Small Northern Nevada city loses appeal for more C-Tax revenue

CARSON CITY — The Nevada Supreme Court on Thursday rejected an appeal by the city of Fernley challenging the constitutionality of a local government tax distribution formula.

In its unanimous opinion, the court said the Legislature’s creation in 1997 of the Local Government Tax Distribution Account, known as the C-Tax, was not “special or local” legislation in violation of the state constitution.

The court upheld a motion for summary judgment against Fernley and in favor of the state Department of Taxation.

The Legislature nearly 20 years ago consolidated six different local government distribution formulas into one to be more responsive to growth in the state’s cities and counties. It includes the liquor, cigarette and real property transfer taxes, among others.

The consolidated funds are distributed by the Department of Taxation using a two-tiered system, first to the 17 counties which in turn distribute revenue to local governments including cities, libraries, fire districts and others.

Fernley incorporated as a city on July 1, 2001, and sought an increase in its share of the C-Tax. But Fernley did not opt to provide local services such as police. Instead it relied on Lyon County to do so.

So even though Fernley’s population more than doubled, growing from 8,000 in 1997 to 19,000 in 2015, it never received a bigger share of the C-Tax revenues other than an adjustment based on inflation.

Fernley received $133,000 in C-Tax distributions in 2013, compared to $7.3 million to Mesquite and $8.9 million to Boulder City, cities that provide traditional government services.

Efforts by Fernley to reach an agreement with Lyon County so that it can provide services have been unsuccessful.

“Fernley incorporated hoping to collect more tax distributions, but it has not provided any new benefits to its residents, beyond those it provided when it was an unincorporated town, nor has it assumed the fiscal responsibility of Lyon Country for providing its services,” said Justice Kris Pickering for the court. “The Legislature enacted the C-Tax to encourage general-purpose governments that provide public services, such as police and fire protection.”

Contact Sean Whaley at or 775-687-3900. Find him on Twitter: @seanw801

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