LEGAL AND ECONOMIC CONSIDERATIONS FOR INCORPORATION OF NEVADA TOWNS

Transcription

1 TECHNICAL REPORT UCED 2000/01-02 LEGAL AND ECONOMIC CONSIDERATIONS FOR INCORPORATION OF NEVADA TOWNS UNIVERSITY OF NEVADA, RENO

2 LEGAL AND ECONOMIC CONSIDERATIONS FOR INCORPORATION OF NEVADA TOWNS Prepared By: George W. Borden and Thomas R. Harris Nevada Cooperative Extension Center For Economic Development University of Nevada, Reno George W. Borden is a Community Development Specialist, Nevada Cooperative Extension. He is located in Las Vegas, Nevada. 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. August 2000 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.

3 This publication, Legal and Economic Considerations for Incorporation of Nevada Towns 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, 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

4 I. Introduction Communities organize to provide services that residents cannot provide for themselves individually. To pay for these services, communities must have access to financial resources. The State of Nevada offers communities various options for managing their affairs. Three are addressed in this paper: General Improvement Districts, Unincorporated Towns, and Incorporated Cities. This paper is intended for use by any member of the public interested in learning more about options available to Nevada communities. The Nevada Revised Statutes are used as the primary source of information. The interested reader will also want to refer to decisions by the Nevada Supreme Court regarding these statutes, the Nevada Administrative Code, the Nevada Attorney General and their district or city attorney. II. General Improvement Districts A General Improvement District (GID) is created pursuant to NRS Chapter 318. These districts serve a public use and will promote the health, safety, prosperity, security and general welfare of their inhabitants. Their projects must be in the public interest. Each district is a body corporate and politic and a quasi-municipal corporation. (NRS ) Furthermore, the board that manages a GID has all rights and powers necessary or incidental to or implied from the specific powers granted and specific powers shall not be considered as a limitation upon any power necessary or appropriate to carry out [its] purposes... GIDs are included in this paper because they provide means of organizing a community s resources that is similar to incorporation. The board of county commissioners is in any county in Nevada has the jurisdiction, power and authority to create districts within the county it serves. (NRS ) The board of commissioners may adopt a resolution or consider a petition by a proposed property owner to initiate the formation of a district. (NRS ) Once the initiating ordinance has been adopted, the property owners of the proposed district are notified and given the opportunity to protest the formation of the district. If after considering the protests and determining that the district is required by public convenience and necessity and that the creation of the district is economically sound and feasible the board of commissioners can adopt an ordinance creating the district. (NRS to ) The board of commissioners establishes the accounting and auditing practices and procedures for the district, a budget and management standards for the district. In counties of fewer than 400,000 people, it has the option of appointing five people to serve as the first board of trustees for the district. These positions will be filled through general elections hereafter. The board also has the option of serving as the ex officio board of trustees in counties with fewer than 400,000 people. In counties of more than 400,000 people, the board of commissioners is the ex officio board of trustees of the district. (NRS to NRS )

5 A. Powers of General Improvement Districts There are twenty basic powers granted to general improvement districts. According to NRS Any one, all or any combination of the following basic powers may be granted to a district... These twenty powers are enumerated below. Please note that GIDs do not have the authority to provide for police, planning, or zoning. 1. Furnishing electric light and power 2. Extermination and abatement of mosquitoes, flies, other insects, rats, and liver fluke or fasciola hepatica. 3. Furnishing facilities or services for public cemeteries. 4. Furnishing facilities for swimming polls. 5. Furnishing facilities for television. 6. Furnishing facilities for FM radio. 7. Furnishing streets and alleys. 8. Furnishing curb, gutter and sidewalks. 9. Furnishing sidewalks. 10. Furnishing facilities for storm drainage or flood control. 11. Furnishing sanitary facilities for sewerage. 12. Furnishing facilities for lighting streets. 13. Furnishing facilities for the collection and disposal of garbage and refuse. 14. Furnishing recreational facilities. 15. Furnishing facilities for water. 16. Furnishing fencing. 17. Furnishing facilities for protection from fire. 18. Furnishing energy for heating. 19. Furnishing emergency medical services. 20. Control and eradication of noxious weeds. B. Access to Revenues Depending on the specific purposes of the GID, the board may have the power to levy a general ad valorem tax, special assessments, establish tolls, rates and other service charges. The GID may also be able to borrow money and issue short-term notes, warrants, interim debentures, general obligation bonds, revenue bonds, and special assessment bonds. The ability of the board to utilize debt will depend on the population and purpose of the district. (NRS 318) A district may be eligible for distributions from the state government if it provides two of the following: fire protection, road repair, maintenance and construction, or parks and recreation. (NRS ) As mentioned previously, the total ad valorem tax levy for all public purposes must not exceed $3.64 on each $100 of assessed valuation. This also has implications for a GID, as any given piece of taxable property within its boundaries may be subject to tax by the state, county, town, other special districts, or school district. If a GID is being considered as one means of local organization and ad valorem taxes are being considered as one source of possible revenue, then the $3.64 limit needs to be taken into consideration. It can be especially difficult for GIDs with low assessed valuation of taxable property. To generate sufficient revenues, the GID in this situation may have to levy higher ad valorem taxes than a local government with high assessed

