Carson City officials are banking on commercial growth to fill a projected $450,000 annual budget gap created by a cap on property tax increases passed earlier this month by state lawmakers.
"We've got to expand that retail market because we can no longer make it up with property taxes," City Manager Linda Ritter told city supervisors Thursday.
"If our sales tax revenue falls, we're out of luck."
The city's portion of sales tax revenue funds about 45 percent of its operating budget. But while it's been a steady source of income over the last few years, sales taxes can swing up or down depending on how much people spend.
In the past, the city could raise property taxes to cover shortfalls in sales taxes.
Not any more.
Carson City's property tax rate was about 21 cents below what the municipality was allowed to charge. That wiggle room disappeared with the Governor's signing of the state Legislature's property tax relief bill.
Property tax increases in Nevada are now limited to 3 percent on homes, and 8 percent on commercial or rental buildings.
While Mayor Marv Teixeira said he doesn't see the cap causing much trouble for Carson City, staffers are busy crunching numbers and revising budgets to meet the new revenue projections.
With the cap, the city estimates property tax revenue will increase by about $350,000 a year, compared to a $533,000 hike last year and an $810,000 jump the year before.
Combined with expected sales tax increases, the city's income will likely rise about $950,000 a year.
According to Ritter, though, the cost of business as usual goes up by about $1.4 million a year due to inflation, cost-of-living salary increases and skyrocketing health-care costs. It will take more commercial development to replace the $450,000 difference, she said, preferably retail since gaming brings in far less taxes than department stores.
That difference won't be made up in time for next year, if at all. Early estimates indicate the cap will drop about a half million dollars from the city's operating budget of more than $50 million, according to Ritter.
While it's only about 1 percent of the overall budget, it will have some noticeable effects, she said.
"We're not going to be able to meet some of the (desires) of some of our departments," she said.
For example, the local library had requested money for more staff, books and longer hours. The Carson City District Attorney had also asked for more staff. She said neither will get their wish.
According to Teixeira, however, whatever measures the city might take for savings will be slight.
"I think Carson City is in good shape in that we're not dependent on any one thing, gaming or tourism. We have a broad (tax) base from the college to government," he said.
"We don't have the room we've had in the past but I don't see us having to cut or reshape anything. We're just going to have to get used to doing more with less."
