CLARK COUNTY: FINANCIAL TRENDS AND INDICATORS

Transcription

1 TECHNICAL REPORT UCED 97/98-03 CLARK COUNTY: FINANCIAL TRENDS AND INDICATORS UNIVERSITY OF NEVADA, RENO

2 CLARK COUNTY: Financial Trends and Indicators Prepared By: Peter Janson Ted E. Oleson, Jr. and Thomas R. Harris Nevada Cooperative Extension Center For Economic Development University of Nevada, Reno Peter Janson is a Graduate Research Associate with the University Center for Economic Development, Department of Applied Economics and Statistics at the University of Nevada, Reno. Ted E. Oleson, Jr. is an Instructor in the Department of Economics at the University of Nevada, Reno. Thomas R. Harris is a Professor in the Department of Applied Economics and Director of the University Center for Economic Development at the University of Nevada, Reno. March 1998 UNIVERSITY OF NEVADA RENO The University of Nevada, Reno is an Equal Opportunity/Affirmative Action employer and does not discriminate on the basis of race, color, religion, sex, age, creed, national origin, veteran status, physical or mental disability, and in accordance with university policy, sexual orientation, in any program or activity it operates. The University of Nevada employs only United States citizens and aliens lawfully authorized to work in the United States. ii

3 This publication, Clark County: Financial Trends and Indicators was published by the University Center for Economic Development in the Department of Applied Economics and Statistics at the University of Nevada, Reno. Funds for this publication were provided by the United States Department of Commerce Economic Development Administration under University Centers Program contract # This publication's statements, conclusions, recommendations, and/or data represent solely the findings and views of the authors and do not necessarily represent the views of the U.S. Department of Commerce, the Economic Development Administration, Clark County Commissioners, State of Nevada Commission on Economic Development, the University of Nevada, Reno, or any reference sources used or quoted by this study. Reference to research projects, programs, books, magazines, or newspaper articles does not imply an endorsement or recommendation by the authors unless otherwise stated. Correspondence regarding this document should be sent to: Thomas R. Harris, Director University Center for Economic Development University of Nevada, Reno Department of Applied Economics and Statistics Mail Stop 204 Reno, Nevada UCED University of Nevada, Reno Nevada Cooperative Extension iii

4 Table of Contents Section Executive Summary I Economic and Demographic Characteristics 1 Page 1.1 a Population b, c Population Components d Dependents Ratio a Total Housing Units b Housing Shares Real Income per Capita Food Stamp Recipients Per Population 1.5 a Labor Force and Industrial 15 Employment 1.5 b Unemployment Rate a Real Total Building Permit Value b Real Building Permit Value by 19 Type vi II Tax Bases Real Assessed Value of Property Real Taxable Sales Real Gaming Revenue Real Net Proceeds of Mines Tax Base Indices 31 III Revenues Real Total Revenue Real Revenues Per Capita Revenues by Source Per Capita Composition of Revenues Restricted Revenues Intergovernmental Revenues Elastic Revenue Sources General Fund to All Funds County Property Tax Rate Actual - Budgeted Revenues 54 iv

5 IV Expenditures Real General Fund Expenditures Expenditures Per Capita Expenditures by Major Type a Composition of Spending Functions b Composition of Spending Public Employees Per Population 4.6 Fringe Benefits as Percent of Salaries 72 and Wages V Operating Position Net Surplus (Deficit) Ending Balance as Percent of Total 77 Expenditures VI Capital Outlay Capital Outlay Capital Outlay to Total Spending 81 Appendix 82 v

6 Introduction Executive Summary Local Governments must understand their current fiscal position for planning their future needs and resources. The Financial Trends Monitoring System was developed by the International City Management Association as a standard approach to evaluate local fiscal conditions. The goal of this report is to present an overview of the county's economic, demographic, tax base, revenue, and spending trends. The trends in the indicators presented for these areas allow the county to assess its current condition and identify any emerging needs or problems. Within each group of indicators, the following aspects are presented: Indicator Description and Relevance: Each indicator is defined in the context of its importance in evaluating the fiscal condition. A Comparison of Current and Past Conditions: A ten year history of the indicator in tabular and graphic form allows the county to evaluate whether its current condition has improved or deteriorated. Changes and Trends: The changes in the indicator are examined to determine what has happened and whether it is an aberration or part of a trend. Multiple Measures: Each group of fiscal indicators presents several different measures which each show a particular aspect of the broader area. For example, demographics are measured by total population, growth rates, percent over age 64 and school enrollments. Economic and Demographic Conditions: The economic and demographic condition indicators are used to evaluate the community's needs and resources. The economy (measured by employment and other labor related measures) is an indicator of both the health of the community and its needs for public services. The demographic indicators (population and housing) show who is living in the community and what types of services are likely to be needed. Certain measures such as poverty rates or mobile home residents may indicate particular needs. By and large, the economic and demographic characteristics are beyond the control of local government, which can usually only react to them. In the long run a community needs a local economic base that is protected from sudden downturns in the business cycle but can take advantage of upturns. Population: Clark County grew at an incredible rate over the last ten years. The county grew by over 84% compared to a growth rate of 10.5% for the United States. Therefore, Clark County grew by over 6.6 times the national average. The percentage in the age group over 64 grew in the county as well as the percentage of dependants. The incredible growth has resulted in strains on the infrastructure. vi

