Newmont's property tax cut will take $1.2 million a year out of rural budgets

Newmont Gold's tax cut granted by the State Board of Equalization last month will cost four rural counties a total of $1.2 million a year.

That money will come out of not only county operating budgets but school district and local government budgets.

The board voted to toss out a 50-year depreciation schedule for buildings and other improvements on mine property which has been in Nevada law since 1981.

Instead, the state board agreed with Newmont lawyer Jim Wadhams that those improvements should be valued according to their "economic life." That can be as little as 10 years, greatly accelerating the depreciation of those assets and reducing their taxable value.

And, in Newmont's case, it reduced the total taxable value of their five mines in Eureka, Humboldt, Lander and Elko counties by a total of $189.5 million -from $1.45 billion to $1.27 billion.

The biggest loser will be Eureka County, home of the Carlin Trend - one of the world's biggest and most lucrative gold mining operations. The decision reduced the taxable value of the Carlin Trend by $113.9 million.

When run through Nevada's complex property tax assessment formula it translates to a tax cut of $676,588 in Eureka County school and general county operating funds.

"I don't know what we'll do," said Eureka Assessor Jim Ithurralde. "It could be especially bad if other companies start coming in. I already got a call from Homestake (another major mining firm)."

The other big loser is Humboldt County where the taxable value of the Twin Creeks and Lone Tree mines was reduced a total of $68 million. With Humboldt's $1.89 tax rate, that would result in $450,206 fewer dollars to the county, schools and local governments there.

The losses will be much smaller in Elko and Lander counties - just $5,563 from Lander's Mule Canyon Mine and $60,195 from the Rain Mine in Elko. But officials in those areas joined Ithurralde and Humboldt County Assessor Jeff Johnson in worrying that other companies, including non-mining companies, will challenge the 50 year depreciation schedule.

"Next year I anticipate every other mine doing the same thing," said Johnson. "I hate to give them ideas, but I think they've already got them."

He said the overall damage to county and school budgets could be serious.

At the same time, Carson City Assessor Kit Weaver expressed concern the state board ruling will open the door to other companies seeking to escape the straight-line, 50-year depreciation schedule. He said casinos won't be far behind seeking reductions, followed by other businesses.

Weaver said the end result will be more pressure on the small businessman and residential homeowner who will have to make up the difference in those budgets in order to pay for essential government services.

He said under the 1981 law - part of Nevada's property tax shift - everyone from residential homeowners to big business agreed to a straight-line, 50-year depreciation schedule.

"That pretty much meant every structure in the state was undervalued compared to market value," said Weaver. "Everyone got a break which was good enough for everybody until now. Now, even that's not good enough for mining."

He predicted a rash of other big business operations seeking reductions under the new state board rule.

"The select few will get an advantage," he said. "The rest won't."

Wadhams said during the Board of Equalization hearing that when the value of gold drops from $400 an ounce to $275 as it has in the past two years, so does the value of the mills, refineries and other improvements at the mines. And he said so should the taxes the mining companies pay on those properties. He said instead of 50 years to depreciate a building or mill, some of those structures will be essentially valueless in six years.

While his argument convinced the board at its Sept. 27 hearing, the assessors say that precedent is not only dangerous but contrary to their understanding of the law that created that 50-year depreciation schedule.