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) Net Abated Taxes $364 (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 0.2% 0.2% 0.0% 0.1% 0.2% Est.

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

$0 $100 $200 $300 $400 $500 $600 $700 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Millions Revenue Abated Revenue

$354.6 M Abated Revenues (Projected)

Note: 2016 values are estimated

$1,070 $1,075 $1,094 $1,173 $1,116 $1,018 $908 $852 $835 $836 $851 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues Per Capita

Inflation-Adjusted; 2006=100

Note: 2015 and 2016 values are estimated

2.1% 2.0% 2.2% 2.5% 2.5% 2.3% 2.0% 1.9% 1.8% 1.8% 1.8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues as a % of GDP

Inflation-Adjusted; 2006=100

Note: 2015 and 2016 values are estimated

2.3% 2.2% 2.3% 2.8% 2.7% 2.4% 2.1% 1.9% 1.8% 1.8% 1.8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues as a % of Personal Income Inflation-Adjusted; 2006=100

Note: 2016 values are estimated

$1,930 $1,944 $2,034 $2,375 $2,459 $2,283 $2,058 $1,915 $1,842 $1,812 $1,826 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues Per Employee

Inflation-Adjusted; 2006=100

Note: 2016 values are estimated

$6,630 $6,704 $7,069 $7,669 $7,548 $6,944 $6,265 $5,921 $5,834 $5,922 $6,088 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues Per Student

Inflation-Adjusted; 2006=100

Note: 2016 values are estimated

$2,439 $2,455 $2,510 $2,685 $2,548 $2,329 $2,104 $1,994 $1,963 $1,968 $2,003 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues Per Housing Unit

Inflation-Adjusted; 2006=100

Note: 2016 values are estimated

$2,725 $2,772 $2,886 $3,073 $2,887 $2,693 $2,378 $2,246 $2,205 $2,210 $2,249 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues Per Occupied Housing Unit Inflation-Adjusted; 2006=100

Note: 2016 values are estimated

5.8% 6.1% 6.6% 8.5% 9.1% 8.2% 7.1% 6.3% 5.8% 5.5% 5.3% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Property Tax Revenues as a % of Taxable Retail Sales Inflation-Adjusted; 2006=100

Secondary Property Tax Cap Calculation

Washoe County; Fiscal Years

6.9% 8.0% 7.7% 8.0% 7.7% 4.9% 4.0% 6.4% 4.2% 3.0% 3.2% 0.2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Because the secondary calculation is below 3%, it now applies to residential and non-residential property.

3%

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

$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Billions Property Tax Collections Property Tax Abatement

Boom: 2005-2009

Assessed Value: +106% Property Taxes: +57% Abatement: $3.3B

Bust: 2010-2013

Assessed Value: -43% Property Taxes: -31% Abatement: $0.9B

Recovery: 2014-2016

Assessed Value: +21% Property Taxes: +9% Abatement: $1.1B

Since the property tax caps were created in FY 2005, total assessed value has increased by 42%, while property taxes have increased by only 19%, and $5.3 billion in property taxes have been abated.

Schools 40% Counties 26% Cities 13% Towns 3% Special District 13% State (Other) 5%

All agencies are impacted, especially schools

Abatement Distribution

Fiscal Year 2016

WASHOE COUNTY WASHOE COUNTY SCHOOLS RENO CITY STATE OF NEVADA

Overlapping Property Tax Rates

Fiscal Year 2016

Area 1000 – Reno City Rate per $100 Color Code AB104 FAIR SHARE 0.0272 AG EXTENSION 0.0100 ANIMAL SERVICES 0.0300 CAPITAL FACILITIES 0.0500 CHILD PROTECTION 0.0400 COUNTY DEBT 0.0349 COUNTY GENERAL 0.9893 JAIL 0.0774 DISTRICT COURTS 0.0192 INDIGENT HEALTH 0.0600 INDIGENT INSURANCE 0.0150 LIBRARY OVERRIDE 0.0200 SENIOR CITIZENS 0.0100 YOUTH FACILITY 0.0087 SCHOOL GENERAL 0.7500 SCHOOL DEBT 0.3885 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

$0 $50 $100 $150 $200 $250 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Millions Revenue Abated Revenue

$120.0 M Abated Revenues (Projected)

$0 $20 $40 $60 $80 $100 $120 $140 $160 $180 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Millions

• 20%
• 10%

0% 10% 20% 30% 40% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Revenue Annual Revenue Growth

WCSD General Fund

Revenue Sourced to State Distributive School Fund

$0 $5 $10 $15 $20 $25 $30 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Millions

• 2%

0% 2% 4% 6% 8% 10% 12% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Revenue Annual Revenue Growth

WCSD Special Revenue Fund

Revenue Sourced to State Distributive School Fund

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