City seeks ways to generate revenues

Robert Perea, The Fernley Reporter

Various efforts to gain a greater share of the state’s consolidated tax have failed, and leaving Lyon County doesn’t seem to be a potential option, so the city of Fernley is looking to turn to the voters for a solution to its need for additional revenues.

The Fernley City Council on June 1 approved a motion to develop a ballot question to ask voters their opinions about various measures to generate revenues from taxes or fees that would be used for infrastructure such as parks or street improvements and public safety.

Along with that, the council also directed staff to develop a strategy for a bill draft request for the next session of the state legislature that could address some of the city’s possible options.

City manager Daphne Hooper said the ballot questions would only be advisory, and would ask how voters would feel about an increase in sales, gas or property taxes, whether they would consider supporting an increase to help the city improve public safety, or whether they would support moving forward adjusting the legislative boundaries of Fernley, whether that be by joining another county or forming its own.

Each of those options bring a multitude of questions and problems of their own.

The issue arises from the failure of the city’s efforts through several avenues to get an adjustment to the allocation of the C-Tax revenues. The city received about $150,000 in C-Tax revenues for the 2016-17 fiscal year while Lyon County received about $15 million.

Consolidated Tax (C-Tax) was implemented in 1997 to formulate distribution of six different state levied taxes to local jurisdictions. The City of Fernley was incorporated after the C-Tax structure was put into place. Fernley was incorporated in 2001, and therefore was not represented when the formula for distributing funds from the tax was derived. The population of the City has nearly tripled since incorporation.

The Consolidated Tax is comprised of revenues from six different tax pools, including liquor tax, cigarette tax, real property transfer tax, basic city-county relief tax, supplemental city-county relief fax and the basic motor vehicle privilege tax.

In June 2012, The city of Fernley filed a lawsuit against the Nevada Department of Taxation and State Treasurer Kate Marshall claiming Fernley is receiving less consolidated tax revenue than other cities of similar size and asking the court to award Fernley its fair share of the consolidated tax.

On Oct. 6, 2014, District Court Judge James T. Russell dismissed the suit in a summary judgment. On Jan. 14, 2016, the Nevada Supreme Court rejected the City’s appeal of the district court’s dismissal its lawsuit against the State Department of Taxation.

The City has also been unsuccessful in efforts to get a reallocation of the C-Tax distribution through the state legislature.

Following the Supreme Court decision, the city created a working group comprised of lobbyists, C-Tax attorney Josh Hicks and city staff that discussed and reviewed potential options for moving forward.

Among the ideas discussed by that working group were the possibilities of the city of Fernley leaving Lyon County to be annexed by Storey County or Churchill County or forming its own county, similar to Carson City.

In 2015, Storey County collected $2,485,663.41 in C-Tax revenue.

However, the concerns identified by the working group for that option were that the Storey County jail is already overcrowded, the Storey County Commission may not want to expand from its current board of three seats, and opposition would likely come from Lyon and Washoe counties due to loss of revenue. The working group also questioned how law enforcement would be provided to the city of Fernley.

In 2015, Churchill County collected $6,948,959.88 in C-Tax revenue, but the working group was concerned whether the city of Fallon would be interested in sharing revenue with another city, and it said Churchill County does not have an appetite to explore this option.

Creating its own county would also create problems for the city, because it would have to provide all the services that are required to be provided by counties, including fire, health, social services, district court, sheriff and jail.

In addition, other counties would likely oppose that option, particularly Washoe County, where Mayor Roy Edgington said Incline Village might be interested in doing the same thing.

Under state law, to receive C-Tax funds, a city or town must provide police protection and at least two services from among fire protection, road maintenance and parks and recreation.

The working group said it would cost between $3.5 million and $5 million per year for the city to create and operate a police department.

However, council members voiced opposition to creating a police department. The city’s police protection is currently provided by the Lyon County Sheriff’s Office.

Councilwoman Shari Whalen questioned what good it would do to spend $5 million on a police department when the city would not be guaranteed to receive that much in C-Tax. Even if the city received enough to operate a police department, Whalen said it would gain nothing if it didn’t also receive enough to provide more services that it struggles to provide.

“I feel like we could look at a plan to raise revenue and not think C-Tax is the silver bullet, because it’s not,” Whalen said.

Councilwoman Sue Seidl had similar concerns.

“I envision if the sheriff’s department pulled out, (a police department) would be under protected and underfunded from the start,” Seidl said.

Councilman Cal Eilrich was opposed to both the idea of creating a police department, and leaving Lyon County.

“There’s multitudes of problems we don’t even know,” he said.

In the end, the council the best of the working group’s suggestions were to move forward with preparing advisory questions to be placed on the ballot for the November general election to ask voters their opinions.

“One thing that needs to be done is to get input from the community,” Hooper said. “We have to figure out how we get more revenue to fund services to benefit the community of Fernley.”