percent in North Las Vegas, 30.3 percent in Las Vegas, 28.3 percent in Henderson and 19.6 percent in Boulder City, according to the Nevada Legislature. Cities have come under fire by state lawmakers for not cutting their rates to deal with a hike in property value that would otherwise increase tax bills.

As far as Clark County is concerned, officials there never expected the windfall from the property taxes. The county's property tax revenue would have gone up about 35 percent without the reduction by the Legislature, but the county commission always supported some sort of relief, and the solution designed by the Legislature appears fair, Reilly said.

Jeremy Aguero, a Las Vegas tax expert hired by the Legislative Counsel Bureau, said the cities will be taking home less revenue than the 11.4 percent average the past 10 years. He said there could be a "tightening of belts" by cities since property taxes are crucial for paying for government services, especially police and fire, during a time of substantial population growth.

Even though North Las Vegas could receive a 9.7 percent increase in property tax revenue, that number is expected to be even lower if the city enacts its proposed rate cut worth about $570,000 in revenue, officials said.

In its initial budget, North Las Vegas projected the revenue gain would be closer to 14 percent, Stoeckinger said. Property taxes account for about 11 percent of the city's overall revenue.

Stoeckinger said no decision has been made on where to trim the budget, which based on last week's proposal would increase nearly 10 percent from to $427 million from $389 million. Spending in the city's general fund, which includes most city services, was projected to increase 11.5 percent to $162.5 million. To deal with growth, the city planned to add 141 positions, including 50 in public safety.

In February, North Las Vegas Mayor Mike Montandon asked legislators to be wary of capping assessed value. He said he feared the city wouldn't get the benefit from an increase in value.

Montandon said Monday that having cities roll back tax rates to provide relief was the best plan, but he said the city will adjust to what was adopted.

"We just won't be able to grow everything we wanted to," Montandon said. "It will not require any cuts."

The North Las Vegas City Council will hold a public hearing on its proposed budget on May 17.

Two weeks ago, Boulder City took the lead in the region when it announced its intention to cut its rate -- by far the lowest in the region -- by 10 percent to 18.4 cents from 20.3 cents per $100 valuation. Despite a cut, the city expected its property tax revenue would go up 3.4 percent.

Boulder City Mayor Bob Ferraro said he doesn't have a problem with the state's tax cap plan. He said it is good for residents and won't harm the city's finances.

"It could have been much worse," said Ferraro who said the city may be able to go ahead with its planned rate cut. "I think we are going to be all right. We will know more later this week."