6 valuation of taxable property. Once the statutory limit of $3.64 is reached, generating additional revenue can be difficult. Local governments may find themselves feuding. Disputes that cannot be resolved by the local governments themselves will be resolved by the Tax Commission. (NRS ) C. Cooperative Agreements A GID may not find it financially feasible to pay for all of the services it would like to provide. According to NRS , counties, incorporated cities, unincorporated towns, school districts, and other special districts may into enter cooperative agreements to provide governmental functions. These agreements may involve use of property, equipment or personnel. A GID may not have to make the capital expenditures necessary to build new structure, purchase equipment or hire additional staff. It may be able to reach an agreement with the county to use existing structures, equipment, and staff as necessary for a fee. D. Budget Examples for Selected General Improvement Districts Selected budget items from two General Improvement Districts are presented below to show the variety of services that GIDs offer as well as their means of paying for them. Incline Village is organized as a GID and offers an extensive array of services with an equally extensive means of financing those activities. Grandview Terrace is a small GID organized to provide water service to its residents. Its revenues consist mainly of user fees. Any community considering forming a GID should carefully consider the services it wants to provide as a GID as well as the most appropriate means of financing those services. As mentioned above, sources of revenue may include property taxes, special assessments, tolls, rates, services charges, intergovernmental revenues from the state, and grants. If a GID plans to use property tax as a means of generating revenue, it must also be concerned about the Nevada Revised Statute limit of $3.64 of total property tax for every $100 of assessed value. There may be complications that arise with the county and other political entities, such as towns, cities, and other districts, as they all vie for right to levy property tax within that limit.

7 Incline Village GID Grandview Terrace GID Selected Items Selected Budget Items Final Budget Budget Assessed Value $ 1,413,035,513 Assessed Value $ 1,195,301 Tax Rate $ Tax Rate Revenue Revenue Operating Revenue Water Service $ 28,000 Sales and Fees $ 16,724,706 Interest and Past Due Charges $ 900 Recreation Fee $ 2,208,400 Hook-Up Fees $ 3,000 Ad Valorem Tax $ 593,056 Total Operating Revenue $ 31,900 SCCRT* $ 1,017,463 Expenditures Other Taxes Telephone and Utilities $ 7,850 Other Taxes $ 2,000 Legal, Accounting and Secretarial $ 2,375 Total Operating Revenue $ 20,545,625 Board Member Fees $ 1,830 Non-Operating Revenue Insurance $ 800 Interest Income $ 937,472 Office Supplies and Advertising $ 575 Assessment Income $ 86,134 Repairs and Maintenance $ 9,000 Total Non-Operating Revenue $ 1,023,606 Total Expenditures $ 22,430 Total Revenues $ 21,569,231 Total Net Income $ 9,470 Expenditures Operating Expense Wages and Benefits $ 8,600,224 Cost of Revenue $ 971,424 Services and Supplies $ 4,330,719 Utilities 1,731,968 Depreciation $ 4,016,743 Legal and Auditing Fees $ 182,750 Capital Outlay $ 436,212 Total Operating Expense $ 20,270,040 Non-Operating Expense Debt Service Interest $ 724,429 Other $ 16,112 Total Non-Operating Expense $ 740,541 Total Expenses $ 21,010,581 Total Net Income $ 558,650 Assessed Value and Tax Rate Source: Nevada Department of Taxation Property Tax Rates for Nevada Local Governments, Budget Information: Annual Budgets for Incline Village GID, and Grandview Terrace GID, $ *Supplemental City County Relief Tax

