Henderson residents could be facing their first property tax increase in 23 years.
However, the city can raise the tax only 3 cents per $100 of assessed valuation without a vote of the residents or a change in state law, a number well short of the recommendation to be made by a special committee.
The Special Budget Ad Hoc Committee recommends that the City Council next week consider raising property taxes up to 20 cents per $100 in assessed valuation, according to the committee report released Tuesday. The money would generate up to $16.5 million per year, helping the city address its $2 million annual operating shortfall and $17 million annual infrastructure needs.
City spokesman Bud Cranor said the council would be able to implement a property tax increase beyond 3 cents only with a vote of city residents. The city is limited by state law in how much it can raise property taxes without a ballot initiative.
In 2005, the state approved a property tax cap with annual increase limits of 3 percent for residential and 8 percent for commercial properties. The 3 percent residential cap applies to owner-occupied residences. Residential properties owned by banks, bought by hedge funds or other investors for use as rentals can be increased in the 8 percent commercial category. The idea of the law nine years ago was to prevent homeowners from being priced out of their residences by rapidly increasing property taxes.
Property tax, which accounts for 26 percent of the city’s general fund revenues, is estimated at $58.5 million this year, down from $85.7 million in 2008. The general fund budget for fiscal year 2014 is $219.1 million, with more than half dedicated to public safety.
However, only one-fourth of property taxes from Henderson residents and businesses go to the city’s general fund. The rest is collected by the state, Clark County, the Clark County School District and other special districts.
Mayor Andy Hafen, who couldn’t be reached for comment Tuesday, told the Review-Journal in November he would support a legislative look at adjusting or lifting the cap during the 2015 session.
A 1 cent property tax increase could generate $825,000 in revenue, adding $6.13 to the per year property tax bill for a $175,000 home. A 20-cent increase would add $122.50 to a $175,000 home.
The committee’s recommendation will come less than two weeks after Hafen touted the city’s low property tax rate of 71 cents per $100 of assessed valuation during his State of the City address, a tax rate that has not changed since 1991. By comparison the tax rate in Las Vegas is $1.06 per $100 of assessed valuation, while North Las Vegas is $1.16.
Although the city of about 276,000 residents hasn’t raised property taxes in 23 years, it has cut expenses by more than $127 million since the economic downturn in 2008.
The city’s staff has been reduced by 230 positions, and nonunion compensation has declined 6 percent to 11 percent, according to the city. Cost-of-living adjustments have been frozen since 2010, and all employees agreed to concessions equaling 2 percent of pay for the past two fiscal years. And the city has deferred capital construction and maintenance projects during the downturn.
“Today, however, the city is at a point where it can no longer sustain a model of deferring maintenance,” the committee’s report said. “At risk is the underlying fabric of our citywide economy. If infrastructure fails or amenities degrade, the quality of life that residents currently enjoy will diminish.”
The committee of 21 members was appointed by the City Council to review the city’s budget and operations to find recommendations for new revenue or possible cuts to fill budgetary gaps.
The committee also recommended other fee increases and cuts to city services to raise funding, including cutting all Parks and Recreation Department discount cards, called punch passes, bread pickup and the senior transportation program, saving an estimated $368,000.
An increase in the department’s fees for preschool, participant identification cards, sports and aquatic pricing, and streamlined Safekey rates could generate another $523,000 for the city, according to the report.
Other proposals include cutting the city’s matching contribution of $350,000 to Meals On Wheels, closing or limiting recreation center hours on low-use days, possibly delaying the build-out of the city’s next five new parks, and regionalizing emergency services where appropriate.
The committee also recommends the department conduct a “comprehensive pricing study” of other cities that could identify another $2 million in new revenue, implementing surcharges for non-private use and full cost recovery for private use of city facilities.
The City Council on Tuesday will direct City Manager Jacob Snow on how they want the report handled.
“(The City Council) can accept all the recommendations, they can accept some of them,” Cranor said. “It’s just kind of up to them right now.”
One of the directions for Snow could be to develop a timeline for implementation for any recommendations the City Council wants to move forward with, Cranor said.
Cranor said he didn’t know whether any of the council members or mayor had seen the report yet.
The 21-member committee included community members, business owners, accountants, CPAs, lawyers and lobbyists. It was chaired by Tim Brooks of the Water Street District Business Association and owner of the Emerald Island Casino in downtown Henderson.
Contact reporter Arnold M. Knightly at firstname.lastname@example.org or 702-477-3882. Follow him on Twitter @KnightlyGrind.