Douglas budget hits a bump

Sales tax revenues did not quite meet expectations last year, just one of the reasons county officials are scrambling to balance the 2006-07 budget, according to County Manager Dan Holler.

"We were a little disappointed with Christmas sales," he said. "Overall, we saw a 5 percent increase in sales over the previous year, but we were hoping for 8 to 10 percent."

The opening of Wal-Mart in Carson City, lower car sales and the decrease in new store construction all contributed to the problem. Rising interest rates could also be taking a toll, Holler said.

"Several other categories, like homebuilding, are down. That affects the building suppliers," he said.

The budget deficit stands at between $100,000 and $150,000 and Holler said he is optimistic at this point that it can be resolved.

The dip in sales is only part of the picture. Loss of revenues due to the property tax cap has also taken its toll.

Approved by the Legislature in 2005, the measure limits the rate of increase to 3 percent for primary residences and 8 percent for commercial buildings.

Douglas County's property tax rate is the second lowest in the state and now the county is being penalized due to the 3 percent cap. Property tax rates are higher in other counties and they will generate more dollars than Douglas, Holler said.

An increased tax on new construction is being considered to make up the difference, but that could be seen as a disproportionate burden for developers, he said.

"Those taxes would be capped from now on, but it would raise the costs for new development," he said.

To further complicate the picture, ongoing negotiations with employee organizations means the expenditures are in flux, Holler said.

"Our challenge now is, how do we meet current budget demands and fund this unknown amount," he said.

More meetings are set for county officials to squeeze the budget before public hearings in April, Holler said.

Following is a basic summary concerning revenues in Douglas County, the information from a January report by the comptroller's office. Revenues are listed in descending order with respect to the amounts generated.

• All Nevada counties receive revenue from a statewide sales tax. Known as State Consolidated Taxes, the funding source distributed based in part on a formula.

All counties levy a minimum rate of 6.5 percent sales tax, directly charged at the retail level. The state divides revenues from this 6.5 percent tax between the state general fund, local schools and basic city county relief tax.

An additional .25 percent has been added in Douglas County, that funding designated for local parks, libraries, senior services and the airport.

The .25 percent tax is expected to generate about $2.65 million this year, which ends July 1.

Because sales tax revenues result from retail purchases, they are less stable, vacillating more with the local economy than property taxes.

The tax is also regressive, meaning it can disproportionately affect those with lower incomes, but an estimated 30 to 40 percent of sales taxes are paid by people living outside the county, Holler said.

State law governs the levy of additional sales taxes.

• Counties and cities are authorized by state law to levy and collect ad valorem (based on value) property taxes within their jurisdictions. Nevada law generally requires that property be assessed at 35 percent of fair market value.

Recent legislation has capped the growth rate of tax bills for primary residences at 3 percent or less and at 8 percent or less for commercial property. This tax abatement will cost Douglas County an estimated $1.25 million, representing an across-the-board reduction in revenues.

The funds are distributed between a number of entities, including the general fund, cooperative extension, medical assistance for indigents and 911 services.

Property taxes bring about $12.7 million, or 19.5 percent of the county's total revenue.

• Based on the cost of government services provided, charges for services are estimated at $11.8 million, or 18.4 percent of total county revenues. Water and sewer fees, recreation fees, recording and engineering fees all fall into this category.

• Intergovernmental funds, which consist primarily of grants, come from Federal and State sources and bring in an estimated $6.8 million, or 10.5 percent of the total county revenues.

A few examples of this type of revenue are the state support Douglas County receives for China Springs and Aurora Pines youth programs.

Grant funding can change significantly from one year to the next.

• Room taxes are a direct tax paid for motels, hotels, RV parks and other transient housing. Douglas County charges 10 percent for this tax, the funds used for promotion, road maintenance, and the Tahoe Douglas Visitors Authority.

The amount of room tax is at the discretion of the county where the population does not exceed 100,000, but any revenues over 5 percent must be used for tourism promotion.

Room tax revenues have declined over the past five years, from 12.6 percent of Douglas County's budget in 2000-01 to 9 percent for 2004-05. Total revenues for the 2005-06 fiscal year, which ends July 1, are expected to be about $5.7 million.

• The Miscellaneous revenues category lumps everything from earnings on investment to dental plan premium charges and developer contributions for water and sewer infrastructure.

About $4.6 million, or 7.2 percent of the county's revenues are generated from this source.

• Licenses and permits generate an estimated $3.1 million, or 4.8 percent of Douglas County's revenue. Building permits, cable and natural gas franchise agreements and liquor licenses all fall in this category. The general fund receives most of these revenues.

• The Other taxes category include gas, road residential construction and road commercial construction taxes.

The gas tax, which goes to maintain roads, totals about $2.3 million a year. Revenues from this tax go to the regional transportation fund.

The road residential construction tax generates about $300,000. The tax is assessed when a building permit is issued. The funds are used only for heavy maintenance.

The road commercial construction tax is assessed when the building permit is issued and generates about $160,000 annually.

• Estimated at $1.76 million, gaming revenues have fallen steadily in recent years and now makes up just 2.7 percent of Douglas County's total revenues, a decrease of $160,000 over the previous year.

The decline is expected to continue unless new gaming establishments are developed. Gaming revenues are deposited into the general fund ($1.3 million) and the county construction fund ($300,000).

Increases in gaming fees are limited or completely prohibited by state law.

• Revenues from fines and forfeitures, which includes court, juvenile probation and animal control fines, total about $877,000 annually, or 1.4 percent of total county revenue.

Proceeds are primarily deposited in the general fund.

Susie Vasquez can be reached at svasquez@recordcourier.com or 782-5121, ext. 211.

BREAKOUT

The General Fund is the largest expenditure in Douglas County, supporting many traditional government services including law enforcement and the courts, the district attorney, assessor, clerk, treasurer, recorder, accounting and information systems.

Revenues are generated from property and sales taxes, licenses and permits, gaming, intergovernmental and charges for service.

The distribution of expenditures in the general fund has shifted to law enforcement, which uses about 41 percent of the budget. General government as dropped from 29 to 26 percent.

The increase of law enforcement's expenditures can be attributed to the growth in personnel-related expenditures, as 89 percent of the budget is used for personnel costs.