8 III. Unincorporated Towns NRS Chapters 269 and 244 contain the statutes providing for and limiting the power of board of county commissioners and other boards to manage the affairs of and provide for unincorporated towns. The county and any other boards that may participate in the management of the town s affairs are limited to those powers stated or inferred from these statutes. As provided for in NRS 269, the board of county commissioners may oversee the affairs of any unincorporated town. However, the citizens of those towns have the option of more specific control. A discussion of these three options follows. A. Town Board Form of Government NRS to provides for the creation town boards. Any unincorporated town may establish a town board form of government according to these statutes. (NRS ) According to NRS , the residents of a town may submit a petition requesting a town board form of government to the board of county commissioners. The board of county commissioners may either adopt the proposal or submit the proposal to the electors for their approval. If the town board form of government is adopted, then the commissioners will appoint five residents and qualified electors to serve on the board until the next general election when the town will elect the next five members (NRS ) The town board can be discontinued when the board of county commissioners puts that question on the ballot in a general election (NRS ) A town board may adopt all ordinances, rules, and regulations and perform all other acts necessary for the execution of the powers and jurisdiction conferred NRS Chapter 269 (NRS ) as well as revise and codify those ordinances into a town code. (NRS to ) It can punish breaches of ordinances. (NRS ) The town board may provide the following for the unincorporated town. The board of county commissioners may also provide these. 1. Fire Protection (NRS to ) 2. Police Protection (NRS to ) 3. Public Works (NRS to ). 4. Television or FM radio broadcast translator signals (NRS and NRS ) 5. Manage, use and sell property (NRS ) 6. Limit competition by providing or franchising for the following (NRS and ) a. Ambulance Service b. Public transportation or taxi cabs c. Waste disposal d. Operations at an airport (excluding police and fire protection but may include car rental and concession stands)

9 e. Water and Sewage Treatment (unless regulated in that town by an agency of the state) f. Concessions on property owned or leased by the town g. Landfills 7. Business licenses (NRS ) 8. Regulate vehicle traffic (NRS ) 9. Board of Health (NRS ) 10. Keeping of animals (NRS TO and ) 11. Nuisances (NRS to ) 12. Loitering and prowling (NRS ) 13. Disorderly Conduct (NRS ) 14. Regulation of storage of explosive and combustible materials (NRS ) 15. Regulate discharge of firearms (NRS ) B. Town Advisory Board An unincorporated town may also be managed in part by a Town Advisory Board. The residents of an unincorporated area of a county can either petition the board of county commissioners to begin the process or placed directly on a ballot providing that certain criteria are met. (NRS and ) If the petition is brought to the board and meets the necessary criteria, the board may pass an ordinance thus forming the unincorporated town (NRS 550). The board of county commissioners also has the option of putting the question to the voters in the next primary or general election. (NRS ) If the voters approve the question, the board can proceed with the formation of the unincorporated town by ordinance. This ordinance must contain the boundaries, a listing of the services to be provided, and the number of members to be on the town advisory board. (NRS ) This original ordinance may be amended later to adjust the list of services provided. (NRS ) NRS Chapter provides a list of possible services that may be provided by an unincorporated town. These include the following: 1. Cemetery 2. Dump stations and sites 3. Fire protection 4. Flood control and drainage 5. Garbage collection 6. Police 7. Parks 8. Recreation 9. Sewage collection 10. Streets 11. Street lights 12. Swimming pools 13. Television translator 14. Water distribution 15. Acquisition, maintenance and improvement of town property.

