Property taxes: Falling revenues add another hit to state budget

Statewide property tax revenues are projected to drop 18.69 percent this fiscal year, causing yet another multimillion-dollar hit to the state budget.

That is the projection the Budget Division is using to build the state budget for the coming biennium. While the state only uses 17 cents of the maximum $3.64 per $100 of assessed valuation rate, the state is on the hook for the decrease in revenue from the 75-cent portion each school district receives. The law requires the state to make up any shortfall suffered by the school districts.

From a high of $143.5 billion in assessed value two years ago, the Department of Taxation's annual property tax report says the value of property in the state of Nevada fell to $119.66 billion as of the fiscal year which ended June 30, an overall drop of 17 percent.

If the valuation drops 18.69 percent this fiscal year as predicted, total assessed values for Nevada will fall another $22 billion to $97.3 billion.

According to projections, that total will take an additional 2.83 percent hit in fiscal 2012 before values begin to rise again.

What that means to the state budget is a $139 million check to Nevada school districts to make up lost property tax revenue in their current budgets.

It also means a $31.5 million reduction in the money the state has for bonded indebtedness, but Mark Winebarger of the Treasurer's Office said barring something unforeseen, the state will have no trouble making bond payments.

Carson City Assessor Dave Dawley said his office has been very conservative in raising assessed values, even freezing them on the west side after the Waterfall Fire. But for the first time, he said, declining values will give about a quarter of the capital's homeowners a reduction in their annual property tax bill - unless supervisors raise the tax rate. In that case, he said no one will see a smaller tax bill.

Because the decline wasn't as severe in Carson as in Clark and Washoe, assessed values for about three-quarters of Carson homes still are higher than the capped valuations used to calculate property taxes. They won't get a tax cut.

The system imposed by the Nevada Legislature in 2005 limited annual increases in a homeowner's taxes to

3 percent. For a business, it's a maximum of 8 percent.

So as home prices rose dramatically from 2000 through 2007 - by double-digit percentages annually in Clark, Washoe and the lake portion of Douglas County - actual tax increases were held low by the caps.

Until and unless the assessed value falls below the taxable value, the property tax bill won't go down.

That has happened in Clark and Washoe counties where the projected declines in valuation are 23 percent and 8 percent respectively, on top of double digit declines the previous year.

But, in the capital, total assessed value dropped just more than 1 percent from $1.84 billion in 2008-09 to $1.827 billion in 2009-10. Because supervisors raised the city's overall rate, revenues actually increased by about $700,000 to more than $60 million.

In Douglas, property owners got some relief as total assessed valuation declined $124 million to $3.368 billion last year. That resulted in a drop of just less than $3.2 million in the $103.6 million in revenue shared between the county, school district and special assessment districts.

Douglas Assessor Doug Sonnemannn said values have since dropped to about $3 billion and he expects they will fall as much as 10 percent more.

The primary cause was casino properties at Stateline receiving substantial devaluations. They did so by using the income model in appeals to the board of equalization, which allows businesses to receive property tax reductions based on a poor business year rather than basing the tax on the value of the property and improvements.

Sonnemann said none of the Tahoe residential properties have fallen to below their taxable value so there will be no decrease in taxes there. Older neighborhoods in the valley, he said, are also unlikely to see any tax decrease because their values have also remained pretty stable.

But he said houses built in the last five to 10 years will probably see a tax decrease because their values rose dramatically and have fallen just as dramatically.

Unlike Carson, Sonnemann said Douglas commissioners can't raise the countywide rate because Minden is at the top allowable tax rate and Indian Hills isn't far behind. But he said homeowners and businesses still valued at above the cap could see the 3 percent and 8 percent increases despite falling property values.

In Churchill County, property values defied the statewide trend and rose from $725.9 million to

$790.8 million, resulting in an increase of $1.8 million in total tax collections to

$24.16 million.