With eight days until the end of the legislative session, there is one issue that has gone unmentioned beyond quiet murmurs in hallways and in caucus rooms.

One lobbyist called it the “elephant in the room” this session. Some were gearing up for a fight, confident that it could not only help solve some of the state’s budget problems but fix an antiquated system. Others were praying it would meet a swift end, concerned about its impacts on residents and the logistics of putting it into action.

They waited, and they waited. But the fight on property taxes never came.

Talk to those in the legislative building, and there’s near widespread agreement that something needs to be done about Nevada’s property tax system, which a 2014 Tax Foundation study deemed “cumbersome, convoluted, and unstable.” According to a recent Guinn Center report, Nevada ranks 37th-lowest in the nation for property tax collections per capita at $994 and, compared to other states, tends to be over reliant on sales and use taxes and under reliant on property taxes.

Property taxes were a hot topic of conversation in the 2017 legislative session, with conversations about changes to property tax caps and a depreciation factor unique to Nevada. One proposal — to amend Nevada’s Constitution to allow the depreciation factor in property taxes to reset on sale, thereby equalizing property taxes between older and newer properties of similar value — was ushered through the legislative process under Democratic leadership. SJR14 passed on near-party lines in 2017, with only Republican state Sen. Ben Kieckhefer joining Democrats in support.

But, in order to change the Constitution, such a proposal needs to be twice approved by the Legislature before heading to a vote of the people for a final stamp of approval. Members of the business community, local governments and other observers fully expected the proposal to move forward to a second vote this session. Yet, with only about a week left, the proposal and an accompanying piece of legislation, SB419, have yet to receive so much as a committee hearing and are considered all but dead.

There are a number of theories about why the issue stagnated this session. Some blame Gov. Steve Sisolak for taking the wind out of its sails when he declared that there would be no new taxes this session.

Others note that cautious Democrats have avoided rocking the boat as they gear up for an election that will not only determine whether President Donald Trump stays in the White House but whether their party will retain control of the Legislature as lawmakers prepare for redistricting next session. A property tax ballot measure would also need a substantial monetary investment into an education campaign to get it approved by voters in 2020, and no clear leader has emerged.

Democratic state Sen. Julia Ratti, the sponsor of the proposal, is circumspect in her explanation.

“There's a lot of work to do and campaign to get it across the ballot, and I'm not sure we're ready,” Ratti said. “There are clearly some flaws in the property tax system. This is a policy we're going to have to address at some point, and I'm not sure we have the broad-based coalition to get it across the finish line to the ballot yet.”

County assessors, who had expressed concerns about the legislation on the grounds that it would be technically difficult to implement, are cheering the news.

“To many of us it’s good news,” Douglas County Assessor Trent Tholen said. “We have a bit of an email chain going, and there are several who are very excited that SJR14 will likely die.”

But others are left scratching their heads, trying to understand why the Legislature wouldn’t even hold a hearing on a measure projected to raise billions over the next decade that in 2017 enjoyed relatively widespread support from commercial developers, local governments and even the taxpayers association, particularly when lawmakers are grappling with if and how schools need to be made whole in order to fund teacher pay raises promised by Sisolak and a new funding formula that reallocates money between school districts but does nothing to increase the size of the pie.

“My concern is that the funding formula that we’re spending a tremendous amount of time on — and it’s overdue and certainly needs to be done — will give the Legislature the feeling that we fixed funding for education and that couldn’t be further from the truth,” said Mike Kazmierski, president and CEO of the Economic Development Agency of Western Nevada. “It’s a little bit like building a car and not putting any gas in it. We’re making the car better, but we’re at a quarter tank, and no one wants to put any more gas in the tank.”

Legislative conversations, now and then

One unlikely proponent of SJR14 in the 2017 session was NAIOP, the commercial real estate development association. Lobbyist Jonathan Leleu said the association did so with the understanding that it would be one piece of a more robust conversation on property tax reform and because of the fact that legislative lawyers believed resetting the depreciation factor upon sale of a property was out of the question without a constitutional amendment.

