Attachment A GENERAL OVERVIEW Valuation of Property Secured Real - PowerPoint PPT Presentation

Attachment A

GENERAL OVERVIEW

Valuation of Property Secured Real Estate  Land Valued at Cash (Market) Value  Improvements Valued at Replacement Cost, LESS 1.5% depreciation for up to 50 years (i.e., max depreciation is 75%) Personal Property (business property not affixed to real property)  Valued at Acquisition Cost (adjusted by cost factors) less 5% depreciation to a max of 80% Centrally Assessed (transportation lines and utilities that cross jurisdictional borders)

Tax Bill Cap Formula Commercial (all but owner-occupied residential)  The LESSER of 8%, OR :  The GREATER of 2x CPI OR Average 10yr AV growth rate Owner-Occupied Residential  The LESSER of 3%, OR the Commercial Cap

Tax Bill Calculation Part One SAMPLE OF 20-YEAR-OLD HOME WITH $200,000 TAXABLE VALUE Land (Market Value) $30,000 Improvements at Replacement Cost $170,000 Taxable Value Before Depreciation $200,000 Less 30% Depreciation on Improvements (20 yrs. x 1.5% Dep. Rate) $(51,000) Net Taxable Value $149,000 Assessed Value at 35% $52,150 Overlapping Tax Rate at 3.6600 per $100 AV $1,909 Effective Tax Rate on Full Taxable Value ($1,909 as a Share of Taxable Value Before Depreciation) 0.95%

Tax Bill Calculation Part Two APPLICATION OF ABATEMENT CAP ON TAX BILL Prior Year Tax Bill (Assumed $1,500) $1,500 Tax Growth Cap (Assumed 3%) $1,545 Current Year Tax Bill $1,909 Less Tax Bill Cap $(1,545) $364 Net Abated Taxes (19.1% of Tax Bill) Effective Tax Rate after Abatement ($1,545 as a Share of Taxable Value Before Depreciation) 0.77%

IMPACTS OF PROPERTY TAX CAPS

Washoe County Abatement Caps History FY “Residential” [1] “Commercial” [2] 10yr AV CPI 2x CPI 2006 3.0% 6.9% 6.9% 2.7% 5.4% 2007 3.0% 8.0% 8.0% 3.4% 6.8% 2008 3.0% 7.7% 7.7% 3.2% 6.4% 2009 3.0% 8.0% 8.4% 2.8% 5.6% 2010 3.0% 7.7% 7.2% 3.8% 7.6% 2011 3.0% 4.9% 4.9% -0.4% -0.8% 2012 3.0% 4.0% 4.0% 1.6% 3.2% 2013 3.0% 6.4% 2.7% 3.2% 6.4% 2014 3.0% 4.2% 1.7% 2.1% 4.2% 2015 3.0% 3.0% 1.3% 1.5% 3.0% 2016 3.0% 3.2% 0.6% 1.6% 3.2% 2017 Est. 0.2% 0.2% 0.0% 0.1% 0.2% Notes : [1] Residential cap cannot be greater than commercial. [2] Commercial is the lower of 8% or the greater of 10yr average AV or 2x CPI.

Washoe County Projected Property Tax Revenues Fiscal Years Revenue Abated Revenue $700 Millions $354.6 M $600 Abated Revenues (Projected) $500 $400 $300 $200 $100 $0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Property Tax Revenues Per Capita Inflation-Adjusted; 2006=100 $1,173 $1,116 $1,094 $1,075 $1,070 $1,018 $908 $852 $851 $835 $836 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2016 values are estimated

Property Tax Revenues as a % of GDP Inflation-Adjusted; 2006=100 2.5% 2.5% 2.3% 2.2% 2.1% 2.0% 1.9% 2.0% 1.8% 1.8% 1.8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2015 and 2016 values are estimated

Property Tax Revenues as a % of Personal Income Inflation-Adjusted; 2006=100 2.8% 2.7% 2.4% 2.3% 2.3% 2.1% 2.2% 1.9% 1.8% 1.8% 1.8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2015 and 2016 values are estimated

Property Tax Revenues Per Employee Inflation-Adjusted; 2006=100 $2,459 $2,375 $2,283 $2,058 $2,034 $1,944 $1,930 $1,915 $1,842 $1,826 $1,812 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2016 values are estimated

