City and county officials in the Las Vegas area are pushing for a change to the state's caps on property taxes. The caps, coupled with reduced property values, have cost local governments billions of dollars in lost tax revenue the past decade, according to published reports.
The call for change came at a NAIOP sponsored panel discussion featuring the Clark County Manager and city managers from Las Vegas, Henderson, and North Las Vegas.
Clark County Manager Don Burnette told the panel the system is broken. "We as a community need to do something about it. We cannot afford to go another legislative session without having some changes to the law," Burnette said.
The Nevada Legislature approved the caps in 2005 as a way to hold the line on skyrocketing property taxes during the real estate boom. Owner-occupied residential, and qualifying low-income multi-family property taxes can't increase more than 3% annually. Year-over-year commercial property tax increases are capped at 8%.
Lower assessed values can be established based on the cost, market, and income approaches to value through the appeal process. For instance, a hotel that saw its occupancy rate drop could appeal for a reduced assessment via the income approach.
Once a lower value and tax is established by the county assessor or board of equalization, the year-over-year tax amount can rise only by the amount of the cap. The cap is specifically on tax, not value. Caps follow the real estate, not the ownership, and remain in place even after a property has been sold. Despite the fact that the cap can increase as much as 8% on commercial properties, counties have largely held the commercial cap between 3% and 5% for the past handful of years.
Recession Hits Hard
Analysts say the caps did a good job of providing tax relief during rising property values but with the real estate recession, they've had a dramatic impact on local government funding.
Even though values are slowly increasing, property tax growth is expected to remain at 0.2 percent in the next fiscal year.
Lawmakers won't be able to tackle the issue until the next legislative session begins in 2017. Efforts to tweak the tax rate cap failed in 2015.