7 Housing: Total housing units increased from the demands of the population growth. The county appears to have an adequate mix of housing. Income: Income per capita adjusted for inflation has risen steadily over the last ten years. Real income grew at an average annual rate of 2.4% which is equal to the national average. Poverty: The number of welfare recipients (AFDC and Food Stamps) nearly doubled during the 1990 s. More significantly the number of food stamp recipients per 1000 population grew by 31.4% during the period. Labor: Employment opportunities increased significantly as the casino industry expanded. Both labor force and unemployment rates appear to be at acceptable levels. Business Activity: Building permit activity which is an indicator of small and local business activity was strong throughout the period. This was a result of both residential and commercial activity. Construction spending has been the driving force in the economy in the last few years. However, there is an indication that it is slowing down. In general, the economic and demographic indicators show that the county has had rapid population and economic growth. The higher than average poverty rates are concerning and indicate potentially higher needs for certain social services. The various indicators also signal the need for concern about local infrastructure capacity. Tax Bases: The local economy provides resources for local government through a variety of revenue sources. These revenues are derived from taxes or charges levied upon particular tax bases. In Nevada, the major tax bases for local government is sales, property and mining and for Clark County, gaming. While increasing tax bases are positive, the true indicator for evaluating the local government's ability to provide services is the inflation-adjusted amount of the tax base per person (or per capita). If the per capita tax base is increasing, the local government will generate more revenue per resident. A decreasing per capita tax base is a negative indicator since it means that the county has fewer resources per resident. Analysis: Assessed Value of Property: Assessed value of property grew tremendously in the last ten years because of the enormous amount of building activity and increased property values. Building permit activity is expected to decline which will slow the rate of growth of the assessed value of property. Taxable Sales: The average rate of growth of taxable sales in Clark County from 1987 to 1996 was 8.8%. The average rate of growth of retail sales in the United States was 2.3%. vii

8 Real Gaming Revenues: From 1986 to 1996 the gaming industry in Clark County grew by an average yearly rate of 5.8%. The nation s economy overall grew by an average rate of 2.6% as measured by real gross domestic product (GDP). This is an indication of the magnitude of the growth rate of this tax base. The greatest increases in this tax base occurs after the opening of major new gaming properties. Net Proceeds of Mines: This tax base amounts to 0.04% of assessed value of property. The small amount makes it insignificant for Clark County. Generally, the tax base study shows that Clark County has an incredibly higher tax base per capita now than it had ten years ago. However, the rate of growth may begin to slow. Revenues: Local governments receive revenues from various sources. Some sources are relatively stable while the business cycle and growth of the community affect others. The community needs to have sufficient revenues to provide the necessary services while having a mix of revenue sources that will not be too sensitive to any downturn in the local economy. The elastic revenue sources are those that are sensitive to the business cycle. If the share of revenues coming from elastic sources is rising, this may forebode problems in the event of an economic downturn. A community s tax rates are an indicator of whether the tax base is keeping pace with growth or whether higher rates are needed to finance necessary services for growth. Tax rates are limited by Nevada Statutes and by voters. The following indicators are used to evaluate revenues in the county: Real Total Revenue: Overall, county revenues have kept pace with growth in the county although the sources of revenues are changing gradually. Total general fund revenues, adjusted for inflation, have risen by over $203 million or 100% from 1986 to Real Revenues Per Capita: When further adjusted for changes in population, per capita real revenues have increased by 8.6% during the period. The increasing revenues per capita indicate that government revenues are more than keeping pace with population and inflation. Revenues by Source Per Capita: The sources of revenues have shifted slightly. Property taxes grew from 10.9% of the revenues in 1986 to 12.0% in Sales revenues grew slightly more, going from 13.4% to 16.1% of total revenues. Other revenue sources went from 37.9% to 35.9%. Among the other revenue sources the prevalent changes are in Licenses, Permits & Fines, which decreased slightly and Intergovernmental, which increased slightly. Restricted Revenues: Restricted revenues have decreased slightly although the county uses a larger perentage of transfers than the statewide average. Intergovernmental Revenues: Intergovernmental revenues are constant and lower than the statewide average as Clark County relies on sales taxes less than other Nevada counties. viii

