Washoe County Commissioners will hear options for possible ways to meet a projected $17 million obligation to pay refunds to approximately 8,700 Incline Village property owners at their meeting next week.
The Nevada Supreme Court issued a ruling on July 7, 2011 which upheld an earlier District Court order directing the Washoe County Treasurer to issue refunds of overpaid property taxes and interest to affected taxpayers in the Lake Tahoe area. The Supreme Court’s decision came two years after the County had appealed the District Court’s decision.
Reason for Decision. At the heart of the issue is the fact that the former Washoe County Assessor used four methodologies to calculate the taxable value of properties in Incline Village/Crystal Bay with features such as views of Lake Tahoe or beachfront locations based on common appraisal practices, but not ratified by the Nevada Tax Commission as required by law (although they had been ratified by the Nevada Department of Taxation). The Nevada State Supreme Court upheld the lower court’s decision that the County’s methodology was unconstitutional because it had not been ultimately adopted at the State level. Previous rulings found the Nevada Tax Commission “derelict” in its duties since it did not define assessment methodology as required by law.
The County had already made refunds to all 1090 property owners in the Incline Village/Crystal Bay area that had had one of those four methodologies applied to their assessment and had properly filed an appeal of their taxes; those refunds totaled $6.1 million. This latest Supreme Court decision extends the refund benefit to all Incline Village/Crystal Bay property taxpayers in order to enforce a decision by the County’s Board of Equalization that ordered the refunds to all taxpayers in Incline Village/Crystal Bay because some had received refunds.
No Funds Available. Washoe County has reduced its budget by $154 million over the past five years as a result of the on-going recession, and its workforce has been cut by 20%. The overall 21% reduction in the County’s General Fund has meant significant cuts in Public Safety, Parks, Libraries, and all other County services. The County is currently negotiating with its nine unions to achieve additional wage and benefit concessions to meet the current budget deficit which was increased by $2.5 million by Nevada State Legislative impacts. The $17 million of property tax refunds to Incline Village property owners is in addition to the $36.1 million budget deficit already identified for the 2011/12 fiscal year which started July 1st. Further service cuts to pay these refunds would mean drastic cuts to already impaired core public services.
Potential Sources. The 2009 Nevada Legislature authorized the Washoe County Commission to enact a one cent vehicle excise tax, called the Governmental Services Tax (GST) which would raise approximately $8 million in additional revenues. The intent of the Legislation at the time was to partially compensate for local revenue diverted to the State. Enactment of the tax would make Washoe County consistent with Clark County for the fee paid on the depreciated value of registered vehicles including cars, boats, and trailers. The Washoe County Commission has not enacted this tax in recognition of the current economic recession, and instead cut county spending and eliminated 769 county jobs. However, given the Nevada Supreme Court’s order, county staff will be recommending to the Commission at their meeting on July 26th that enactment of this tax may be one of the possible sources of revenue to meet this obligation as the county does not otherwise have the resources to do so.
If a one cent vehicle excise tax is enacted, it would increase the cost of registering a vehicle from the current 4 cents GST assessed to 5 cents. The tax is progressive, meaning that the lower the value of a person’s vehicle (or boat or RV), the less they would pay.
Staff Recommendations. In addition to identifying the enactment of a one cent vehicle excise tax as allowed by state law, staff will be recommending to the County Commission next week that the refunds be paid by borrowing from the county’s risk management fund and the proceeds of the one cent tax used to pay the fund back with interest. The risk management fund has reserves retained for identified property and liabilities claims and for employee worker compensation coverage, some of which is required by state law such as the “Heart and Lung Liability” lifetime medical coverage required for any public safety employees who develop heart or lung disease. While staff notes that reduction of this fund does put the county at risk, the reality is that there are no other revenue sources available to pay the $17 million court-ordered property tax refunds to Incline Village property owners.
Staff is also recommending that Washoe County reduce subsequent apportionments of tax revenues from the other taxing entities within the county that shared in the property tax revenues as allowed by state law. Those other entities are the Washoe County School District, the Incline Village General Improvement District, the State of Nevada, and the North Lake Tahoe Fire District. Future property tax revenues would be reduced for these entities until the full share of their refund obligation is met.
Next Steps. The County Commission is scheduled to address this issue at their meeting on Tuesday, July 26th with a time certain of 6:15 p.m. The meeting takes place in the Commission Chambers and will be televised live on TV-217 (for Charter customers) and webstreamed live on the county’s website at www.washoecounty.us The full staff report can be viewed by going to http://www.washoecounty.us/bcc/agendas.html and selecting the July 26th agenda and clicking on item # 19.
If the Commission approves staff’s recommendation to borrow up to $17 million from the risk management fund to pay the Incline Village refund obligation and enact a 1 cent vehicle excise tax to repay the loan, the first reading of an ordinance authorizing the tax would be on their September 13th agenda.
Other Important Information. It is also important to note that the staff report states that further legal options are not recommended based on research and analysis conducted by the District Attorney’s Office. Staff also recommends that processing of the refunds should begin immediately, once the funding source is decided. In fact, Treasurer Tammi Davis has already begun the complex process of calculating refund amounts as well as identifying past property owners entitled to the payments; a process which requires an extensive amount of time.