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RCT before the Legislature

Michael Schneider

The Nevada State Legislature will hear arguments for tripling the current $1,000 residential construction tax during the current session.

Douglas County school board member Don Forrester, who has been active on this issue for some time, said he is in favor of the increase, and, for the first time, so are many other districts in the state.

“This is the first time we ever got unanimous support from the state,” said Forrester who said even Las Vegas, which had traditionally been against the increase, supported it this year. “No one can keep up in this state.”

This would be a help to Douglas County due to the Supreme Court’s recent reversal of District Judge Dave Gamble’s ruling on fair share cost fees.

On July 22, 1993, Douglas County, in an effort to allow the school district to keep up with the county’s ever-growing population, established the fair share cost fee.

After crediting each dwelling unit for the residential construction tax of $1,000 and the debt service on outstanding bond, the county arrived at a net adjusted fair share cost of about $2,400 per dwelling unit, according to State Supreme Court documents. This amount was then charged to each new subdivision developer for each unit effective on Sept. 2, 1993.

This charge became the first to help the growing school district since the bond issue that was passed in May of 1992, which was used to begin building Pinon Hills and Minden elementary schools.

The county began imposing the fee in October 1993, following approval of the ordinance. When H&S Construction refused to pay the FSC fees for two lots in the Sunridge development, the county refused to issue a building permit.

The FSC was then challenged by H&S as well as the Douglas County Contractors Association and Keuper Kustom Homes Inc.

Gamble found for the county in July of 1995. But the case was appealed and eventually heard before the Nevada Supreme Court.

On Dec. 20, 1996, the Supreme Court reversed Gamble’s decision, stating that the FSC is not a contract, regulatory fee or a fee in lieu of land dedication, as the county called it, but that it is a tax or impact fee.

Under the current law, a regulatory fee or a fee in lieu of land dedication can only be charged if that fee is going to be used to benefit only the subdivision’s residents where the tax is levied.

Under Nevada Revised Statute 278B.050, an impact fee means a charge imposed by a local government on new development to finance the costs of a capital improvement or facility expansion necessitated by and attributable to new development. Further, NRS 278B.020 defines “capital improvement” as a drainage project, sanitary sewer project, storm sewer project, street project, or water project, not improvements to the school district.

The Supreme Court wrote, in its opinion in the case, “Appellants (H&S, DC Contractors…) contend, and we agree, that the imposition of the FSC is improper because NRS 278B fails to include school site acquisition among the list of permissible capital improvements. If we were to accept respondents’ (the county’s) position, we would render essentially meaningless the constraints purposely written into Chapter 278B by the Legislature.”

Gamble disagreed in his ruling.

“The court concludes that the area of funding for school capital improvements has not been preempted by the Nevada State Legislature,” Gamble wrote in his decision.

Superintendent of Douglas County Schools, Pendery Clark said the district suspected the issue would be contested in court and therefore put the fees collected in a separate fund which was not used.

“The money was never spent,” said Clark. “We knew it would be fought in the courts.”

Forrester said the whole issue began with the Chichester Estates subdivision.

He said that because of the large number of potential students the subdivision would bring into the county’s school district, the developer was to buy a lot which would eventually become Minden Elementary School.

Although this agreement didn’t work out, partially due to the fact that a good place for the school couldn’t be found at the time, the district got the idea of charging developers money.

“We felt if we could get land, then why not get money in place of land?” said Forrester saying that developments began popping up all over the county, not just where the district wanted to place schools.

“Now we’re getting nothing from these subdivisions,” said Forrester, admitting that the district actually does get $1,000 in residential construction tax for each dwelling unit.

“If the county commission approves a development, then we (the school district) don’t have space for the kids,” said Clark.

As for the FSC fees already collected, the Supreme Court, while ruling they were collected illegally, didn’t offer any recourse for returning them nor did it mention to whom they should be returned.

Forrester said the case will eventually make its way back to Gamble’s court where the judge will decide who gets what amounts of the large sum of money sitting in a district account.

“We’re out $1.5 million we already collected,” said Forrester. He said that in addition to the large sum of money the developers want back, they also want the county to pay $50,000 for their attorney’s fees and 10 percent interest for the money collected.

Forrester said the county has only been earning half that in interest since the money was put into the account.

Forrester said that for the immediate future, the Douglas County school district is in decent shape. But with its population increasing by about 100 students per year due to increases at the county’s middle schools, it may not be long before the situation becomes critical.

“Douglas High School will be at capacity by the year 2000,” said Forrester. “We’ll be looking at a high school really seriously in the next few years.”

This is not all that’s needed in the district by a long shot.

Forrester said the district planned to use the money collected from the contractor’s fees to finish work on Minden and Pinon Hills schools. He said two additional pods must be built at Minden and Pinon Hills still needs one more pod.

Also, he said, it has become very important for the county to address the needs of the Lake schools due to the Lake portion of the county’s desire to separate form the Valley.

He said, among numerous other improvements, the Lake needs a new library at George Whittell High School, more classrooms at Zephyr Cove Elementary School and a better music room at Kingsbury Middle School.

“Now these improvements will have to come out of the limited capital renovations funds,” Forrester said.