Friday, Jan. 7, 2005 | 10:53 a.m.
More than half of the proposals to curb skyrocketing property tax increases have fatal flaws, according to a report on 14 proposals.
The analysis by Guy Hobbs of Hobbs, Ong and Associates was released Thursday before a conference today at UNLV that promises to bring together local and national analysts, officials from local and state governments, and the legislators who will be working over the next several months in Carson City to draft a solution to the tax issue.
The issue has come to the forefront of political debate because Clark County property owners received "notice of value" cards indicating their land, and therefore their ultimate tax bills, have increased on average more than 35 percent over the previous year. The increase can mean hundreds of dollars for property owners.
Hobbs, who led Gov. Kenny Guinn's Task Force on Tax Policy in 2002 and 2003, keeps a neutral tone throughout much of the 25-page analysis on property tax issues, but he warned against quick fixes. That includes leading proposals, one that would cap property tax increases at 6 percent a year and another that would freeze property taxes.
Hobbs warns against a systematic attack on the fundamental methods of levying and collecting property taxes, which Hobbs notes have been a critically important and stable revenue source for governments, including school districts.
"... We are talking about a crucial revenue source when we talk about property tax revenue," Hobbs said in the report. "Extreme care and thoughtfulness must be exercised when modifications to the system are considered."
He said the spike in property taxes is likely a short-term phenomenon that is already easing.
"In other words," Hobbs wrote, "it would be dangerous to attempt to make sweeping systemic changes to the assessment and tax regime to solve a problem founded in a short-term aberration."
While the details on many proposals are still being worked out, a matrix that Hobbs includes with the analysis includes color-coded red marks for significant failures in eight of the 14 proposals.
One of the solutions that was first proposed came from Clark County Assessor Mark Schofield, who warned of a political revolt by taxpayers unless something was done, and done soon, to curb the property tax increases. Schofield proposed -- he said as a means of starting a larger conversation -- a 6 percent cap on property tax increases.
The cap would be temporary but would give the Legislature time to craft a lasting solution that would protect government agencies from wild swings in revenue and still be enough to pay for government services.
All the caps and a temporary freeze, a recent proposal from state Sen. Dina Titus, D-Las Vegas, failed to provide "vertical equity," Hobbs found.
That means that some property owners -- namely those who have seen the largest increases in their property values, a trend which loosely correlates with property in some of the newest, toniest parts of the valley -- would see the largest benefit. Other property owners who have seen modest increases or even decreases in property values would see little or no benefit from the caps or a freeze.
Other proposals that receive failing grades in one or more areas: California's Proposition 13, which included both a cap of 2 percent increases and a rollback of property taxes, gets a red mark for "economic neutrality," and Hobbs said such a solution "would be well beyond the scope of solving the problem at hand."
Reducing tax rates, another proposal, would be difficult because of the difficulty in administration, Hobbs said. Clark County alone has 88 tax rates for different neighborhoods.
A similar issue exists for bringing targeted tax relief for taxpayers in "severe economic hardship." Hobbs said it would be difficult to administer and difficult for taxpayers to comply with the requirements to qualify.
The same issues apply to so-called "circuit breakers" that would qualify some taxpayers for lower taxes in a means-tested approach.
Hobbs said ultimately, legislators are likely to find two or three measures that achieve the goal of tax relief, can pass constitutional muster, and can effectively be administered.
Schofield said he isn't offended by the Hobbs' identification of a single failure in his proposal. He pointed out that an important advantage of his proposal is that it meets the Nevada constitutional requirement that all taxpayers be treated equally.
And Schofield joined other observers in praising the study, which Hobbs' firm did without pay. He did some of the initial work for the Nevada Association of Counties and the Nevada League of Cities.
The analysis "explains each one of these 14 proposals and the impacts each one would have," Schofield said. "It's an exceptional job, very balanced, very neutral."
The greatest benefit could go to the legislators who must wrestle with the potential remedies, he said.
"They've heard about these proposals, and they're not quite sure about the mechanics, of how each would work," Schofield said. "Now they have a chance to see the mechanics and the impacts."
Clark County Manager Thom Reilly, whose government receives a third of its annual budget from property taxes, said the analysis is an important part of the debate on the issue.
He declined to comment specifically on any of the 14 proposals, but said more analysis is important.
"Something like this, particularly from someone with Guy's credibility, only enhances debate and deliberation," Reilly said.
The county plans to videotape the UNLV conference today at which Hobbs is expected to publicly present the analysis. The conference will be broadcast over the county's cable Channel 4.
Those with an interest in property taxes can also find the full report online at www.hobbsong.com, Hobbs said.
One of those who read the analysis as soon as it became available Thursday was Carole Vilardo, president of the Nevada Taxpayers Association.
The analysis "did a very good job of laying out the issues," Vilardo said. The report examines the "issues being what has caused the problem, the need to evaluate the type of solution, the criteria used to evaluate the solution and at this point in time it lists as many of the solutions as are known."
She noted that some of the proposals lack fully fleshed-out analyses because not all the details are yet known.
"The devil is in the details, and the only one where all the details are known is the 6 percent cap proposal," Vilardo said. "The paper sets up a very good outline in terms of what needs to be looked at and how they should be looked at ... At the very least it throws up a red flag as far as sufficiency and indicates what factors have to be mitigated."
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