Carson City supervisors rejected a property tax plan Monday that builders said would hurt new construction sales.
Builders told supervisors the 18-cent property tax rate increase would have lowered demand for residential and commercial construction in an already slow economy.
"We're in a market competing for a handful of buyers (who are) looking for the best value they can get," said Mark Turner of Silver Oak Homes.
The property tax rate increase, which would have affected mostly new construction, would have raised the rate from $3.13 per $100 of assessed value to about $3.31 per $100 of assessed value. A home assessed at $100,000 would have had to pay $180 more a year in property taxes.
Property taxes under a 2005 state law can only go up 3 percent a year on existing homes and 8 percent a year on existing commercial properties, regardless of tax rate increases.
New properties pay the full property tax rate in the year they're built.
Turner said potential buyers notice the discrepancy in taxes between similar properties built a only few years apart.
"They look at that tax bill and they run away," he said.
The tax rate increase would have raised $9,000 of the $18.6 million the city expects to collect in property taxes next fiscal year, said Finance Director Nick Providenti.
Supervisors accepted the rest of the next year's budget. The general fund is $58 million.
The city had increased the rate each year since the state capped taxes, Providenti said. The new increase wouldn't have raised a lot of money, he said, but it would have helped make sure the city didn't get capped at a low rate again.
Providenti said the state property tax cap, not the city, is responsible for the discrepancy in taxes between old and new construction.
"It's really not fair," he said. "I can understand the issues the builders have."
Pat Hon of Alpha Homes said her business has had only one new home building permit issued this year.
Even the perception of increased costs can cause a builder to lose a sale in the slow economy, she said.
"We don't need that, at this point in time, when we're all trying to keep the doors open," she said.
The city isn't responsible for the "inequality" created by the state, Mayor Bob Crowell said, but supervisors need to be as prudent as possible.
"The board doesn't want to do anything that will stall the economic recovery," he said.