“In order to have a more full-bodied policy discussion on what modifications need to be made to the tax structure here in the state, we said we will support SJR14, and we took a lot of heat for supporting that not only from a business community but from our own members and from several legislators,” Leleu said. “The reason for our support was we wanted to be able to have a more full-bodied policy discussion during the interim.”

But Leleu and others involved in 2017 say conversations around property taxes waned in the interim between legislative sessions.

“Unfortunately, we didn't have one single discussion during the interim on this issue, despite our efforts,” Leleu said. “We made several inquiries, tried to assemble a group, made outreach to different folks.”

One organization that had taken a lead on property taxes in 2017, the Nevada Association of Counties (NACO), took its foot off the pedal after the bill it sponsored to establish a floor on caps for annual increases in property taxes died without ever receiving a committee vote last session.

“Our members are still interested in property tax reform, and it was a big priority for us last session, but we didn't have a lot of success last session and there just wasn't the same momentum going into this session,” said NACO Executive Director Dagny Stapleton. “There wasn't that same level of interest or work this interim.”

Those involved in the discussions say that the issue didn’t come to a head this session until a few weeks ago, when legislative leadership called a meeting to talk about property taxes and review a report commissioned by the Legislative Counsel Bureau looking at the potential economic impact of SJR14, which had just come out.

The study, conducted by Applied Analysis, determined that allowing the property tax depreciation factor to reset on sale would generate an additional $13.2 billion in property taxes statewide over the first 12 years of implementation. The analysis used 2018 fiscal year property data and, for purposes of its estimations, ran its numbers as if the measure had gone into effect that year.

The 377-page report broke down the 12-year economic impact for every major and minor entity that benefits from property taxes, from $4.6 billion for Clark County schools to $251,000 for the Amargosa Library District. The analysis shows that property taxes would ramp up slowly at first — because of the time it takes for properties to sell and the depreciation to reset, and also the compounding impact of having more properties that have reset over time — and then eventually level off.

“At some point you’ve turned over almost all of the properties so you’ve essentially recaptured the appreciation and the abatement that has occurred,” said Jeremy Aguero, principal analyst with Applied Analysis. “So that’s why you’re seeing that leveling off because we’ve had depreciation over that period of time.”

By the time the report was released, NAIOP felt it was too late, Leleu said, and was prepared to testify in neutral. The association felt there hadn’t been a broad-based conversation about property taxes and that they didn’t have enough time to do their own analysis of the report, and were prepared to withdraw their support.

“It really put us in a tough spot,” Leleu said. “We've never been able to publicly air that — although we have let everyone in the business community and the legislators who are involved know where we sit on this — that we are just no longer able to support it simply because we have not been able to have that discussion.”

Nexus with education funding

The fact that the discussion never happened strikes many involved in the 2017 conversations as strange. Republican state Sen. Ben Kieckhefer, the lone Republican vote in support of SJR14, said he went into 2019 preparing himself for another fight.

“I fully expected to be walking into the Legislature this year continuing that debate and sort of girding myself up for it. I was the lone vote on that resolution on my side of the aisle and certainly took plenty of heat for it over the past two years, including during my election,” Kieckhefer said. “But here we are with about a week and a half left in the session, and it appears to be a nonstarter.”

Kieckhefer said that he voted in favor of the bill in 2017 because the pieces that make up the state’s property tax structure — including the caps and depreciation factor — don’t fit together in a way that is meeting the needs of local governments.

“I don't think it's unreasonable to try to make a broken system function more effectively while still being committed to protecting my constituents, who are very sensitive to property tax increases,” Kieckhefer said. “Particularly as someone who represents Incline Village and the north shore of Lake Tahoe, small changes can have dramatic impacts on some people. I'm certainly cognizant of that and wouldn't do anything that I thought was putting people in a dangerous position.”

The primary argument against SJR14, besides the concerns from the county assessors about implementation, is that it would raise taxes. Depending on whom you talk to, you’ll get a different answer about whether it should be considered a tax increase.