9 Elastic Revenue Sources: Elastic revenues are also lower than the statewide average. Ratio of General Fund to All Funds: As a percentage of total funds, Clark County is comparable with the statewide average. County Property Tax Rate: The property tax rate for Clark County appears to be modest compared to other counties. Actual Minus Budgeted Revenues: Clark County appears to do an adequate job of budgeting revenues from year to year. Expenditures: Local expenditures should be providing the necessary services to the local population. Factors determining expenditures include budget priorities, demands for services and uncontrollable factors such as federal mandates, and inflation. Expenditures per capita should not rise excessively (unless reflecting voter desire for more services) nor decrease excessively (unless due to efficiency savings). If the composition of spending changes, it may indicate changes in budget priorities or forced reductions due to lack of revenues. The following indicators are used to evaluate expenditures in the county: Real General Fund Expenditures: Overall, county spending has increased over the past decade even when adjusted for changes in inflation and population. When adjusted for inflation, total spending rose by over 108%. Expenditures Per Capita: When expenditures are adjusted for population they grew by 7.4%. This indicates that the county is spending more per resident now than it did ten years ago. This probably indicates that the county is providing a higher level of some services. Expenditures by Major Type: The composition of spending has changed somewhat during the past decade. General Government and Culture & Recreation have increased in spending while all other spending types have decreased. This is different than for other Nevada counties where Public Safety and Welfare are rising. The amount of spending on welfare may soon begin to increase and should be carefully monitored in light of prospective federal devolution. Composition of Spending Functions: Since local government is a service provider, it spends the majority of its money on personnel. Salaries and benefits comprised 67.5% of the total budget in The share of the budget going to salaries has remained approximately stable (as has the actual level of government employment) while the share paid for benefits is significantly increasing. The share for benefits is complex and seems to be one of the major warning indicators for the county. The share of the budget spent on capital outlay has been steadily decreasing and is quite alarming. The county will need to increase this type of spending to make up for past deficiencies. ix

10 Public Employees Per 1000 Population: While there may have been shifts in personnel among departments, the overall level of employees is roughly constant. Fringe Benefits as Percent of Salaries and Wages: Benefits in Clark County have risen from 27.3% of total compensation to 33.6%. Other counties have seen similar increases. However, this is alarming and should be monitored. Operating Position: Local governments are not allowed to operate in a deficit position. Some local governments facing higher expenditures than revenues had an operating deficit made up by depleting the previous years ending balance. This is acceptable for short-term or unforeseen circumstances but a trend of operating deficits is negative. Net Surplus Deficit: The county experienced an operating deficit during the recessionary year of The only other deficit year was Ending Balance: Clark County has always maintained a healthy ending balance. This reserve position should be adequate during any expected economic downturns. Overall, it appears that the county maintains a satisfactory operating position. Capital: Expenditures for operating equipment such as trucks and computers drawn from the operating budget are usually referred to as capital outlay. Capital outlay items normally include equipment that will last longer than one year and that has an initial cost above a significant minimum cost. The ratio of capital outlay to net operating expenditures is a rough indicator of whether the stock of equipment is being adequately replaced. If this ratio declines it may mean that the local government s needs are temporarily satisfied or that they are being deferred due to other budget priorities. The following indicators are used to evaluate capital outlay for the county: Capital Outlay: Capital outlay has decreased substantially during the period. The trend is consistently downward and should be monitored. Capital Outlay to Total Spending: Capital outlay went from 3.9% of the total budget in 1986 to 0.1% in The decrease is expected to continue in 1996 and Normally to compensate for a previous period of deferred spending it is necessary to increase capital spending to higher than normal levels. The county will probably need to increase its capital spending in the near future. x

11 I Economic and Demographic Characteristics The economic and demographic condition indicators are used to evaluate the community's needs and resources. The economy (measured by income, labor force, employment, and unemployment) is an indicator of both the health of the community and its needs for public services. The demographic indicators (population, poverty, and housing) show who is living in the community and what types of services are likely to be needed. Certain measures such as poverty rates or mobile home residents may indicate particular needs. By and large, the economic and demographic characteristics are beyond the control of local government, which can usually only react to them. In the long run a community needs a local economic base that is protected from sudden downturns in the business cycle but can take advantage of upturns. Population: Clark County grew at an incredible rate over the last ten years. The county grew by over 84% compared to a growth rate of 10.5% for the United States. Therefore, Clark County grew by over 6.6 times the national average. The percentage in the age group over 64 grew in the county as well as the percentage of dependants. The incredible growth has resulted in strains on the infrastructure. Housing: Total housing units increased from the demands of the population growth. The county appears to have an adequate mix of housing. Income: Income per capita adjusted for inflation has risen steadily over the last ten years. Real income grew at an average annual rate of 2.4% which is equal to the national average. Poverty: The number of welfare recipients (AFDC and Food Stamps) nearly doubled during the 1990 s. More significantly the number of food stamp recipients per 1000 population grew by 31.4% during the period. Labor: Employment opportunities increased significantly as the casino industry expanded. Both labor force and unemployment rates appear to be at acceptable levels. Business Activity: Building permit activity which is an indicator of small and local business activity was strong throughout the period. This was a result of both residential and commercial activity. Construction spending has been the driving force in the economy in the last few years. However, there is an indication that it is slowing down. In general, the economic and demographic indicators show that the county has had rapid population and economic growth. The higher than average poverty rates are concerning and indicate potentially higher needs for certain social services. The various indicators may also indicate some concern about local infrastructure. 1

