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News Analysis
'Hybrid' bill weaker than it appears?

By Steven Miller

The so-called ‘hybrid’ property tax solution passed by the Nevada Assembly yesterday is far from the done-deal that media reports have suggested.

In the Senate the proposal of Democrat Minority Leader Dina Titus for a one-year freeze is gathering important new momentum, while beneath the surface in the Assembly, anxiety remains over AB 489.

Behind the Senate development is concern over the double-digit tax increases still set to sting Nevada commercial and business property owners under the Assembly proposal. That bill would stick Clark County businesses with property tax increases of over 13 percent, the Las Vegas Review-Journal reported Wednesday.

In addition, the legislation would impose a “split roll” regime of higher taxes on all property owners but homeowners—notwithstanding the Nevada Constitution’s ban on any property tax assessment scheme that is not “uniform and equal.”

Because AB 489’s split-roll provision is a virtual invitation to a legal challenge, GOP senators now see the Titus proposal as good protection for all property owners, should the “hybrid” solution fail in the courts.

Titus has said she could try to freeze all taxes this year—including both residential and commercial properties—and postpone the main provisions of the assembly bill to the year afterward.

Sen. Warren Hardy, R-Las Vegas, noted that AB-489 has been represented as a compromise between Assembly Majority Leader Barbara Buckley and Assembly Minority Leader Lynn Hettrick. But while Assembly leaders “might view the compromise as a long-term fix,” he said, “I don’t think we [in the Senate] do.”

Hardy told the Las Vegas Sun that he and others worry about the burden imposed on businesses under the legislation.

“Some of us are looking for ways to make sure businesses are treated fairly. We certainly don’t like the split roll,” he said. Hardy also pointed out that a freeze would also help “compel local government to tighten their belts a little bit. I don’t think that’s a bad thing.”

Titus told the Sun that while she may have enough votes to get her amendment through the Senate, she was unsure if the bill could clear the Assembly. What she did not spell out is that Assembly Speaker Richard Perkins, who has positioned himself to reap political credit for the Buckley-Hettrick compromise, has demonstrated  little willingness to support any proposals that could make Titus—a competitor for the 2006 Democrat gubernatorial nomination—look good.

Thus, with GOP fiscal conservatives in the Senate backing a Titus freeze amendment, and Perkins resistant, the stage may be set for another confrontation between the Legislature’s two chambers. Although poorly reported by Nevada media, such a prolonged deadlock was the main reason for the acrimony of the 2003 Session, plus the two special sessions that immediately followed: Perkins and Buckley refused to accept any major tax-increase “solution” that did not include the Gross Receipt Tax. At the same time, even most Democrats in the state senate, not to speak of Republicans, would not support any version of the GRT.

This session, despite the 41 to 1 majority among Assembly rank and file in favor of AB 489, significant political anxiety rumbles beneath the surface and could erupt in a confrontation with the Senate. Some of the angst is telegraphed by the bill’s first 600-odd words—the lengthy “findings” that attempt to strengthen the bill for the legal challenges it is likely to face (while also making the politicians voting for it look wise and compassionate).

A look into key provisions of the bill reveals some reasons for the anxiety. First, the legislation is extremely complex—full of long, compound and convoluted provisions that even legal experts are finding hard to decode. [You can download the bill here and read it for yourself.]

Given this complexity, it’s clear that few Assembly members actually understood the bill’s provisions when voting for them. Instead, under the pressure of county tax assessment mailings scheduled for early March, and pressures from the Assembly’s majority and minority leaders, they simply relied on leadership assurances. But all three leaders—Buckley, Perkins and Hettrick—now have a personal political stake in the bill.

Second, the legislation is chock-full of apparent weaknesses for eager lawyers to attack. One finding, for example, says: “The Legislature hereby finds and declares that an increase in the tax bill of the owner of a home by more than 3 percent over the tax bill of that homeowner for the previous year constitutes a severe economic hardship within the meaning of subsection 10 of Section 1 of Article 10 of the Nevada Constitution.” (Emphasis added.)

Note that the declaration does not limit such “hardship” to owner-occupied homes, but instead refers simply and generally to “owner[s] of homes.” Thus, attorneys for owners of other residential properties where the owners themselves do not reside can be expected to challenge AB 489 in court. The Legislature itself, they will point out, has acknowledged that their clients also suffer such a “hardship.” How appropriate is it then, counsel will ask, for their clients to be denied the 3 percent cap?

A third concern of all Assembly members, given the virtually impenetrable text of AB 489, has to be whether or not the central political benefit of supporting the legislation will even occur. Media outlets have reported at length that the legislation gives homeowners residing in their homes a flat 3 percent cap on property tax increases. But if AB 489 really does that, why does it not clearly and directly say so?  Instead, the bill's complexity suggests that its authors’ well-known reluctance to let any prospective taxpayer penny escape the insatiable maw of government may be operating in some as-yet unseen manner.

Another, related concern, especially for Democrats, may be the issue of equity for people who do not own, but rent their residences. Scott Smith, legislative representative for the Southern Nevada Multi Housing Association, warned lawmakers that, as written, the Assembly legislation means a significant new burden on renters. That's because of the double-digit tax increases AB 489 would mean for rental properties—which in the natural course of things will be passed on to rental occupants.

Finally, still another factor that could complicate any quick approval of AB 489 is Gov. Kenny Guinn's sudden re-insertion of himself into the public property tax discussion.  Throughout the year-long gathering crisis for taxpayers, the governor publicly refused to offer any leadership in the effort to find a solution. Now that the Assembly has produced a bill, however, the governor yesterday was suddenly talking “we,” again: “If they get this done,” he told the Review-Journal, “we’ll be in a position to send a positive message to the people of Nevada relating to property taxes.”

In some quarters of the Legislature, one source told BusinessNevada, the prospect of Guinn now seeking to share credit for any property tax solution is reason enough to delay such a solution.