Fast-track vote eyed on property tax issue

Assembly Majority Leader Barbara Buckley, D-Las Vegas, says she may push for a special election to fast-track constitutional changes needed to fix Nevada's property tax system.

Both she and Minority Leader Lynn Hettrick, R-Gardnerville, say existing language - particularly that requiring all property taxes be "uniform and equal" - blocks several ways to prevent huge spikes in homeowner tax bills this year.

"I've got some in my district that are going up 80 percent if we don't do something," said Hettrick, who represents the Nevada side of Lake Tahoe including Incline Village.

Constitutional changes in Nevada require legislative action followed by a vote of the people in two successive elections - which takes at least four years.

Buckley said she has explored the idea of a special election to cut that time in half and that Legislative Counsel Brenda Erdoes says it's possible.

"We're going to explore whether we could change the constitution to give significant tax relief to everyone and then a special break to a homeowner because of unique circumstances," she said.

She said that could also enable the state to give apartment owners a break so they don't get hit with large tax increases which are then passed on to renters.

Hettrick agreed a constitutional amendment is necessary.

"To make this thing fly, we've got to put the constitutional amendments in it and convince folks some more relief is coming as soon as we can get the constitution amended."

He said he and Buckley are thinking of ways to expand the definition of "extreme hardship" to cover situations such as Incline Village. "Extreme hardship" is the only option for violating the uniform and equal requirement in setting property taxes for Nevadans and is allowed only for single family residences which are owner occupied.

Buckley's plan would cap tax increases for owner-occupied residences valued at $500,000 or less at 4 percent a year.

"That doesn't solve Incline Village or Douglas County," said Hettrick.

He said homes in those areas are almost all worth more than $500,000 and increasing in value dramatically every year. He said her plan would cut a 40 percent increase in taxes to about 20. "That doesn't work," said Hettrick.

"If they go up 20 percent, we've got a guaranteed petition - Prop 13 - in Nevada," he said.

Buckley said they are also looking at "some sort of tiered additional abatement of tax liability for residential homeowners whose homes are above that value."

Hettrick said if the problems of high value areas like Incline Village can be fixed and some relief found for renters and small business, he can support the plan. He said there are several things he likes about it, including that newly developed property can be put on the tax rolls at full market value.

That solves much of the problem growing counties like Clark and Washoe have with the other plans, all of which limit the taxes on newly developed property. Mike Alastuey representing Clark County said that new growth produces a major portion of its new funding each year.

"That helps address the fairness," Buckley said. "Let growth pay for growth."

She said even without constitutional change, the plan would sharply reduce the amount of inflationary increases in taxes for large, expensive homes and business property.

The plans will be presented in detail, with examples to show how properties in different areas would be affected, at Tuesday's joint meeting of the Senate Taxation and Assembly Growth and Infrastructure committees.

Lawmakers have to act quickly because county assessors have warned they need to know what changes are by the end of the month to incorporate them in tax bills that must be mailed in July.

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

How the proposed tax formula would work:

First, state taxation officials calculate the overall percentage increase in taxable value statewide and compare that to the historic average annual increase.

Over the past 10 years, property-tax values have increased an average of 9.4 percent in Nevada. This year, however, the increase may be more than 15 percent. The state would then reduce its share of the property tax pie - the 15 cents used for state and university construction and the 75-cent levy that goes to school districts - so the total revenue from those pieces matches what the total would be if property-tax values grew by the historic average.

The 15-cent levy might be reduced to 13 cents and the 75-cent portion to 65 cents, for example, and each county's tax rate would be reduced by those amounts.

The next step would be to calculate this year's percentage increase for each county and compare that to that county's historic average increase. In Clark County for example, the historic average is about 11.4 percent, but this year the percentage will be more than 20 percent.

Then, the tax experts would calculate how much each county's tax rate would have to go down - as they did for the statewide portions - to reduce total property-tax revenues to the amount the county would have received if the annual increase had been average for that county.

That rate reduction would be different for each county. In counties with the biggest percentage increases, the biggest spikes would be cut at least in half. In counties with little or no growth in property values, the state reductions would probably get the total increase, making any rate cuts by local governments unnecessary.

Homeowners would get a smaller tax bill than under the existing system because their tax rate would be reduced by the total of the state and county rollbacks.

But the methods used to determine taxable value of a property would remain unchanged, so properties that experienced a huge increase in value - 40 percent or more - would still face substantial tax increases. Using examples provided to the legislators, a home with a 45 percent increase in taxable value could still face a 23 percent increase in its tax bill.

Businesses, multifamily housing units and homes worth more than $500,000 would have to pay that increase.

For homes occupied by their owners worth less than $500,000, the plan would use the constitutional "extreme hardship" provision to cap their tax increase at 4 percent.