Property Tax Revenues Per Student Inflation-Adjusted; 2006=100 $7,669 $7,548 $7,069 $6,944 $6,704 $6,630 $6,265 $6,088 $5,921 $5,922 $5,834 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2016 values are estimated

Property Tax Revenues Per Housing Unit Inflation-Adjusted; 2006=100 $2,685 $2,548 $2,510 $2,455 $2,439 $2,329 $2,104 $2,003 $1,994 $1,963 $1,968 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2016 values are estimated

Property Tax Revenues Per Occupied Housing Unit Inflation-Adjusted; 2006=100 $3,073 $2,886 $2,887 $2,772 $2,725 $2,693 $2,378 $2,249 $2,246 $2,205 $2,210 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2016 values are estimated

Property Tax Revenues as a % of Taxable Retail Sales Inflation-Adjusted; 2006=100 9.1% 8.5% 8.2% 7.1% 6.6% 6.3% 5.8% 6.1% 5.5% 5.8% 5.3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Note: 2016 values are estimated

Secondary Property Tax Cap Calculation Washoe County; Fiscal Years 8.0% 8.0% 7.7% 7.7% 6.9% 6.4% Because the secondary calculation is below 3%, it 4.9% now applies to residential 4.2% and non-residential property. 4.0% 3.2% 3.0% 3% 0.2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Statewide Abatements What has been the impact to all Nevada government agencies (cities, counties, schools, libraries, special districts, regional agencies, etc.)?

Nevada Property Tax Collection Trend Fiscal Years Property Tax Collections Property Tax Abatement Boom: 2005-2009 $5.0 Billions Assessed Value: +106% $4.5 Property Taxes: +57% Abatement: $3.3B Bust: 2010-2013 $4.0 Recovery: 2014-2016 Assessed Value: -43% Property Taxes: -31% $3.5 Abatement: $0.9B Assessed Value: +21% Property Taxes: +9% Abatement: $1.1B $3.0 $2.5 Since the property tax caps were $2.0 created in FY 2005, total assessed value $1.5 has increased by 42%, while property $1.0 taxes have increased by only 19%, and $0.5 $5.3 billion in property taxes have $0.0 been abated. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Abatement Distribution Fiscal Year 2016 State (Other) 5% Special District 13% Towns 3% Schools All agencies 40% are impacted, Cities especially 13% schools Counties 26%

Area 1000 – Reno City Rate per $100 Color Code Overlapping AB104 FAIR SHARE 0.0272 AG EXTENSION 0.0100 Property Tax Rates ANIMAL SERVICES 0.0300 CAPITAL FACILITIES 0.0500 Fiscal Year 2016 CHILD PROTECTION 0.0400 COUNTY DEBT 0.0349 STATE OF COUNTY GENERAL 0.9893 NEVADA JAIL 0.0774 DISTRICT COURTS 0.0192 INDIGENT HEALTH 0.0600 INDIGENT INSURANCE 0.0150 RENO CITY WASHOE LIBRARY OVERRIDE 0.0200 COUNTY SENIOR CITIZENS 0.0100 YOUTH FACILITY 0.0087 SCHOOL GENERAL 0.7500 WASHOE SCHOOL DEBT 0.3885 COUNTY SCHOOLS RENO CITY GENERAL 0.9598 RENO CITY DEBT 0.0000 STATE OF NEVADA 0.1700 Total Overlapping Tax Rate 3.6600

What has been the impact to the Washoe County School District?

WCSD Projected Property Tax Revenues Fiscal Years Revenue Abated Revenue $250 Millions $120.0 M Abated Revenues $200 (Projected) $150 $100 $50 $0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

WCSD General Fund Revenue Sourced to State Distributive School Fund Revenue Annual Revenue Growth $180 40% Millions $160 30% $140 $120 20% $100 10% $80 $60 0% $40 -10% $20 $0 -20% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

WCSD Special Revenue Fund Revenue Sourced to State Distributive School Fund Revenue Annual Revenue Growth $30 12% Millions 10% $25 8% $20 6% $15 4% $10 2% $5 0% $0 -2% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Senate Bill 207

CONCLUSION

Conclusion  Current property tax formula is complicated, unpredictable, and un-sustainable  Depreciation and abatement caps will continue to erode what used to be Nevada's most stable revenue source  Property tax has not kept pace with cost of maintaining services, threatening service reductions throughout the state  Nevada stakeholders need to understand formula impacts and work with legislative leadership to fix what is broken