Bill proposing property tax floor increase receives icy reception

Tabitha Mueller
Tabitha Mueller
LegislatureReal Estate

Nevada's local governments are looking to stabilize and protect tax revenue with a bill that would raise the floor for property tax increases, but opponents criticized the measure on Tuesday as an overstep of government authority in the wake of an economically devastating pandemic.

The Nevada Association of Counties (NACO) brought forward SB10, heard Tuesday in the Senate Revenue and Economic Development committee, to address local government shortfalls stemming from unexpected dips in property tax revenues.

Under current law, property taxes are capped at a certain percentage, with the goal of protecting property tax payers from burdensome increases year-over-year. Those caps can vary between zero and 3 percent for residential and zero and 8 percent for non-residential properties. The bill would remove the ability for caps to drop below 3 percent and place a ceiling of 8 percent on tax caps for non-residential properties. 

"SB10 would make one simple change, and that is removing the ability of the standard three percent and eight percent property tax caps to fall below three percent," NACO Director Dagny Stapleton said. "Importantly, this change will affect very few property taxpayers next year and in many years, it may have no impact."

Nevada's property tax caps are calculated based in part on a county's average growth in property values over a 10 year period. During the recession, significant decreases in housing values led to the cap bottoming out years after the recession ended, Stapleton said. She added that though housing values have since improved, local governments have nonetheless struggled to recoup lost revenues and meet growing demand.

"Anecdotally, this is a really important example of why SB10 is needed," Stapleton said. "Were there another continued dip in the housing market that caused assessed values to decline in those years following, that could again pull the cap down in years not necessarily correlated with decreased economic factors, and suddenly could again impact local government revenue."

The bill garnered 206 opinions, only one of which was logged in favor. The majority of public comment came in opposition with requests not to raise taxes during a time of economic hardship.

Thomas Ghidossi, a self-identified retired farmer, said that he found it “interesting” that almost all of the callers in favor of the bill were affiliated with a government entity. He worried the bill would increase fees and taxes on homeowners.

“As a senior citizen, we worry that the constant increases in property taxes, along with other fees such as sewer, water, etc., will eventually force us to sell our house in order to pay the taxes,” Ghidossi said. “Why would that be okay? Wouldn't it be better to work on some protections for our senior citizens that would limit these increases, and do something to help us rather than hurt us as individuals?”

Another caller, Tina St Ores, cited a survey from Berkeley that indicated more than half of California voters were considering moving because taxes were too high. She said that SB10 along with other similar legislation introduced in Nevada would make the cost of living untenable.

“Why does Nevada want to make a California 2.0?” St Ores said. “Everything is far more expensive than it was just a year ago, or even six months ago.”

In fiscal year 2016-2017, nine of Nevada's 17 counties had property tax caps that fell below 3 percent, Stapleton said. If SB10 had been in place at that time, she said that an additional $69 million in property tax revenue would have gone primarily to local governments. 

This fiscal year, Stapleton said that projections show that five counties will fall below 3 percent, and the bill would have a revenue impact of $104,500.

"What [this bill] will do is provide additional stability, predictability and equity for Nevada's local governments, school districts … and special districts that rely on property taxes to provide more services to Nevadans," Stapleton said.

Caller Brittany Sheehan said that she did not believe that the state government or Nevada’s school system needed more funding.

“The schools have done less for our students in the past year than any other time of our lives,” Sheehan said. “CCSD itself has a multibillion dollar budget and the state did get $4.5 billion recently in COVID relief, so I don't think that this is appropriate, especially at this time.”

But some think the legislation does not go far enough. Jon Leleu, a lobbyist for NAIOP, Nevada's Commercial Real Estate Development Association, said the organization agrees with the intent of SB10, but still believes lawmakers need to enact actual change to the state’s property tax system.

"The property tax system in Nevada is broken ... For six years, Nevada has completely failed to address the root cause of these issues, and has instead chosen partial fixes, starts, gimmicks, band-aids," Leleu said. "Nevadans deserve a full discussion on this issue. They deserve a comprehensive tax reform."

State lawmakers have long tossed around ideas and proposals to fix the state’s oft-criticized property tax system, including passing a proposed constitutional amendment in 2017 to allow the depreciation factor in property taxes to reset on sale — an attempt to equalize property taxes between old and new properties. But the issue died a quiet death in 2019, with lawmakers and interested parties largely dropping the issue over fears of a politically difficult ballot question and other unresolved pending issues with the state’s property tax structure. 

Eureka County Assessor Michael Mear called in support of the legislation, noting that even though the bill would make less than a 1 percent difference on the county's overall budget, that difference would be equivalent to $63,000 in property tax revenue or one employee.

"When we have a cap that drops below the three percent level, even if the caps rebound next year to their full amounts of say 3 and 8 percent, we're still only growing off of that prior year that was capped at 2.4 percent," Mear said. "So we never actually catch up in terms of lost property tax revenue."

In a letter submitted ahead of the bill hearing, Janine Hansen, the state chairman for the Independent American Party, wrote that the increased property tax caps would prove unaffordable for Nevadans who are navigating an unforgiving job and housing market—a summary of many callers’ fears.

"The State of Nevada received $4.5 Billion in Covid relief money. Use that money instead of raising taxes," Hansen wrote. "Why are you raising taxes when people have lost their jobs, homes and businesses? How can Nevadans ever catch up?"

Though a vast majority of opponents calling about the bill cited fears about government overspending and increased property tax payments, Stapleton said that the bill's revenue would largely stick with local governments, and not go toward state capital improvement projects or be funneled into the state’s general fund. 

"There is nothing in this bill … that would change the way that we assess property or value property." Stapleton said. "It would not change the depreciation, it would not change how property is assessed, it would not change that formula. It would only make a very minimal change to the cap—how the caps on how much your bills can increase are calculated."

This story was updated at 10:43 a.m. on Tuesday, March 31 to clarify existing law around property tax caps.


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