10 The Town Advisory Board may have three to five members. Its duties are to assist the board of county commissioners in governing the unincorporated town by acting as liaison between the residents of the town and the board of county commissioners and advise the board of county commissioners on matters of importance to the unincorporated town and its residents. (NRS and ) Additionally, the board of county commissioners of any county may designate one or more of the town services to be within the power of a town advisory board to manage. (NRS ) The board of county commissioners is obligated to solicit the advice of the town advisory board in preparation of the tentative budget for the town affected and allow towns to recommend their own ordinances and codes. (NRS ) The board of county commissioners may also allow the town advisory board to control any expenditures which are a part of a county-approved budget. (NRS ) The Town Advisory Board may also be given control of unappropriated money available through the county for town purposes to be expended at [its] discretion. (NRS ) C. Citizens Advisory Council If the board of county commissioners is the governing body of an unincorporated town, the board can create a Citizens Advisory Council (NRS ). The council consists of three to five members who are residents and qualified electors in the town. It shall assist the board of county commissioners in governing the town by acting as liaison between the residents of the town and the board. The council cannot expend or contract any town money for any purpose. Its members serve without compensation. The existence of a Citizens Advisory Council in no way affects the responsibilities of the board of commissioners. (NRS to NRS ) D. Cooperative Agreements An unincorporated town may not find it financially feasible to pay for all of the services it would like to provide. According to NRS , counties, incorporated cities, unincorporated towns, school districts, and other special districts may into enter cooperative agreements to provide governmental functions. These agreements may involve use of property, equipment or personnel. For example, an unincorporated town may not the funds necessary to make the capital expenditures necessary to build new structures, purchase equipment or hire additional staff. It may be able to reach an agreement with the county to use existing structures, equipment, and staff as necessary for a fee. E. Sources of Revenue Available to Unincorporated Towns 1. Property Tax Property tax, also referred to as the Ad Valorem Tax, is an important source of revenue for local governments. Real and personal property in Nevada can be assessed for taxation. There are exceptions, but generally property subject to taxation must be assessed at 35% of its taxable value. Furthermore, the total ad valorem tax levy for all public purposes must not exceed $3.64 on each $100 of assessed valuation. This has serious implications for local government. For example, any given piece of taxable property may be subject to tax by the state, county, town, special district, or school district. A local government seeking to levy a new ad valorem tax will

11 need to take this limit into consideration. It can be especially difficult for local governments with low assessed valuation of taxable property. To generate sufficient revenues, the local government in this situation may have to levy higher ad valorem taxes than a local government with high assessed valuation of taxable property. Once the statutory limit of $3.64 is reached, generating additional revenue can be difficult. Local governments may find themselves feuding. Disputes that cannot be resolved by the local governments themselves will be resolved by the Tax Commission. (NRS ) According to NRS the board of county commissioners assess, fix, and designate the amount of taxes that should be levied and collected for city or town purposes on all real and personal property assessable for state or county purposes within any town or city in their county. In practice, as part of the budgeting process, the town board would submit their request(s) for taxes to be levied to the county commissioners. Towns have access to the funds set aside for them pursuant to NRS For example, if a general ad valorem tax is assessed on a particular unincorporated town, that money is to be used solely for the benefit of that town by the governing body of that town, e.g., the town board. The board of county commissioners can levy and collect taxes on assessable real and personal property within any town or city within their county (NRS ) There are exceptions, but generally the board of county commissioners shall levy a tax, not exceeding 1.5% per annum upon the assessed value of all real and personal property situated in any unincorporated town in their respective county (NRS ) 2. Intergovernment Revenues/Consolidated Tax Distribution In 1997, the State Legislature created the Local Government Tax Distribution Fund. This revenue is distributed to local governments as Consolidated Tax Distributions. This fund is comprised of Revenues from the following taxes: 1. Supplemental City-County Relief Tax (SCCRT) 1.75% of all taxable sales and taxable items of use. Ninety-nine percent of total collections returned to local governments through the Consolidated Tax Program. 2. Basic City-County Relief Tax (BCCRT) One-half of 1% of all taxable sales and taxable items of use. Ninety-nine percent of in-state collections returned to eligible local governments through the Consolidated Tax Program. 3. Cigarette Tax: 17.5 mills per cigarette or 30% of manufacturers wholesale price of other tobacco. Five mills per cigarette for distribution to eligible local governments through the Consolidated Tax Program, less administrative fees. 4. Liquor Tax: Various rates and licenses. 50cents per gallon of collections on over 22% alcohol allocated for distribution to eligible local governments through the Consolidated Tax Program. 5. Motor Vehicle Privilege Tax: 6. Real Property Transfer Tax (RPTT) An unincorporated town can receive intergovernmental transfers from the state government. (NRS ). To be eligible the town must have received some distribution before July 1, 1998 (NRS ). If a local government is created after July 1, 1998 and that body offers

