Friday, March 18, 2005 | 10:34 a.m.
Property Tax Terms
Taxable value -- the value of the land and what it would cost to replace the buildings or improvements.
Assessed value -- 35 percent of the taxable value.
Property tax -- is equal to the assessed value, divided by 100, and multiplied by the tax rate.
CARSON CITY -- Assembly Democrats are spearheading a property tax plan that they say gives the most relief to middle-class homeowners, is constitutional and would be a long-term solution to rising home values.
Assembly Majority Leader Barbara Buckley, D-Las Vegas, said she hopes the idea will clear the Assembly by next Wednesday or Thursday so property owners have a guarantee of property tax relief by the end of the month.
"This is a culmination of all the discussion that has happened in the last month and a half," she said.
The idea is three-pronged. First, all homeowners with a taxable value of $500,000 or less would receive a hardship exemption that would ensure their property taxes would not increase by more than 4 percent in any year.
Second, all other properties -- including commercial properties and homes with a taxable value of more than $500,000 -- would be grouped by county, and the taxable rate would be based on the average rate of growth over a period of time, perhaps five or 10 years.
Rural counties that have experienced negative growth would be held harmless, Buckley said.
Finally, the Legislature would push a constitutional amendment that would loosen a clause that requires it to tax all properties in a "uniform and equal" way.
That way, Buckley said, the Legislature could respond to unique situations such as the one now, when rising land costs have created huge spikes in home values in some areas of the state while other, rural areas have experienced negative growth.
Buckley said she spoke with key Republicans in the Senate, including Senate Majority Leader Bill Raggio, R-Reno, who said he was keeping an open mind about the idea. But several Republicans on the joint committee looking at property taxes said they aren't sold on it so far.
Assembly Minority Leader Lynn Hettrick, R-Gardnerville, said he was concerned that giving hardship exemptions to people with homes up to $500,000 isn't enough.
County assessors determine taxable values by factoring in the value of land and the cost of materials and labor it would take to replace a property. Properties also depreciate 1.5 percent each year up to 50 years. So taxable values are often significantly less than market value.
Hettrick represents Incline Village near Lake Tahoe, where home values have skyrocketed 50 percent or more, largely because of land costs.
Sen. Sandra Tiffany, R-Henderson, said she "didn't hear anything today that was overwhelmingly different from anything else."
Tiffany said some people with homes worth more than $500,000 in her district also need more targeted tax relief. She said she prefers capping assessed values at a low rate, such as 2 percent, or freezing them. She also supports an interim study to look at long-term solutions.
"In my opinion, the Assembly majority leader's proposal will not get any traction," she said.
Buckley said she chose the $500,000 cutoff after looking at average home values in areas that need property tax relief, such as Anthem, Summerlin and the Southern Highlands. Most middle-class families have homes worth $500,000 or less, she said.
People with homes worth more still would get the benefit of the rolling average, which would soften the blow of any major spikes in their home values, she said. And the Legislature still could take up the issue of whether to grant hardship exemptions to people with homes of greater value, she said.
Buckley said she presented the idea to Assembly Democrats on Thursday, and it received "unanimous" support. In addition to Raggio, she said she also approached Sen. Randolph Townsend, R-Reno, and Sen. Mike McGuinness, R-Fallon, who said they were open to the idea.
This week is the first time that Legislators have presented comprehensive solutions to the property tax problem. Local governments have asked legislators to come out with a solution by the end of March so they can plan their budgets knowing how much property tax revenue to expect.
On Tuesday, they saw bill drafts for three other ideas, one that would cap assessed values, one that would freeze them one year and then raise them by the rate of inflation, and one that would allow counties to cap adjust their tax rates so taxes would not rise higher than the level of inflation plus population growth.
Also on Thursday, Boyd School of Law Professor Steve Johnson made a presentation to the joint committee, asking them to consider incorporating a hardship exemption into their final solution, whatever it might be.
He pointed out that voters approved a mechanism for the Legislature to dole out hardship exemptions in 2002, though legislators have never used it.
"My own belief is something based on a severe economic hardship is much more likely to hold up in court than something that is not," he said.
The joint committee will take up the issue again on Tuesday, when it sees numbers on how all of the major proposals would affect state, county and school coffers.
Responses from local governments were more positive to Buckley's plan than others. Tax expert Marvin Leavitt, who consults with local governments, said he would rather deal with assessed values instead of capping rates, such as the formula proposed by staff.
One problem is that homeowners don't know what kind of taxes to expect if taxes aren't based on assessed values. Local governments are hoping the property tax solution will appease homeowners enough that they don't push for an initiative similar to California's restrictive Proposition 13.
"Our feelings in general were that if you don't deal with taxes at the parcel level, which provides some guarantee to individual property owners and particular homeowners, then we are encouraging a Prop 13," he said.
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