12 Indicator 1.1a Population 1,400,000 1,200,000 1,000, , , , , Indicator 1.1a Population* ,036 1,083 1,146 Percent Growth 5.5% 5.8% 6.5% 6.2% 10.7% 4.3% 4.9% 8.2% 6.7% 4.5% 5.8% *In Thousands Source: Nevada State Demographer 2

13 Indicator 1.1 a Population Description: Population is a fundamental indicator of the size of the community. It thus reflects the most basic measure of the demand for public services and the local tax base. Significant population changes can have budgetary implications. If population grows too rapidly this may create need for increased capital and public services. If population declines or grows too slowly, the community may not enjoy economies of scale from local infrastructure (such as sewer and roads) and costs per resident may actually increase. Population decline may also require reduced spending. Analysis: The county experienced incredible population growth during the period. From 1986 to 1996 the county grew by over 84% compared with the state total growth of 69.9%. The growth rate in the United States during this period was 10.5%. Therefore, Clark County grew by over 6.6 times the national average. The minimum yearly growth experienced by the county was 4.3% in Strains on the county infrastructure can occur from rapid growth. This indicator should be closely monitored. 3

14 Indicator 1.1b,c Population Components 350, , , , , ,000 50, Over 64 Under Age 20 School Enrollment 4

15 Indicator 1.1b Over 64* Percent Over % 9.9% 10.1% 10.3% 10.4% 10.8% 11.0% 11.3% 11.5% 11.7% 11.9% 12.0% Under Age 20* Percent Under Age % 27.6% 27.5% 27.4% 27.3% 27.3% 27.5% 27.6% 27.9% 28.1% 28.2% 28.4% *In Thousands Indicator 1.1c School Enrollment* Enrollment Ratio 16.3% 16.1% 16.0% 16.0% 16.5% 15.7% 15.9% 16.2% 16.1% 16.1% 16.5% *In Thousands 5

16 Indicator 1.1d Dependents Ratio 41.0% 40.5% 40.0% 39.5% 39.0% 38.5% 38.0% 37.5% 37.0% 36.5% 36.0% 35.5% Indicator 1.1d Dependents Ratio 37.4% 37.5% 37.5% 37.6% 37.7% 38.1% 38.5% 38.9% 39.3% 39.7% 40.1% 40.4% Source: Nevada State Demographer 6

17 1.1 b,c, Population Components 1.1 d Dependents Ratio Description: The components of the population represent different age groups within the county. The importance of this indicator is that school enrollment represents demand for school services and other child services while the population over age 64 typically has different demands for public services. Older population groups typically require higher levels of services such as medical care, long-term care, and other social services. The percent of dependents in the population consists of persons under age 20 (children and school age) and persons over age 64 (presumably retired). If the number of dependents in the area rises too high it may mean that a higher tax burden may be imposed on the rest of the population. Analysis: The number and proportion of dependents in the county have increased during the period. The over 64 age group increased from 9.6% of the population to 11.9% from 1986 to The under age 20 group grew from 27.8% of the population to 28.2% during the same period. The proportion of dependents grew from 37.4% of the population to 40.1%. The population growth in the county was abnormally high in working age population since job growth was extraordinary. The population components are now approaching national averages. In general, the increased number of dependents may require shifts in budget priorities as social services become more important. 7

18 Indicator 1.2a Total Housing Units 450, , , , , , , ,000 50, Source: Nevada State Demographer, County Assessor 8

19 Indicator 1.2b Housing Shares 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% SF Share MF Share Mobile Share Indicator 1.2a Total 338, , , , , ,143 SF 150, , , , , ,832 MF 158, , , , , ,877 Mobile 30,087 31,279 31,766 31,462 31,951 33,434 Source: Nevada State Demographer, County Assessor 9

20 Indicator 1.2 a Total Housing Units Indicator 1.2 b Housing Shares Description: The number and type of housing are indicators of the need for housing related services and indirect indicators of the property tax base. Like population, if housing grows too fast, the community s infrastructure may be stretched. If housing grows too slow or declines, this may cause declining housing prices and declining property tax base. The type of housing is important as different housing has different values and different impacts on infrastructure and public services. For example, mobile homes typically have lower values than single family and depreciate faster. Single family houses typically have higher number of persons per house. Multifamily (apartments or condominiums) often serves as entry level or temporary housing. A community should have a mix of housing types. Analysis: Total housing increased by 31.9% from 1986 to Single family housing increased by 11.6% while multi-family decreased by 8.0% and mobile homes decreased by 15.7%. During this period single family housing surpassed multi-family housing in housing units. The county appears to have a fairly good mix of housing. 10

21 25,000 Indicator 1.3 Real Income Per Capita 20,000 15,000 10,000 5, Sources: Bureau of Economic Analysis REIS. 11

