Officials worry about bills eliminating revenues

Local governments agreed with lawmakers that skyrocketing property taxes needed to be capped, even though it reduced their revenues by more than $300 million statewide.

"We never opposed AB489," said Andrew List of the Nevada Association of Counties. "We realized the (property tax) revenue we were receiving was a windfall and never felt we were entitled to that extra money."

Nevertheless, city and county officials are worried about a series of bills that would cut or eliminate local government revenue sources, saying enough is enough. Although most of the bills are stalled, the ideas behind them could resurface in amendments.

The biggest was SB277, Sen. Randolph Townsend's push to eliminate franchise fees that make up as much as 14 percent of some local government budgets and totaled $141 million statewide last year.

"That would have a larger impact on our budgets potentially than the property tax cap," said David Fraser of the Nevada League of Cities. "And franchise fees are not taxes. They're rental payments for the use of public rights-of-way."

Those fees are collected from gas, power, phone and other utilities for their use of the local government streets, land and airways. Fraser said not charging them would effectively be subsidizing utilities by letting them use public property.

While Townsend argued those are charges on the public, Fraser disagreed.

"We charge those fees to the utilities and they choose to itemize those on their bills," he said. "We don't require them to do that and I don't see them itemize all their other expenses."

While SB277 died on a 4-3 vote in Townsend's Commerce and Labor Committee, List and Fraser pointed out the Reno Republican has vowed to resurrect the issue in another bill.

For Carson City, SB277 would be a $3.7 million cut in city revenues. It would amount to $1.1 million in Lyon and $375,000 in Douglas.

"There are a couple of revenue sources local governments have that are growing and stable in Nevada," said Mary Walker, lobbyist for Carson, Douglas and Lyon counties, among others. "The two primary ones are property taxes and franchise fees. They've cut property taxes to where they're no longer going to be the growing revenue source we've been depending on to provide services, and now they're talking about complete elimination of franchise fees."

She said the elimination would leave local governments relying on sales tax, which can fluctuate dramatically.

"If something happens, we're not talking about a moderate trimming of services," she said. "We're talking about closure of parks, fire and sheriff's substations."

Fraser said those are such big hits to local revenues, "you couldn't avoid service cuts."

"Local governments provide some very important services, not the least of which is public safety, which is typically 60 percent of a city's general fund," he said. "Simple math tells you if you do away with 14 percent of revenue, it would be hard not to impact those services."

He said taking away franchise fees alone could effectively subvert the will of Southern Nevada voters who approved higher taxes to put more police on the streets last November.

Mary Henderson, who represents North Las Vegas, said another serious problem is AB435 which would take the cost of credit card license and registration renewals out of the governmental services tax collected by the Department of Motor Vehicles. The estimated effect statewide is $11 million a year.

Henderson told the Ways and Means Committee last week the state already keeps 6 percent of those revenues for administrative costs. Allowing people to renew license and registrations electronically using credit cards means fewer new employees at DMV. In addition, credit cards avoid bad checks, which cost DMV hundreds of thousands a year.

"Those savings should more than offset the cost of the vendor fees," said List.

Henderson said numerous bills would cut local revenues or impose mandates that increase costs. Some of the proposals take relatively small amounts from local entities, but "it's like death from a thousand paper cuts."

"These things just seem to be coming from every direction this session."

Carson City Finance Director Tom Minton said SB356 is high on his list. It would ask voters if they want to deduct the value of their trade-in vehicle for purposes of sales taxes when they buy a new car. He said that would cost Carson City more than $500,000 a year.

He and Walker said when that and other ideas are added up, the capital city could lost more than $7 million a year.

List pointed to SB248, which would provide defendants the right to a jury trial in misdemeanor DUI and domestic battery cases. That could add millions a year to the cost of operating municipal and justice courts around the state. In addition, he said many entities would have to build or expand court facilities because few justice and municipal courts now have room for jury boxes.

"It would be a huge unfunded mandate," he said.

Marvin Leavitt, representing the Urban Consortium - Nevada's five biggest cities - said the most severe proposal is Sen. Bob Beers' constitutional amendment to cap all revenues at population growth plus inflation unless voters agree to an increase.

"The way it's written, everything would have to be voted on by the people - even dog licenses and park fees."

"But the big problem is if you have a couple of bad years economically then have a good year, the bad year stops you from regaining the revenue. Revenues would in effect be ratcheted down."

Leavitt said the state has far too much say in local government finances now, and the property tax reform extended state power by requiring local governments ask the Tax Commission's permission to raise their property tax rate even a penny. "If you look at what revenues we get and what we can change ourselves, it's nothing,"

Most of the bills that worry local officials are dead or stalled at this point.

But Henderson said that often means little in the Legislature, where reincarnation occurs daily.

"Of the 200 odd bills that were killed, how many are going to start showing up as amendments? It's scary. We're watching everything."

Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.