Property taxes flashpoint of 2005 Nevada Legislature

When Nevada Gov. Kenny Guinn lays out his legislative agenda in his State of the State speech Monday, he'll waste no time getting to an issue many are calling the flashpoint of the 2005 session: property tax relief.

"It'll be one of the first things he's going to address," Guinn's spokesman Greg Bortolin said. "The governor recognizes this is a very important issue."

It's tough to find a player in Nevada politics who disagrees. Rapid growth and land speculation have sent property values in the state's urban areas to California-heights. Many homeowners face the prospect of tax bills that could be double what they're now paying.

Appeals to the Clark County Board of Equalization from stunned homeowners have almost tripled.

Legislative leaders have sworn to act this session - before tax payments are due, and before citizens can take the matter into their own hands with an initiative. Looming over the debate is the specter of California's Proposition 13, the 27-year-old anti-tax initiative born out of voter furor that many say is responsible for weaker local governments, higher "hidden" taxes and fees and ballot-box budgeting.

While support for a Proposition 13-style solution is limited in the Legislature, many think it would gain traction with voters.

Lawmakers are on a tight schedule. County officials have said they need a law in place by the end of March for them to have time to implement the measure before the coming fiscal year, when higher taxes take effect.

That leaves eight weeks for legislators and the governor to alter a complex system and wrestle with questions that spark ideological and regional friction: How can the state provide relief to taxpayers without putting undue strain on growing counties? And can any solution work for both the state's largest county, Clark, and its smallest, Esmeralda?

In an attempt to give lawmakers breathing room, Senate Minority Leader Dina Titus, D-Las Vegas, has proposed freezing property taxes at 2004 levels for one year while they study the problem.

"I would like for us to find a long-term solution, but I know how the Legislature works and I don't think we're going to find one by March," Titus said.

Titus' proposal already has opposition.

Guinn will not support a temporary freeze, Bortolin said.

"That doesn't really address the problem either. Let's fix it, not study it for another two years," he said.

Already legislators have offered up 14 proposals.

The list of options gets shorter when constitutional limits are considered. The Nevada Constitution requires taxation to be "equal and uniform," which many experts believe limits the state's options. Amending the constitution is a five-year process.

"In a sense many of those proposals are self-eliminating," said Guy Hobbs, an expert on Nevada taxation who's closely studied the property tax plans. "Short-term relief has to be able to be implemented quickly and without amending the constitution."

The most talked about proposal is Clark County Assessor Mark Schofield's plan to cap taxable property value increases at 6 percent a year. Properties that increase at a slower rate would not be affected. New construction would be taxed at full value for one year before the 6 percent cap kicks in.

Historically, property taxes have increased at about the 6 percent rate, Schofield said. He said his plan would restore predictability and stability to the tax system, provide relief to taxpayers without kneecapping county governments and would not require a constitutional amendment.

Schofield's plan has faced criticism from those looking out for rural counties that haven't had increases in property values.

"One size doesn't fit all, 6 percent isn't going to work in all ... counties," said Andrew List, head of the Nevada Association of Counties.

List said an across-the-board cap could prevent rural counties, many of which are struggling to pay for services, from reaping future benefits of rapid development or new industry. And in places like Clark and Washoe counties, "You're going to need the extra growth money to deal with growth," List said.

There also are more complicated and, according to some, more progressive alternatives to the 6 percent cap. One approach allows a portion - say, $100,000 - of the property value to be treated differently, either exempt from taxation or taxed at different rate. Hobbs said an exemption solution also would offer relief to taxpayers, provide stability and continue to collect taxes, particularly from the wealthiest homeowners.

Hobbs said an exemption proposal could be crafted that would not violate the state constitution's "equal and uniform" clause.

Sen. Kathy McClain, D-Las Vegas, has proposed directing the tax relief specifically to owners of single-family, owner-occupied properties. Using a 2002 constitutional amendment that allows property tax relief for homeowners suffering "severe economic hardship," McClain's proposal limits the increase of the land value for those taxpayers to 2 percent a year.

Other options include:

n Treating some properties differently than others, known as "split roll." This would allow the state to tax second homes at a different rate than permanent residences and would likely require a constitutional amendment.

n Using a "smoothing technique" to blunt spikes in property values. Property tax would be based on a property's three-year average value.

n Reducing tax rates.

n Returning excess taxes through taxpayer rebates.

Experts and many legislators said the solution is likely to be some combination of several approaches and will be measured on how much relief it provides and how it placates a frustrated public and avoids a citizen-led initiative.

Assemblywoman Sharron Angle, R-Reno, whose Proposition 13-type initiative fell about 5,000 signatures short last fall, said she'll continue to push for a California-style constitutional amendment. She's proposed rolling back taxes to 2001-02 levels, and limiting them to 1 percent of assessed value. Angle said support for her proposal is increasing.

While Angle, a hardline conservative, may have trouble advancing her proposal in a Democrat-controlled Assembly, lawmakers and interest groups are taking the Proposition 13 threat seriously.

"If the Legislature doesn't act, the people themselves will do it," said Bill Bible, president of the Nevada Resort Association, representing major hotel-casinos. "And people may do it even if the Legislature does act."

Titus was more hopeful that an initiative could be avoided.

"If we do something reasonable, I think people will respect that," she said. "When the question is, 'Do you want to be California?' I think people will be rational."