22 Indicator 1.4 Food Stamp Recipients Per 1000 Population Source: State of Nevada, Human Resources Department, Welfare Division Note: Welfare data are estimates only, not official caseload. 12

23 Indicator Income Per Capita 15,307 16,028 16,997 18,581 19,631 19,984 21,136 22,208 23,243 Real Income Per Capita 18,511 18,823 19,450 20,597 20,871 20,507 21,136 21,702 22,274 Source: Bureau of Economic Analysis REIS. Indicator AFDC Recipients 16,093 19,883 24,635 26,339 29,300 32,715 32,065 24,787 Food Stamp Recipients 37,775 47,084 60,253 69,042 71,147 74,049 72,380 60,915 Food Stamp Recipients Per Note: Estimates only, not official caseload. Source: State of Nevada, Human Resources Department, Welfare Division 13

24 Indicator 1.3 Real Income Per Capita Indicator 1.4 Food Stamp Recipients Per 1000 Population Description: The two measures of income represent the level and distribution of income within the county. Real per capita income shows the average amount of income earned by residents within the county. A rising level of per capita income indicates a more prosperous economy. Food stamp and AFDC recipients represent the number of people in poverty. A rising number of Food Stamp or AFDC recipients may indicate increasing demands for social services and problems with the local economy. To adjust for population changes, the number of Food Stamp recipients is also reported per 1000 population. Analysis: Real per capita income generally rose from 1986 to The exception is the recessionary years of 1991 and This indicates a rising amount of total income. The average yearly rise in real per capita income from 1986 to 1994 was 2.4%. This was equal to the national average. The number of persons in poverty, reflected in both Food Stamps and AFDC recipients nearly doubled during the period. From 1986 to 1996 the number of food stamp recipients per 1000 population grew by 31.4%. In 1997 these levels are expected to decrease somewhat. The number in poverty is a warning signal reflecting increased demand for social services and possibly reduced ability to pay for public services. The two income trends are somewhat contradictory and may reflect changes in the distribution of income. 14

25 Indicator 1.5a Labor Force and Industrial Employment 700, , , , , , , Labor Force Industrial Employment Indicator 1.5a Labor Force 305, , , , , , , , , , ,800 Industrial Employment 262, , , , , , , , , , ,200 Participation 52.0% 52.4% 52.3% 51.5% 63.2% 59.9% 59.2% 59.1% 60.2% 50.8% 51.6% Sources: State of Nevada, Employment, Training and Rehabilitation Department. 15

26 8.0% Indicator 1.5b Unemployment Rate 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Clark Unemployment Rate U.S. Unemployment Rate Indicator 1.5b Clark Unemployment Rate 6.3% 6.5% 5.4% 5.0% 4.7% 5.7% 6.8% 7.2% 5.8% 5.4% 5.3% U.S. Unemployment Rate 7.0% 6.2% 5.5% 5.3% 5.6% 6.8% 7.5% 6.9% 6.1% 5.6% 5.4% Sources: State of Nevada, Employment, Training and Rehabilitation Department. 16

27 Indicator 1.5 a Labor Force and Industrial Employment Indicator 1.5 b Unemployment Rate Description: Indicators 1.5a and 1.5b show the labor market conditions in the county. Labor availability, measured by labor force, indicates the number of people who are either actually working or actively seeking a job. Labor force is the number of residents working or looking for work within the county while industrial employment is the job availability within the county. Industrial employment is an indicator of job availability within the county. The participation ratio indicates the proportion of people in the labor force relative to the total population. An increasing participation rate indicates that more of the population is able to work. The unemployment rate measures the percent of the labor force that is unable to find employment. A decreasing unemployment rate is an indicator of a better local economy. Analysis: Both labor force and industrial employment have increased substantially from 1986 to The relatively sharp rise in 1990 and sharp fall in 1995 in labor force are breaks in the data series and not actual demographic changes. The fact that industrial employment is now higher than labor force (See years 1995 & 1996) may indicate an increasing number of incommuters to the county. The participation rate has remained relatively constant. The unemployment rate indicates the effects of the recesionnary period from 1990 to The fact that Clark County has a lower unemployment rate from 1990 to 1992 is because of the vibrant casino industry and construction spending during this time. As of 1996, employment availability and unemployment rate, appear to be at acceptable levels. 17

28 4,000 Indicator 1.6a Real Total Building Permit Value ($1,000,000s) 3,500 3,000 2,500 2,000 1,500 1, Residential Value Total Permit Value Indicator 1.6a Residential Value 1,096 1,073 1,752 2,173 1,927 1,830 1,496 2,255 2,881 3,795 3,627 Total Permit Value 1,274 1,140 1,806 2,399 1,949 1,785 1,609 1,897 2,386 In Millions of Real 1992 Dollars Source: Manufacturing and Construction Division, Bureau of the Census 18