12 police protection and fire protection, construction, maintenance, road repair, or parks and creation, then the new local government can request to the executive director of the Nevada tax commission to receive intergovernmental transfers (NRS ) An unincorporated town may also receive funds from the county. 3. Licenses, Permits, and Franchise Fees Unincorporated towns may collect revenue through licenses, permits, and franchise fees. Examples include business licenses and animal fees. liquor licenses, gaming licenses, and building permits. If an unincorporated town offers a franchise to a particular business to provide a service for the town, e.g., ambulance service, then the town will also collect a franchise fee for giving that business the exclusive right to provide that service in the town. 4. Charges for services Towns may charge for the use of town property. Examples of charges in this area include fees collected at a swimming pool or cemetery. 5. Proprietary/Enterprise Funds The unincorporated town may provide certain services for fees. These operate in a manner similar to private businesses. The cost of providing the goods or services is covered primarily through user charges. Examples of these services might include water and sewer, solid waste disposal, and electricity. 6. Grants Unincorporated towns may also receive grants. Grants may be available from the state and/or the federal governments. Typically, grant money must be spent according to the specific terms of the grant proposal and the city must match all or part of the grant funds with its own money. An example of a grant a town might receive is a community development block grant. A grant will probably be included as intergovernmental revenue in the fiscal budget. 7. Capital Revenues Capital revenues include the sale of bonds and interest earned on town investments. Towns may acquire debt through the sale of bonds with certain limitations. For example, according to NRS , a town cannot become indebted for public works projects for an amount exceeding 25% of the total last assessed valuation of the taxable property of the town. Refer to the several references in the NRS for more information on bonds. F. Budget Expenditures The following are budget expense items typical to unincorporated towns in Nevada (Town budgets for Tonopah, Pahrump, Minden, and Gardnerville) 1. General Government: Town Board, Administration, Buildings and Grounds 2. Public Safety 3. Public Works 4. Culture and Recreation

13 5. Community Support 6. Cemetery 7. Capital Projects 8. Highways and Streets 9. Television 10. Debt Service IV. Incorporated Cities The Nevada Constitution provides the authority for the creation of municipal corporations in Article 8 section 8. For the purposes of this paper, a municipal corporation is the same as an incorporated city. An incorporated city is a legal, political, and economic entity. A city exercises its legal, political, and economic authority for the public good of the citizens who reside within its boundaries. It passes and enforces laws, provides services, and raises money to pay for the costs of civil government. A city is the creation of the state, as are counties and school districts. Cities are not subordinate to counties. (Povolny, 1981) A. Incorporating Under NRS 266 The legislature has provided for the specific means of organizing an incorporated city in the Nevada Revised Statutes (NRS) Chapter to It is an extensive process. A notice to organize an incorporated city must be filed with the county clerk (NRS ). A petition is then circulated and verified and reviewed by the county clerk, board of county commissioners, committee on local government finance, department of taxation, and any state, county, or regional planning commission or agency that exercises planning authority over any part of the area proposed to be incorporated and to every other local government within the county. (NRS ) There must be public hearings. According to NRS the board of county commissioners must take into account a number of factors for the incorporation of the proposed city including: 1. Population and density of population 2. Land area, uses, topography, natural boundaries and drainage basin 3. Use of area by agriculture and mineral production 4. Extent of commercial and industrial development 5. Extent and age of residential development 6. Comparative size and assessed value of subdivided and unsubdivided land 7. Current and potential issues regarding transportation 8. Past expansion of population and construction 9. Likelihood of significant growth in the area and in adjacent incorporated and unincorporated areas during the next 10 years 10. Present cost, method and adequacy of regulatory controls and governmental service, e.g., water and sewer service, fire rating and protection, police protection, improvement and maintenance of streets, administrative services and recreational facilities and the future need for such services and controls. 11. Present and projected revenues for the county and proposed city 12. Probable effect of incorporation and of any alternatives to incorporation on the social, economic and government structure of the affected county and the proposed city.

