The Nevada Supreme Court on Thursday unanimously rejected Fernley’s attempt to get a bigger share of Lyon County’s tax revenues.
The court agreed with District Judge Todd Russell when Fernley incorporated as a city, it failed to assume responsibility for any of the public services the so-called C-Tax is designed to pay for. Instead, the city left it to Lyon County to provide Fernley’s police and fire protection, road maintenance and other government services such as park maintenance.
“The Department of Taxation informed Fernley on multiple occasions that it would not receive increased C-Tax distributions if it did not provide services under NRS 360.740,” or enter an interlocal agreement to help pay for those services.
Despite those warnings, the opinion states, Fernley incorporated July 1, 2001, and “Lyon County continued to provide Fernley with all of its services.”
Fernley argued it receives far less revenue than other Nevada cities with similar populations. Fernley received just $133,050 in 2013 while Elko got $7.3 million and Boulder City $8.88 million.
But, the opinion states, those cities provide general government services.
The C-Tax (Consolidated Tax) consists of six different levies: the liquor and cigarette taxes, real property transfer tax, basic city-county relief tax and supplemental city-county relief tax plus the motor vehicle privilege tax. It’s apportioned to county government and the various city and special districts in each county according to a formula that was designed to accommodate changes including growth and encourage local governments to provide general government services.
Fernley didn’t apply or offer to provide those sorts of services until seven years after incorporation. The Supreme Court said that’s beyond the four-year statute of limitations for making changes to the tax distribution scheme.
Fernley officials argued since they are the only city to incorporate after passage of the C-Tax, the law amounts to unconstitutional special legislation. The high court disagreed pointing out the law would apply to any other town seeking to incorporate now: “When Fernley incorporated without creating or assuming services, it singled itself out from increased C-Tax distributions.”
“The Legislature wanted to avoid new local governments that emerge to take advantage of extra tax funds without providing any benefit to its residents,” the opinion concludes. “In this case, Fernley presents the exact situation the Legislature evidently sought to avoid: Fernley incorporated hoping to collect more tax distributions but it has not provided any new benefits to its residents beyond those it provided when it was an unincorporated town, nor has it assumed the fiscal responsibility of Lyon County for providing its services.”
The city has also tried for the past three legislative sessions to get that body to provide it more money — without success.