29 2,500 Indicator 1.6b Real Building Permit Value by Type ($1,000,000) 2,000 1,500 1, Single Family Value Multi Family Value Res. Remodels etc. Non-Residential Value Indicator 1.6b Single Family Value ,056 1,284 1,688 1,581 Multi Family Value ,157 1,288 1,122 1, ,200 1,597 2,107 2,047 Res. Remodels etc Non-Residential Value In Millions of Real 1992 Dollars 19

30 Indicator 1.6a Real Total Building Permit Value Indicator 1.6b Real Building Permit Value by Type Description: The value and type of building permits are indicators of economic activity. Building permits activity is subject to the economy and interest rates. The construction sector is a significant share of the overall economy and building permit data can act as a leading indicator. Construction activity is dominated by small businesses that are typically located within the county. Therefore local small business activity can be monitored with building permit data. Building permit type is important because multi family and non-residential permits typically indicate future business activity while single family permits indicate more immediate business activity. Nonresidential building activity may also be public sector or single event construction activity, which may not have a long-term effect on the local economy. The type of activity can also indicate change in the structure of the real property stock. Analysis: Building permit activity in Clark County has been very healthy due to the rapid rise in population and demand for structures. Casino industry construction accounts for the peaks in non-residential construction in 1989 and Residential construction demand is also related to the increase in casino construction and casino properties coming on line. This reflects the housing demands of the casino industry employees. Building permit activity in Clark County has primarily been associated with the casino industry and not with interest rate trends. There is some indication that building permit activity is decreasing in

31 II Tax Bases Description: Local tax bases are directly related to the level of economic activity in the county. Through the various tax formulas, the tax bases generate revenues for local government. The largest tax bases for county governments in Nevada are property, sales, mining and gaming. To provide necessary services, a local government requires a stable or increasing tax base. To measure tax bases requires adjusting for two factors: inflation and population. A tax base must keep pace with both these factors. The most important measure of a tax base is therefore its real per capita level. The term real refers to inflation adjusted while per capita refers to dividing by the population. If the real per capita tax base is increasing, then a constant tax rate will provide increased tax revenues per resident. If the per capita base is decreasing, then tax rates must be increased just to maintain the current tax revenues. Often when local governments ask whether growth pays for itself, they are asking whether the local tax base per capita is rising or falling. Analysis: Assessed Value of Property: Assessed value of property grew tremendously in the last ten years because of the enormous amount of building activity and increased property values. Building permit activity is expected to decline which will slow the rate of growth of the assessed value of property. Taxable Sales: The average rate of growth of taxable sales in Clark County from 1987 to 1996 was 8.8%. The average rate of growth of retail sales in the United States was 2.3%. Real Gaming Revenues: From 1986 to 1996 the gaming industry in Clark County grew by an average yearly rate of 5.8%. The nation s economy overall grew by an average rate of 2.6% as measured by real gross domestic product (GDP). This is an indication of the growth rate of this tax base. The greatest increases in this tax base occurs after the opening of major new gaming properties. Net Proceeds of Mines: This tax base amounts to 0.04% of assessed value of property. The small amount makes it insignificant for Clark County. Generally, the tax base study shows that Clark County has an incredibly higher tax base per capita now than it had ten years ago. However, the rate of growth may begin to slow. 21

32 Indicator 2.1 Real Assessed Value of Property 18,000,000,000 16,000,000,000 14,000,000,000 12,000,000,000 10,000,000,000 8,000,000,000 6,000,000,000 4,000,000,000 2,000,000,

33 Indicator Assessed Value* 7,455 7,929 8,685 9,311 10,298 11,795 13,152 14,626 16,039 17,845 19,686 AV Excluding NPM* 7,451 7,925 8,680 9,305 10,293 11,790 13,147 14,621 16,034 17,838 19,679 NPM** 3,612 3,892 5,718 6,484 5,285 5,462 4,944 4,906 5,275 7,654 7,146 Real AV* 9,016 9,312 9,939 10,322 10,949 12,104 13,152 14,293 15,370 16,557 17,785 Real AV Excluding NPM* 9,011 9,308 9,932 10,315 10,943 12,098 13,147 14,288 15,365 16,550 17,779 Real Total AV Per Capita 15,358 15,030 15,155 14,779 14,766 14,746 15,358 15,917 15,819 15,977 16,427 Real AV-NPM Per Capita 15,351 15,023 15,145 14,769 14,759 14,739 15,352 15,911 15,813 15,971 16,421 *In Millions of Dollars **In Thousands of Dollars Source: Nevada Department of Taxation 23

34 Indicator 2.1 Real Assessed Value of Property Description: Assessed value is the taxable value of real and personal property. It includes centrally assessed property (such as utilities) and net proceeds of mines. Assessed value is normally the most stable tax base in a county. Wide fluctuations, especially downward, are indicative of a decrease in local tax base. Real Assessed value adjusts the reported values for the effects of inflation. Real assessed value per capita adjusts for population. This indicator should be stable or increasing. Analysis: The assessed value of property has increased tremendously throughout the period, especially since From 1986 to 1996 the assessed value of property increased by 164.1%. This is a result of the building activity that has occurred. In late 1997 the UNLV Center for Business and Economic Research forecast a decline in housing permits over the next year. This indicates that the growth rate of assessed value of property will slow down. 24