14 13. The probably effect of incorporation on revenues and services in the county and local governments in adjacent areas. 14. The probably effect of the proposed incorporation and of any alternatives to incorporation on the availability and requirement of water and other natural resources 15. Any determination by a governmental agency that the area is suitable for residential, commercial or industrial development, or that the area will be opened to private acquisition. 16. The recommendations of any commission, agency, district or member of the public who submits a written report. 17. Testimony from any person who testifies at a hearing 18. Existing petitions for annexation of any part of the area. If the proposed city is located within five miles of an existing city, the board of county commissioners must also take into consideration: 1. The size and population of the existing city 2. Growth in population and commercial and industrial development in the existing city during the past 10 years. 3. Any extension of the boundaries of the existing city during the past 10 years. 4. The probability of growth of the existing city toward the area proposed to be incorporated in the next 10 years, considering natural barriers and other factors that might influence such growth. 5. The willingness of the existing city to annex the area proposed for incorporation and to provide services to the area. The board of county commissioners will issue its opinion in writing considering and advisability of incorporating and the feasibility of that proposed city and will make arrangements for an election (NRS ). If the ballot question passes, another election is held to elect the officers of the city (NRS ) Once the officers are elected, Articles of Incorporation must be filed, and a budget must be prepared, ordinances adopted, and property tax levied. The officers must also negotiate equitable apportionment of the fixed assets of the county, contracts for employment of personnel, services, and the purchase of equipment, materials and supplies (NRS to ) NRS provides for the liability of the costs of incorporation. Generally speaking, if the city is not incorporated, these costs are a charge against the county. If the city is incorporated, these costs are a charge against the newly incorporated city. These expenses can include the costs of certifying the petition, publishing notices, requesting the report on items 1-18 and 1-5 above, conducting the public hearing and election, the mailing of sample ballots and any appeals permitted by NRS Once incorporated, a city is classified as first, second, and third class according to NRS First class cities have more than 20,000 residents. Second class cities have more than 5,000 and fewer than 20,000 inhabitants. All cities with fewer than 5,000 residents are classified as third class. As provided for in NRS , first class cities are further organized into 8 wards of the same approximate population and compact formation. Second and third class cities have the

15 option of further organizing into wards and may organize into 3 or 5 wards, depending on their ordinances. Cities organized under NRS Chapter 266 are managed by a mayor and council. The mayor is the chief executive of the city. The mayor s office, general powers and duties, and authority and provided for specifically in NRS through NRS Generally speaking, the mayor supervises the affairs of the city and provides information and makes recommendations to the council. The mayor is the presiding officer of the council, has the right to veto matters passed by the council, and approve all resolutions and ordinances. City councils are discussed specifically in NRS 266. In first class cities, there are 9 council members with one member elected from each ward and one elected by the city at large. In cities with 3 or 5 wards, one councilmen is elected from each ward. If a city is not divided into wards, the councilmen are elected by the voters of the city at large. NRS gives city councils the power to make and pass all ordinances, resolutions and orders,.... necessary for the municipal government and the management of the city affairs, for the execution of all powers vested in the city and to enforce obedience to such ordinances. B. Incorporating Under NRS 267 A city may also exercise the option of adopting the commission form of government instead of the mayor-council government provided for in NRS Chapter 266. One of the main differences between cities organized under 267, is that the voters do not elect a mayor. In the city s charter, the number of commissioners, their terms of office, duties, and compensation are determined. The commission handles all affairs of the city. C. Incorporating With A Special Charter A third option for incorporating involves presenting a draft city charter to the county s legislators, the assemblymen and senators. The legislators can have the charter introduced as a bill at the next meeting of the legislature. The legislature may approve or not approve the charter. It may also decide to amend the charter before approving it. The mayor and council of the newly created city have their powers conferred upon them by the legislature. (Povolny, 1981) This method of incorporating may seem simpler; however, the same level of research and planning as required by NRS 266 should be completed to help ensure the success of the city. At the present time, there are 18 cities incorporated in Nevada. These cities are listed in Table 1. Table 1. Incorporated Cities in Nevada Boulder City Gabbs Sparks Caliente Henderson Wells Carlin Las Vegas Yerington Carson City North Las Vegas Fallon Elko Reno Mesquite Ely Lovelock Winnemucca Italics denote city organized by special charter.

