There's good news and bad news about Nevada's real estate market. The good news is property values are recovering. But according to local officials, the bad news is property tax caps are keeping cities and towns from raising enough revenue to provide necessary services.
In 2005, Nevada passed a state law to protect property owners from huge tax increases during the real estate boom. The law caps year-over-year property tax increases at 8% for commercial properties and 3% for owner-occupied single family and low-income multi-family residential. Now that values are on the upswing, an unintended consequence has occurred - the caps are stifling funding for schools, police, road repairs, and more.
For example, the City of Las Vegas has seen property tax collections decline by $42 million from 2009 to 2014. The Las Vegas Metropolitan Police Department’s property tax collections have fallen by almost $60 million over the same period.
Clark County Manager Don Burnette told the Las Vegas Sun, "Now that we've started to come up, the caps are clearly impeding our ability to recover what we've lost. Even though it took six or seven years to drop $127 million in property tax revenue, it's going to be a much longer period of time before we get back to where we were in 2006."
Local officials are turning to the Nevada Legislature to re-examine the property tax caps in place.
"Even with a slight uptick, the bad part is our property taxes don't generate that much revenue," explained Commissioner Chris Giunchigliani. "Property tax is your stable source of funding. Overall, it's the proper tax to look at. You should review your tax policy every five to 10 years anyway to see if it's working or if there are unintended consequences."
There will be no quick legislative solution. The Nevada Legislature doesn't go back in session until 2015.