35 14,000,000,000 Indicator 2.2 Real Taxable Sales 12,000,000,000 10,000,000,000 8,000,000,000 6,000,000,000 4,000,000,000 2,000,000, Indicator Taxable Sales* 4,678 5,349 5,937 6,805 8,172 8,464 8,297 9,153 10,773 12,861 14,614 Real Taxable Sales* 5,657 6,282 6,794 7,543 8,688 8,685 8,297 8,945 10,324 11,933 13,203 Sales Per Capita 9,637 10,139 10,360 10,801 11,718 10,581 9,689 9,961 10,625 11,515 12,195 *In Millions of Dollars Source: Nevada Department of Taxation 25

36 Indicator 2.2 Real Taxable Sales Description: Taxable sales represent the second largest tax base in most counties (after property). Local governments do not collect sales tax directly. The state government collects all sales and use taxes and redistributes them to local government depending on various formulas. The most significant sales taxes for county government are BCCRT (Basic City County Relief Tax), a 0.5% tax, and SCCRT (Supplemental City County Relief Tax), a 1.75% tax. Both these taxes are shared with cities and special districts on the basis of population and relative assessed value. Taxable sales are sensitive to business cycles and local economic activity. Because of a small retail sales base many local counties in Nevada are considered guaranteed counties for SCCRT purposes. Guarantee status means that sales taxes will be less subject to fluctuation than the underlying taxable sales base. Clark County is a contributor to the guaranteed counties. Analysis: Taxable sales were generally increasing except for the recessionary period years of 1991 and The average rate of growth of taxable sales in the county from 1987 to 1996 was 8.8%. The average rate of growth of retail sales for the United States was 2.3%*. This indicates an abnormally high rate of growth. The incredible growth rate is unsustainable and this indicator should be monitored. *Source: Department of Commerce, Bureau of the Census. 26

37 Indicator 2.3 Real Gaming Revenues 6,000,000,000 5,000,000,000 4,000,000,000 3,000,000,000 2,000,000,000 1,000,000, Indicator Gaming Revenues* 2,393 2,738 3,002 3,296 3,871 4,110 4,226 4,549 5,173 5,335 5,597 Real GR* 2,894 3,216 3,436 3,653 4,116 4,218 4,226 4,445 4,958 4,950 5,057 Real GR Per Cap 4,930 5,190 5,239 5,231 5,551 5,139 4,935 4,950 5,102 4,777 4,670 *In Millions of Dollars Source: Gaming Control Board 27

38 Indicator 2.3 Real Gaming Revenues Description: There are generally three sources of gaming revenues for Nevada counties. They are the City-County Gaming Tax, County Gaming Fees and State Games License-Annual Fees, which are collected by the state and then portions are redistributed back to the county. These revenues are all based on the number of games, table games and gaming devices, as opposed to actual revenue collected. However, since revenue collected is highly correlated with the number of games, revenues are used as a proxy for the tax base. Clark County also imposes a gross gaming revenue tax on the largest operators. Taxable gaming revenues are produced from slot machines, table games and other games such as sports books. Taxable gaming revenues as reported to the State of Nevada, Gaming Control Board is used as the tax base. Analysis: Real Gaming Revenues have increased substantially during the study period especially during 1990 and These years coincide with the opening of major gaming facilities. Overall during the period the gaming industry grew substantially. From 1986 to 1996 the gaming industry in Clark County grew by an average yearly rate of 5.8%. The nation s economy overall grew by an average rate of 2.6% as measured by real gross domestic product (GDP). The UNLV Center for Business and Economic Research reported that gaming revenue growth in 1997 is lower than 1997 GDP for the nation. This indicates a substantial slowing in the rate of growth of this tax base. 28

39 8,000,000 Indicator 2.4 Real Net Proceeds of Mines 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, Indicator Net Proceeds of Mines* 3,612 3,892 5,718 6,484 5,285 5,462 4,944 4,906 5,275 7,654 7,146 Real NPM* 4,368 4,571 6,543 7,188 5,618 5,605 4,944 4,795 5,055 7,101 6,456 Real NPM Per Cap *In Thousands of Dollars Source: Nevada Department of Taxation 29

40 Indicator 2.3 Real Net Proceeds of Mines Description: Net Proceeds of Mines is the primary tax base for determining the property taxes of mines. It is calculated similar to net profit and allows mines to subtract their operating costs from their gross output. Analysis: Net proceeds of mines are relatively insignificant for Clark County. In 1996 this tax base amounts to only 0.04% of assessed value of property. Changes in mining production in Clark County will not significantly affect the county s tax base. 30

41 140.0 Indicator 2.5 Tax Base Indices 1988= AV Sales Gaming NPM Indicator AV Sales Gaming NPM

