As Carson City struggles to pay its bills, it is subsidizing neighboring counties

Even though their economies have been booming, neither Douglas nor Lyon counties will benefit directly from the sales tax revenues their new businesses generate.

But, if they keep growing, Carson City will, to the tune of more than $120,000.

Under a complex set of state laws created when lawmakers chopped back property taxes in 1981, 10 counties - Douglas and Lyon among them - were guaranteed a certain level of sales taxes through a formula designed to ensure they weren't financially crippled by the loss of property tax revenue.

The source of that money is the Supplemental City/County Relief Tax, and when those counties finally reach the point where they don't get the subsidy, it will mean more money for nonguarantee counties - including Carson City.

But that may take a few more years.

Even with a dozen big box stores just south of the Carson City line and two new casinos in the works, Douglas will generate less than the formula provides. This fiscal year, Douglas will generate an estimated $12.9 million but receive $16.5 million - a difference of $3.5 million.

Despite a housing and business boom that made Lyon one of the nation's fastest growing counties in recent years, it too does better under the formula. Lyon will generate some $7 million. The formula guarantees it $12.2 million - a difference of $5.2 million.

That money comes off the top of the out-of-state supplemental relief tax collections. After the guarantee counties are paid, the other counties - primarily Washoe, Clark and Carson City - divide up the rest.

While Lyon has a long way to go before it passes the formula amount, Douglas is closer.

"They were getting to the point of coming out of guarantee," said Penny Hampton, the analyst at the Nevada Department of Taxation assigned to Douglas County. "But in this last couple of years with the sales tax being on a downturn, they've fallen behind."

The $12.9 million Douglas is projected to bring in this fiscal year is just about the same amount as the county collected in 2005-2006 and about $300,000 more than it collected in 2006-2007. Lyon too has been flat in actual collections since 2005-2006 at just under $7 million.

But because of growth and inflation, the amount they are guaranteed has continued to grow, by $900,000 this year in Douglas's case and $1.1 million in Lyon's case.

Since the tax shift, only Nye County has come out of guarantee status. That county did so last year because of the huge growth of Pahrump.

The other counties still under the formula guarantee are Esmeralda, Lander, Lincoln, Mineral, Pershing, Storey and White Pine.

When the subsidies for all nine counties are added together, the total is $12.4 million out of the estimated $85 million the state will receive in out-of-state supplemental relief tax revenue this year.

Carson City's share of those revenues totaled about $1.2 million over the fiscal year that ended June 30. In Clark County the total was just under $60 million and in Washoe County about $13 million. So, if Douglas and Lyon come off the guarantee list, the bulk of the roughly $8.7 million that frees up would go to Clark and Washoe. Based on the percentage of total out-of-state supplemental relief tax credited to Carson City in fiscal 2007 - 1.41 percent - the capital city would get $123,638 of that money. This is a significantly smaller amount than Carson officials have believed they were losing. But Carson officials didn't have the actual figure because it's calculated by the state and simply subtracted from the supplemental tax collections before they are divided up.

Efforts to reach Lyon County interim manager Bob Hadfield and Douglas County Manager Dan Holler were unsuccessful.

Sales tax collections

FY 2006

Carson City....$1.024 billion

Douglas....$818 million

Lyon....$445 million

FY2005

Carson City....$979 million

Douglas....$805.3 million

Lyon....$390.7 million

FY2004

Carson City....$913.5 million

Douglas....$750.9 million

Lyon....$323 million

FY 2007 numbers are not available yet as June sales haven't been reported to the Department of Taxation.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.