“It will increase property tax revenue, so how is it not a property tax increase?” Kieckhefer said.

Allowing depreciation to reset on sale would have the effect of generating more property tax revenue, but a homeowner would not see his or her property tax bill increase unless they sell their home and purchase a new piece of property. The measure also included a directive to the Legislature to establish a program to refund property tax payments to the elderly and those with disabilities to ensure they weren’t hurt as a result of the change.

“I think there are some anti-tax advocates that want to label the SJR14 measure as a tax increase when in reality nobody’s taxes would go up,” Kazmierski said. “Part of this is a perception. If you’re in your house paying your taxes, your taxes will not go up.”

To some, the fact that the Legislature is considering approving a bill, AB309, that would allow counties to enact a sales tax increase — which are generally criticized by Democrats because they take a larger percentage of income from low-income earners than high-income earners — to help fund local schools and won’t hear a bill that would increase property tax revenues, generally seen as a more stable and equitable form of revenue, is perplexing.

“You know what is kind of unnerving is that they passed it last session, and there were more Republicans last session than this session and the message is the Democrats are pro-education — this is not only pro-education, but pro-public safety, pro-local government — it offers a solution to some of the challenges they’re facing to adequately funding public education,” Kazmierski said, “and yet we choose not to even vote on it.”

A spokeswoman for Clark County School District, which is petitioning for an additional $240 million to remain whole and fund Sisolak’s promised teacher pay raises, did not say whether the district is disappointed that the proposal isn’t moving forward. But she did reiterate the district’s support for the measure and any additional revenue it could generate to flesh out the funding formula proposal lawmakers are deliberating.

“These additional dollars would be a good start to fully funding the weights and base in the newly proposed education funding formula outlined in Senate Bill 543,” CCSD spokeswoman Kirsten Searer said in an email. “CCSD would allocate additional funds to support the ambitious goals outlined in our five-year strategic plan, Focus: 2024.”

A stalled bill

The question then is why — with a demonstrated need for additional revenue and relatively broad support for SJR14, so long as it’s part of a broader conversation on property taxes — the legislation isn’t moving forward. Lobbyist Greg Ferraro, who has seen various iterations of the property tax conversations since his first session three decades ago, has one answer.

“As you really start to bring issues to light and have them come up, they become complicated fiscal policy and they become complicated politically,” Ferraro said.

One contributing factor is that 2019 hasn’t been a revenue-focused session, with Sisolak essentially taking those conversations off the table when he declared during his State of the State address that there would be no new taxes. Though Sisolak wouldn’t have to sign the measure since it’s a proposed constitutional amendment, it could still be interpreted as a tax increase by Democrats writ large.

“I think the air was let out of the balloon in the State of the State,” Kieckhefer said. “I think that ultimately there is no discussion this session about new revenue because the governor said there was going to be no discussion this session about new revenue. I look around at my Democratic colleagues who've been clamoring for more money for education for all these years, and now what are they supposed to do?”

Asked whether he was disappointed the Legislature appears unlikely to hear SJR14, Sisolak said that he can only control what’s within his power. He did, however, signal an openness to looking at property taxes as part of the revenue conversation in the future.

“I think that we need to look at our revenue structure,” Sisolak said. “We're talking about education and an educational funding bill, and we'll have to look at everything.”

Even if SJR14 was advanced by the Legislature, it would still need to be approved by voters in 2020, meaning that it wouldn’t have any direct impact on the budget lawmakers are piecing together this session. That means that Democratic lawmakers would have to vote for something that could look and feel to a lot of potential voters a lot like a tax increase — possibly jeopardizing their chances of holding onto seats in competitive districts and the party’s legislative control as the Legislature takes up redistricting next session — without an immediate budget boost.

“You look at the political aspects behind having your fingerprints on a tax increase, or a tax modification that could be spun as an increase, as you stare an election in the face, particularly a presidential one,” Leleu said. “I think that's definitely a factor.”