42 Indicator 2.4 Tax Base Indices 1988 = 100 Description: The tax index is created to adjust for two factors, inflation and population. This measures the relative amount of tax base per resident. An increase in the index indicates more tax base. The amount of tax base per capita in 1988 is used as the base. An increasing tax base index indicates that the tax base is increasing faster than the local population or inflation. An increasing tax base index potentially means that the same tax rate would generate an increased amount of revenue. Conversely, a decreasing index means that either the tax base is decreasing or is growing slower than the population or inflation. A decreasing index may mean that an increased tax rate is required to generate the former level of revenues. Analysis: The assessed value of property index has increased slightly by 0.7% during the period. The growth has been relatively stable. The sales tax index has grown considerably more than the property tax index however; it has been more volatile. This index grew by 2.6% during the period. The recession years of 1991 through 1993 are evident in the drop in the index during this period. Property and sales tax bases have grown over the period. The gaming tax index has experienced a decline during the period with a growth rate of 0.4%. Therefore, the gaming tax base has decreased. Net proceeds of mines has also decreased with a growth rate of 0.6%. However, the impact of this tax base reduction is irrelevant. Generally, Clark County has a greater tax base now than it had ten years ago. 32

43 III Revenues Description: Revenues determine the capacity of a local government to fund and provide services. Important issues to consider in revenue analysis are: Growth: Revenues should grow at a pace sufficient to meet demands for services from increased population, housing or employment. Per capita revenues should be stable or increasing. Sources: No one economic sector or population group should bear the entire tax burden. The county should have diverse sources of revenue, which are appropriate to the economic base. Relying too heavily on one particular source (such as property) may cause excessive tax rates. Dependability: Revenues should be balanced between those that fluctuate with the economic base (such as sales) and those that are stable (such as property). If revenues are too elastic they may increase quickly during economic growth but decline too quickly during a recession. Flexibility: Revenue sources should not be too restricted as to their use (such as grants) and should be available to fund different spending priorities as the priorities change. Administration: Revenues should not be too difficult to collect and administer. Forecasts of revenue for budgeting purposes should be relatively accurate. Analysis: Corresponding to the issues described above, a number of revenue indicators were analyzed. Real Total Revenue: Overall, county revenues have kept pace with growth in the county although the sources of revenues are changing gradually. Total general fund revenues, adjusted for inflation, have risen by over $203 million or 100% from 1986 to Real Revenues Per Capita: When further adjusted for changes in population, per capita real revenues have increased by 8.6% during the period. The increasing revenues per capita indicate that government revenues are more than keeping pace with population and inflation. Revenues by Source Per Capita: The sources of revenues have shifted slightly. Property taxes grew from 10.9% of the revenues in 1986 to 12.0% in Sales revenues grew slightly more, going from 13.4% to 16.1% of total revenues. Other revenue sources went from 37.9% to 35.9%. Among the other revenue sources the prevalent changes are in Licenses, Permits & Fines, which decreased slightly and Intergovernmental, which increased slightly. Restricted Revenues: Restricted revenues have decreased slightly although the county uses a larger perentage of transfers than the statewide average. 33

44 Intergovernmental Revenues: Intergovernmental revenues are constant and lower than the statewide average as Clark County relies on sales taxes less than other Nevada counties. Elastic Revenue Sources: Elastic revenues are also lower than the statewide average. Ratio of General Fund to All Funds: As a percentage of total funds, Clark County is comparable with the statewide average. County Property Tax Rate: The property tax rate for Clark County appears to be modest compared to other counties. Actual Minus Budgeted Revenues: Clark County appears to do an adequate job of budgeting revenues from year to year. 34

45 Indicator 3.1 Real Total Revenue a 1997b Indicator a 1997 Nominal Total Revenue Real Total Revenue In Millions of Dollars Source: County Budget, LCB 35

46 Indicator 3.1 Real Total Revenue Description: Total revenue includes General Fund revenues from all sources. Nominal revenue presents the total in current or actual amounts. Real Total Revenue presents the revenue adjusted for inflation or in constant purchasing power. Nominal revenue may be increasing but if inflation is increasing faster, real revenue may actually decrease. Real revenue is a better indicator since it adjusts revenues for the effects of inflation and thus allows comparison between different years. Ideally, real revenue should be increasing at a rate parallel to population (see Indicator 3.2). If real revenue is declining the county will be unable to purchase as much as it could previously. Analysis: Both nominal and real revenue grew considerably for Clark County during the past decade. One reason revenues did not fluctuate noticeably is because tax revenue source increases of one kind offset decreases of another kind (property and sales taxes replaced gaming based revenues, see Indicator 2.4.) Nominal revenues grew by 188.5% while real revenues grew by 108.4%. The statewide real revenue growth rate was 88.9%. The recent rate of growth of revenue sources is expected to decrease (see Section II Tax Bases) therefore this indicator should be monitored. 36