UPDATE Sept 4, 2023: Local control of short-term rentals (STR)  has  been cited as one of the reasons for a city. But residents might have the power to take control – through the North Lake Tahoe Fire Protection District. The Hawaii Lahaina fire on Maui demonstrates the devastation of fire. The NLTFPD has the ability to set separate ordinances for its boundaries. Pursuant to Article 19, Section 2(3) of the Nevada Constitution, statutory initiative petitions to appear before the 2023 Legislature may be filed on or after January 1, 2022. To qualify for the ballot, petitioners must obtain the signatures of registered voters that equal at least ten percent (10%) of the voters who voted at the last preceding General Election. For the Township of Incline Village, this would be about 901 signatures. So why doesn’t the promoters of the City of Incline Village do this? Or explain – as they have retained multiple lawyers – why this isn’t a good idea? We do not know – but if you like the idea, consider asking them. In August, 2023, a petition was started in neighboring Douglas County to eliminate STRs. Douglas County does not have a separate Fire District for Tahoe, so the petition requires 10% of all Douglas County voters: 4,388 voters.

UPDATE July 9, 2023:  If you find this article of interest, please consider forwarding a link to your friends and neighbors. Meanwhile, the City initiative has been “paused”.  

UPDATED April 6, 2023: Nevada law, NRS 386, sets the boundary of each school district as the boundary of each COUNTY. So forming a city would have NO EFFECT on schools.

UPDATED June 19, 2023: The organization that is running the city initiative, the Village League to Save Incline Assets, Inc. (a 501c3), arranged a survey using Flashvote. To see the survey results (657 responses),  which was open for 48 hours, see this link:  survey results.

A new city in Nevada has not been created since Fernley in 2001. Why? Nevada’s laws discourage city incorporation.

1) A new city’s property tax rate is determined after other taxing entities have gotten their share. Imagine a pie worth $3.64; there is a fixed amount to split up. Nevada law caps the total combined property tax rate at $3.64 per $100 assessed value.   Incline Village (including Crystal Bay) is at $3.4778 now. [see graphic below] This means, of the pie, the City of Incline might have a maximum of 16 cents ($0.1622) property tax rate.

$3.64 maximum – $3.4778 current Incline rate = $0.1622

For the “average” house in Incline (assessed value $280,000), property taxes would go up about $454, with tax rates going up to the maximum allowed: $3.64. That is only $3.3 million in revenue – not enough money for a new city. But a city has the ability to get other taxes – and they will.

Note: Incline already has two local governments that take 22%: IVGID (Incline Village General Improvement District) and NLTFPD (North Lake Tahoe Fire Protection District). A key assumption that has been made about a city is that these two districts would not change – at least initially. None of the other taxing districts: Washoe County, State of Nevada, or the Washoe County School District is going to give up any of their share.

 

2)  A new city would only qualify for “Consolidated tax” (sales tax, property sales transfer tax etc) if it provides police protection and 2 other services from this list:  (1) fire protection; (2) construction, maintenance, and repair of roads; or (3) parks and recreation. (City of Fernley v. State, Dept of Taxation).

IVGID and NLTFPD already receive “C-tax” because they were grandfathered when the law was passed in the 1990s. A new city would likely not get much (maybe $139,000) as IVGID and NLTFPD already receive 98% of the average “C-tax” per resident for Washoe County.  The amount would come from Washoe County’s portion, and it is unlikely to “share” more.

3) Room taxes are controlled at the County level, not the city. So a city would receive only 7.6% of the revenue, which could range from $250,000 to $600,000 depending on the controls the city imposed on short-term rentals.

4) Business license fees, building permit fees and franchise taxes are important revenue sources for cities. These fees/taxes would have to go up to support the city. Franchise taxes for utilities: internet, cable TV, electricity, and gas mean rates for all these utilities would go up. IVGID already imposes a questionable franchise fee as part of its monopoly contract with Waste Management.

5) Washoe County is highly unlikely to give sufficient funding for Incline Village roads maintenance and police/public safety currently provided by the sheriff’s office. This must be resolved and a number decided because otherwise revenues would be insufficient for a city. But Washoe County does not track expenses by location, so how will these numbers be determined?

In 2010, consultants told the City of Pahrump Incorporation Committee:

“NRS 354. 59875 establishes that, when the county transfers responsibility for services to the city, property tax revenue equivalent to the cost of operating these services within the boundaries of the new city must also transfer.

These cost figures are verified at the time of incorporation by the State’s Committee on Local Government Finance.”

We believe “verification” will consist of Washoe County saying – Yep, this is how much we spend – and the Tax Department (Committee on Local Government Finance) would not say a thing.  Our opinion is based on five years of communications with the Tax Department/CLGF by Incline Village residents, including several retired CPAs.  The city (meaning the property owners) would be left scrambling to make up the short-fall.

In 2012, the Clark County Board of Commissioners voted unanimously that a proposed incorporated city of Laughlin was not financially feasible. As the Moapa Valley Progress explained,

“At issue was a significant discrepancy between two sets of financial projections for the proposed city. The first, prepared by the state’s Department of Taxation used Clark County figures on expenses. It projected a deficit of from $1.5 to $4.3 million. The other study was prepared by an independent consultant hired by the Laughlin Economic Development Committee (LEDC), a citizens group in favor of incorporation. This study showed the proposed city with a surplus.

Both sides agreed that the discrepancies came down to two elements: how much state consolidated tax revenue the proposed city would receive and the cost of police and fire services in the proposed city. The county’s figures for emergency services came in $2.1 million higher than those of the LEDC.”

6) By law, a city has to have certain positions, including a mayor, city council, city attorney, clerk/treasurer, and auditor.  A city must also have a municipal court. These positions mean payroll, benefit, and pension costs.

7) A city would have to be part of Nevada’s pension system for employees. Pension costs are a significant expense for government.

8) The city of Fernley had 51 employees in 2012, less than 10 years after it was started.  No employees are police as Lyon County provides public safety through the Sheriff’s Office. It has grown to 71 employees (population about 23,000); its Fiscal year 2023 budget was around $14 million. All organizations want to grow, including government. [IVGID had 830 employees in 2021]. Imagine the office space, technology, equipment and other start-up costs required. Remember when the Parasol Foundation wanted to sell its building? Do you think a City of Incline Village would be asked whether it wanted to buy?   

In summary, under current Nevada law, it is questionable whether a city of Incline Village is viable. When the Village League to Save Incline Assets, Inc.
 releases the financial data it is compiling, their figures and assumptions must be carefully examined.

Source: Nevada Department of Taxation, RedBook Fiscal Year 2023

The author is a long-time property owner and resident of Incline Village. J. Gumz attained her CPA in Illinois and testified before the Nevada state legislature in 1995 regarding the financial feasibility of a new County in Nevada.