What Do Fernley & North Las Vegas Have in Common? (More Than You Think...)

Last week, we were surprised by the City of Fernley filing a federal law suit challenging the current "C-Tax" revenue distribution. But in the coming weeks, will we hear more complaints about "C-Tax" inequity down south?

Long before Fernley dropped the big "game changer" law suit, the Nevada Legislature had already begun studying the current C-Tax structure to spot inequities in need of correction. Last month, this report detailing distribution of C-Tax revenue was submitted. Now pay close attention to Pages 48 & 49 in that report. Notice something strange?

Now go to Pages 168 & 169. Even though North Las Vegas has 217,482 residents compared to Henderson's 267,270 residents, Henderson receives just over DOUBLE the amount of C-Tax funds. (North Las Vegas received $36,539,000 in C-Tax funds last year, while Henderson received $73,965,000 in C-Tax funds last year.) Why? Apparently, it's all because the assessed value of Henderson properties is over double that of North Las Vegas. OK, that seems "kinda sorta" logical... But is that really constitutional?

Remember, Fernley is claiming that the current C-Tax structure violates both the 14th Amendment to the US Constitution and Article 3 of Nevada's Constitution in that it provides anything but equal protection under the law. Even though Fernley faces different structural issues from North Las Vegas, mainly that Lyon County provides police and fire services to Fernley, while North Las Vegas has to pay for its own, North Las Vegas' sad situation seems to strengthen Fernley's case that the C-Tax structure indeed denies many Nevadans equal protection under the law.

For instance, take a look at the local libraries. The C-Tax funds from the state provide direct funding to Las Vegas-Clark County and Henderson Libraries. North Las Vegas, on the other hand, has two libraries that are funded directly by the city. So in essence, North Las Vegas residents have to pay additional taxes for something that Henderson, Las Vegas, and unincorporated Clark County residents receive for no additional tax or fee. What's fair or equal about that?

Much has been said lately about the many woes at North Las Vegas City Hall. For one, many residents still question the move to a new City Hall. And it's looking increasingly possible that North Las Vegas will have to dissolve its own police and fire departments and contract with Clark County instead to save money. (Though unlike Fernley, North Las Vegas will still be paying for it regardless.) But even with that being said, should North Las Vegas residents essentially be punished just because of their zip code?

Believe it or not, Fernley may have found a real civil rights violation here. Why are some cities receiving more funding per capita than others? Yes, I know, it has to do with property values... But should that really be allowed to be a factor in what kind of local government one can expect? Should someone's zip code and/or property value determine whether one can expect a functioning library and adequate police service? Nevada, we have a problem... And it's bigger than even I had initially suspected.

Will Fernley Revive Tax Reform? (?!!)

My goodness, it feels like we've been riding a roller coaster this year when it comes to the whole matter of "The T Word". Ever since the year began, we've seen so many up's and down's with it. First, Kermitt Waters shook things up with his controversial tax initiative. Then, the AFL-CIO made some noise about its own margin tax initiative. Then, Monte Miller's coalition started winning some legal battles.

And then, Brian Sandoval seemingly sucked all the political air out of the tax reformers' room by making his own big move on the 2009/2011 "sunset taxes". But then, a couple Legislature candidates started having some "candid moments" that reignited the conversation. And then last week, Brian Sandoval didn't really have to do anything, as the AFL-CIO's fledgling margin tax coalition looked to be falling apart.

However, is "The T Word" about to cause trouble for Brian Sandoval yet again? And is it about to come from the unlikeliest of places? Yes, believe it or not, the City of Fernley has filed a federal law suit against the State of Nevada and Nevada State Treasurer Kate Marshall (D) (because she handles the state's finances). Why? Well, you have to read this to believe it.

The city of Fernley has filed a lawsuit against the state of Nevada and Treasurer Kate Marshall, alleging it has been shorted on tax proceeds while it has grown during the last decade and a half, raising an issue that could very well affect other municipalities.

The suit is over the so-called Consolidated Tax (nicknamed the "C-Tax") that has been the subject of much legislative wrangling during the last few sessions. It is an amalgam of taxes distributed to local governments.

Here's the nub of the suit: "Despite experiencing population growth of approximately 250% since the C-Tax system was established, Fernley’s current C-Tax distributions are not significantly different from what it received as an unincorporated town in the late 1990s."

The suit lays out stunning comparisons to other cities and says Fernley has been "rebuffed" by lawmakers, who have not given the issue a meaningful vote.

So Fernley is actually claiming that the state is violating both the 14th Amendment of the US Constitution (equal protection under the law) and Article 3, Section 1, of the Nevada Constitution (separation of powers) by giving the city only $143,143 of C-Tax revenue last year when other cities of comparable size receive far more. (Elko received $11,015,989, while Boulder City received $7,935,323.) Fernley also argues that the state is violating Article 4 (Sections 20 & 21) of the Nevada Constitution by developing a system like the C-Tax that collects taxes and distributes revenue in an unequal and unfair manner. These are some serious allegations here.

And if somehow Fernley succeeds in declaring Nevada's C-Tax system unconstitutional, then it may set a major precedent... And perhaps reshape Nevada's entire tax code. Think about it. The Nevada Supreme Court already rebuked the Legislature for the infamous Clean Water Coalition money grab in 2009 because it was considered an unequal and unfair tax. So actually, there may already be a precedent at the state level for the federal courts to look at. And if this suit succeeds, then it may end up punching a huge hole in the state budget structure that can't be filled by another gimmick "quick fix".

So what will the Legislature and the Governor do if this law suit "grows legs"? Will Brian Sandoval really be able to push aside all that "crazy talk" of tax reform, after all? If the current C-Tax system is blown up by federal courts, then the state will have to create some sort of alternative going forward.

It's strange. So far this year, there have been plenty of twists and turns that have threatened to kill talk of imminent progressive tax reform. Yet just as all hopes progressive tax reform are about to die, something else emerges that seemingly brings them back to life. Will Fernley's law suit do the trick, just as the Clean Water Coalition law suit forced Sandoval to deal on the state budget last year?