Property tax cap not the problem


The agitation for a massive tax increase is growing.

I’m not talking about the most important race of Campaign 2014: the 2 percent margins tax, which will appear on Nevada’s Nov. 4 ballot as Question 3. The initiative advanced by the state teachers union would tax businesses with revenues of at least $1 million and suck up to $800 million per year from a fragile economic recovery.

I’m talking about the most important tax policy issue that will confront the 2015 Legislature: the property tax caps enacted in 2005.

Nine years ago, exploding land and home prices drove assessments so high, so fast that many homeowners were at risk of not being able to pay their property tax bills. The Legislature responded by capping the growth of property tax bills. Owner-occupied homes were guaranteed annual increases of no more than 3 percent, and the tax bills on rental and commercial properties could grow no more than 8 percent per year.

Then the housing market crashed, triggering the Great Recession. A steep decline in assessed values and property tax bills followed. Nevada’s real estate sector didn’t hit bottom until 2012.

Home values have bounced back quite nicely over the past two years, but property tax collections haven’t. The caps are working exactly as intended in a volatile market, preventing property tax bills from growing as quickly as assessed values.

That has local government leaders, from mayors to county commissioners to public safety and education officials, thoroughly annoyed. They still have no real control over their collectively bargained personnel costs, so they’re in need of ever more tax dollars to support growing payrolls, employee benefit costs and pension contributions. The city of Las Vegas, for example, has seen property tax collections decline by $42 million from 2009 to 2014. The Las Vegas Metropolitan Police Department’s property tax collections have fallen by almost $60 million over the same period.

There is a clear consensus among local governments: the caps must be lifted, if not done away with altogether. Next year, Carson City will see a push from local government officials and lobbyists to change the property tax formula. They’ll argue that property tax revenues must “recover” more quickly.

What they’re really saying is you need to pay a lot more in property taxes — even if your mortgage is still underwater.

Thus far, tax discussions with candidates for office have focused on Question 3. It’s important for them to take a clear position on the issue because it speaks to their larger views on government, business, economic growth and education. But Question 3 is in the hands of voters. It will be more important for local and state officials — especially legislative candidates — to take a position on the property tax caps. Raise them? Do away with them? Leave the law unchanged?

I asked Gov. Brian Sandoval if he would support increasing property taxes by changing the caps. Mac Bybee, Sandoval’s director of public relations and community affairs, provided an answer via email: “It is not under consideration.”

It was a typically cautious response from the Republican governor. Don’t expect him to champion the cause, but it wasn’t a flat rejection, either.

There are two good reasons local governments favor changing the caps. First, a change in the cap would allow every government entity to collect more dough. That’s very different from, say, the More Cops sales tax plan, which would benefit only county police departments, or levies that feed only the state general fund. Just look at your most recent statement of property tax distribution to see where property tax revenues go. In Southern Nevada, portions of property tax bills go to Clark County School District operations and debt, a city (if you live in one), Clark County, city and county debt, the state, public safety, Family Court, 911 dispatch, libraries and more.

Second, changing the caps would let local governments collect more tax money without a vote of their own elected bodies. As it is, the city of Henderson is considering its own property tax increase (good luck with that), and the city of Las Vegas is exploring various fee hikes and already has its Fire Department ambulances taking on more patient transports to boost revenues. Local elected officials want state lawmakers to bear the political burden of voting for property tax increases.

Now that filing season is over and candidacies are official, campaigns can really get going. Voters should press legislative candidates for a position on the property tax caps. Some people will try to muddy the waters by talking about “abatement reductions” and “revenue gaps.” But this is about making your property tax increases increase even more.

How much more? Would a candidate support a 5 percent cap? A 10 percent cap? Doing away with the caps altogether?

I’ve said it a hundred times before, and I’ll say it again: Southern Nevada’s local governments do not have a revenue problem. They have a payroll problem. And giving them even more property tax money will only make the problem worse.

Glenn Cook (gcook@reviewjournal.com) is the Las Vegas Review-Journal’s senior editorial writer. Follow him on Twitter: @Glenn_CookNV. Listen to him Mondays at 4 p.m. on “Live and Local with Kevin Wall” on KXNT News Radio, 100.5 FM, 840 AM.