And then there’s the question of who would take up the fight at the ballot box, given that the proposal would likely require a significant education campaign to explain to voters why the measure wouldn’t immediately raise their property taxes and why it would still be worth supporting even if it does at some point in the future when they buy a house.

“I still think about Energy Choice, which was my big issue during the last election, and how much it took to convey that to the average voter. Now you’re talking about property taxes, which is very much in the weeds,” said Meredith Levine, director of economic policy at the Guinn Center. “Then you have to overcome a resistance to the idea that, wait a minute, this is my home, and now we’re going to have this possibility even though, your home is still okay, your depreciation factor, if you move to a new house, that’s where it would come into play.”

Those involved with the property tax conversations say if and when the issue does come to the ballot, there will likely need to be a coalition backing it, but one that doesn’t appear to exist at the moment.

“That's going to take a lot of education, and it's going to be the responsibility of a broad based coalition of all kinds of Nevada interests,” Ferraro said. “I do think as we talk more about it and how to do it and what role it plays in the New Nevada economy, there's a lot of smart people in this state and lots of smart people in this Legislature. We'll probably figure something out.”

What happens now

If there’s no movement on SJR14 this session — and a new SJR14 isn’t introduced and passed to get the ball rolling to put the proposal on the 2022 ballot — it will be at least until the 2024 election that voters could address the question of whether they believe the property tax depreciation factor should reset on sale.

“This sets us back five years when it comes to adequate funding of local government and education because our tax structure is so broken,” Kazmierski said. “The message to me is the Legislature does not necessarily believe the public is willing to support this.”

Even then, the Legislature may be in a far different spot by 2021 than it is now, with economists projecting a recession — or at least a period of slower economic growth — to hit sometime before the end of calendar year 2020. If the slowdown is severe enough, the Legislature could have to raise revenue just to meet its current level of spending, without taking into account big-ticket policy proposals, including the new education funding formula and collective bargaining agreements for state workers, that are slated to go into effect in the 2021-2023 biennium if approved by the Legislature this year.

“You could be looking at a tax increase just to mitigate drastic cuts to K-12 and Medicaid, not talking about adding more money to the budget,” Kieckhefer said. “If they're banking on this same landscape in ‘20 and ‘21, I think that is high risk.”

For now, there is an appetite for conversations on reset on sale to continue as part of a broader conversation on property taxes. The Las Vegas Metro Chamber of Commerce, for instance, is open to property tax reform so long as both commercial and residential properties are included in the discussion.

“We do understand the importance of equity in the tax structure,” said chamber lobbyist Paul Moradkhan, who added that the chamber is neutral on SJR14 at the moment. “Any reform efforts we believe would have to address both sides of the ratepayers in the property tax structure.”

NAIOP won’t go so far as to say that they support the concept of reset on sale — Leleu said that it’s too early to even decide that — but the association believes the policy discussion has to continue.

“If someone is willing to bring a bill that authorizes that change to the tax code, it's something we would happily look at along with that full bodied policy discussion,” Leleu said.

Then there’s the Nevada Realtors Association, which doesn’t support point-of-sale triggers but still believes in the overall property tax reform discussion.

“We have been active participants in all discussions concerning our property tax system, just as we’ve remained steadfast in our position that property taxes be fair and reasonable for Nevada homeowners,” Nevada Association of Realtors President Keith Lynam said in a statement.

The Nevada Taxpayers Association echoed those thoughts.

“It is something that needs to be fixed,” said Michael Pelham, the association’s lobbyist. “We certainly realize that, and want to work to find a solution.”

But no one believes that the conversation on property taxes ends this session.

“I think a lot of people know the jigsaw puzzle takes time, and this is a really colorful, important piece of the jigsaw puzzle,” Ferraro said. “But other pieces have to be in place first or simultaneous to it. I don't see it as a stop and a start. I see it as a continuation, and I see the issue elevating in importance in people's minds as we look at sound, fiscal policy for the state of Nevada.”