Fernley demand for more tax revenue survives high court
January 26, 2013
The City of Fernley’s demand for a bigger share of the consolidated tax that funds local governments has survived the Supreme court.City attorney Josh Hicks said the high court ruling Friday tossed out any federal constitutional claims the city had presented but granted its demands for a chance to prove the existing tax structure violates the Nevada Constitution.Carson District Judge Todd Russell originally ordered the state and legislature to participate in a full discovery process. The state challenged that order at the Supreme Court saying the attempt should be barred “as a matter of law.”Hicks said that means the city now has the chance to conduct discovery “setting the record about how the C-Tax operates.” That, he said, will give Fernley the chance to prove its claim that the distribution system violates the Nevada’s Constitution.The city went to court after the 2011 Legislature refused to change the consolidated tax formula that funds much of local government to give the city a bigger share. The lawsuit charges that the formula “is not designed to allow for any meaningful adjustment to distributions.” It asks the Legislature to declare the formula unconstitutional arguing that it cheats small communities like Fernley out of their rightful share of tax revenues.The consolidated tax was created in 1997 to split up money among local governments in Nevada. It consists of the tobacco and liquor taxes, governmental services tax, real property transfer tax, basic city-county relief and supplemental city-county relief portions of the sales tax.As a part of the restrictions, the $86,000 Fernley received when the tax was created only grew to $143,143 in 2011 even though the city’s population has increased from 8,000 to 19,000.Fernley Mayor Leroy Goodman said that is less than a percent of the $14.8 million in tax money Lyon County received in 2011 despite the fact the city has 30 percent of the county’s population and 36 percent of its property value.“We just want a fair and equitable distribution,” he said.The Legislative Counsel Bureau and Department of Taxation argued the lawsuit is barred by the sovereign immunity of the Legislature’s power to apportion tax revenues.The high court agreed that the federal constitutional claims were barred because they were filed years after the two-year statute of limitations.But six of the seven justices agreed to send the case back to district court to consider the state constitutional claims.Hicks said Friday that means he will have the chance to conduct discovery and build a case proving the system is unconstitutional as applied to cities including Fernley, who are seeking a bigger piece of the pie.The lone dissenter among the justices was Nancy Saitta.