A Tale of Two Taxes (updated)

In today's economically stressed environment, it would be quite the political feat to enact any kind of tax increase.

But the backers of the Carson City Center Project, aka Nugget Project, are going to have to hope they can pull off a miracle two-fer.

Later this month, the Carson City Board of Supervisors is going to vote on a new budget that will likely include an increase in the city's property tax rate.

There are some voices out there arguing that the city could make do by cutting more out the of the budget without raising taxes. That may be true in the short term, but it may not do much to counteract the coming fiscal hole created by falling real estate valuations.

Because of the state-mandated tax cap, homeowners were protected from huge tax increases as properties doubled or tripled in value during the boom years. Now, assessed values are starting to fall below those capped rates. If the property tax rate remained unchanged, an estimated 6,470 property owners would see a tax cut next year, a number that would likely increase in coming years.

That's good for homeowners, but not the city.

Considering the huge hit the city has taken on sales taxes, another loss of revenue would definitely impact their operations. Whether we need all of those operations, or if cuts could be made, is up for debate.

Carson City's current property tax rate of 3.1872 is lower than Washoe (3.5593) and Storey (3.4607) counties, but higher than Douglas (3.1296) and Lyon (3.1672) counties. The proposed increase to 3.66 would make it higher than all our neighbors, though the cap will prevent all of the increase from hitting homeowners all at once.

(UPDATE: the rate I had originally for Carson City was incorrect. Also, these rates reflect the base rates for each county. Property inside the town limits of Minden or Gardnerville, or the Truckee Meadows Fire Protection District, is currently taxed at the state limit of 3.66. The cities of Reno, Sparks and Yerington are all just under the limit.)

If this property tax increase is approved (and I think it will be), then the challenge for the Nugget Project supporters will be if they can then drum up enough interest for voters to increase taxes some more to fund it.

Color me skeptical, but I think it would be tough to get voters to approve the project without the tax. Not impossible, but certainly not a slam dunk. Add in a half-cent sales tax increase, on top of the previous property tax hike, and an election year filled with lots of anti-tax Tea Party bluster, and this thing starts to look like Project Titanic heading for the iceberg.

A half-cent increase would give Carson City the highest sales tax rate in the state outside of Clark County. You can almost hear the attacks that will be hurled at this, that it's too much at one time, that having the highest property and sales tax rates in the area will drive business away, etc.

The petition being circulated by project opponents to require the project be approved by voters complicates the situation. The supporters of this petition now appear to have the signatures needed to put it on the ballot, or the supervisors could choose to adopt it without a public vote.

But what happens if you have both these questions on the ballot at the same time? Wouldn't the half-cent sales tax question make the petitioners' question moot? Would it cause too much confusion? Could a legal challenge to the petitioners' question be raised?

Whether the petition ultimately succeeds or not, it has already played a huge role in what may become the project's downfall. First, the fact that enough citizens were questioning the project to go to the extent to start the petition certainly had a negative effect on the private fundraising that was supposed to pay a big portion of the bill.

That project supporters were so adamantly opposed to a public vote from the beginning — thus giving rise to the petition effort — has turned out to be a huge mistake for them. Instead of the debate being focused on the project, it morphed into a fight over the process, and suspicions about why the public shouldn't be allow to vote on it.

This gave the opponents a powerful political weapon that was then used to beat this project into a coma. The petitioners relayed multiple stories to me about how people who were in favor of building the project were turned off by all the "we don't need no public vote" talk coming from the supporters, and signed the petition. Those stories jibe with all the other feedback I'm getting from people in the community.

The Nugget Project now exists on life support, it's private fundraising all but dead, in need of a revenue transplant in the form of a sales tax increase to save it.

It's still entirely possible that supporters could stage an extraordinary campaign to save this project and get it approved. It would certainly make a good story, about how a near-dead project is brought back to life.

But I've bet on too many underdogs in my days to be that optimistic.