16 D. Authority of Incorporated Cities Through the Nevada Constitution, Article VIII, Sections 1 and 8, the legislature has the power to regulate municipal corporations. Cities have the authority to make and pass ordinances for their general welfare. They are not limited by statute, as are counties and unincorporated towns. For example, the city council of cities incorporated under NRS Chapter 266 have the power to make and pass all ordinances, resolutions and orders... necessary for the municipal government and the management of the city affairs, for the execution of all powers vested in the city... (NRS ) The commissioners of a city organized under NRS Chapter 267 have similar power in that they have...all of the powers which are now or may hereafter be conferred upon incorporated cities... (NRS ) Cities chartered through the state legislature have similar wording included in their charters. For example, the preamble for the charter for the City of Elko states, In order to provide for the orderly government of the City of Elko and the general welfare of its citizens the legislature hereby establishes this charter for the government of the City of Elko. Furthermore, their charter states that the board of supervisors may make and pass all ordinances, resolutions, and orders... necessary for the municipal government and the management of the affairs of the city and for the execution of all the powers vested in the city. Although cities are able to pass and enforce ordinances for their general welfare, the statutes do provide for specific issues they may also control. A list of these is included below. 1. Community Development (NRS to ) Emergency Service Phone Number (NRS to NRS ) 3. Redevelopment or Urban Renewal (NRS Chapter 279 and NRS Chapter to and NRS to NRS ) 4. Central Business Area ( to ) 5. Pedestrian Malls (NRS to ) 6. Public Works (NRS to ) 7. Control City Property (NRS to ) 8. Condemn property for public uses (NRS ) 9. Streets, sidewalks, parks, and public grounds (NRS ) 10. Traffic and parking (NRS and ) 11. Utilities ( , ) 12. Railroads and railways (NRS ) 13. Franchises for public purposes (NRS ) 14. Fire Department (NRS ) 15. Cemeteries (NRS ) 16. Police (NRS ) 17. Control of Animals (NRS ) 18. Public health (NRS ) 19. Nuisances (NRS ) 20. Regulate and license professions, trades and businesses (NRS to NRS ) 21. Sell and lease city-owned electric light and power systems (NRS to )

17 22. Establish offices and officers for the city, including city attorney, city clerk, city auditor city treasurer, and chief of police (NRS to ) 23. Municipal Courts ( to ) As provided for in NRS , the city council controls the finances of the city. It can appropriate money for city purposes and provide for the expenses of the city and the city s debt. It can levy taxes, fees, and fines, and issue debt. E. Cooperative Agreements Cities may not find it financially feasible to pay for all of the services they would like to provide. For example, a city may not be able to afford to build a new structure to house its municipal court system or even to employ an entire staff to manage that system. NRS Chapter 277 allows for some alternatives. According to NRS , counties, incorporated cities, unincorporated towns, school districts, and other special districts may into enter cooperative agreements to provide governmental functions. These agreements may involve use of property, equipment or personnel. A city may not have to make the capital expenditures necessary to build a new structure or hire a full-time staff. It may be able to reach an agreement with the county to use its courtroom and staff as necessary for a fee. F. Access to financial resources 1. Property Tax According to NRS the board of county commissioners assess, fix, and designate the amount of taxes that should be levied and collected for city or town purposes on all real and personal property assessable for state or county purposes within any town or city in their county. In practice, as part of the budgeting process, the city council or city commissioners would submit their request(s) for taxes to be levied to the county commissioners. Cities have access to the funds set aside for them pursuant to NRS For example, if a general ad valorem tax is assessed on a particular city, that money is to be used solely for the benefit of that city by the governing body of that city, e.g., the city councilor city commissioners. A city may levy and collect taxes within the city on real and person property. NRS limits the levy to taxes annually to not exceed 3% of the assessed value of all taxable real estate and personal property within the city. There are exceptions, but generally property subject to taxation must be assessed at 35% of its taxable value. Furthermore, the total ad valorem tax levy for all public purposes must not exceed $3.64 on each $100 of assessed valuation. This has serious implications for local government. For example, any given piece of taxable property may be subject to tax by the state, county, city, special district, or school district. A local government seeking to levy a new ad valorem tax will need to take this limit into consideration. It can be especially difficult for local governments with low assessed valuation of taxable property. To generate sufficient revenues, the local government in this situation may have to levy higher ad valorem taxes than a local government with high assessed valuation of taxable property. Once the statutory limit of $3.64 is reached, generating additional revenue can be

18 difficult. Local governments may find themselves feuding. Disputes that cannot be resolved by the local governments themselves will be resolved by the Tax Commission. (NRS ) 2. Intergovernment Revenues Consolidated Tax In 1997, the State Legislature created the Local Government Tax Distribution Fund. This revenue is distributed back to local governments as Consolidated Tax Distribution. This fund is comprised of Revenues from the following taxes: 1. Supplemental City-County Relief Tax (SCCRT) 1.75% of all taxable sales and taxable items of use. Ninety-nine percent of total collections returned to local governments through the Consolidated Tax Program. 2. Basic City-County Relief Tax (BCCRT) One-half of 1% of all taxable sales and taxable items of use. Ninety-nine percent of in-state collections returned to eligible local governments through the Consolidated Tax Program. 3. Cigarette Tax: 17.5 mills per cigarette or 30% of manufacturers wholesale price of other tobacco. Five mills per cigarette for distribution to eligible local governments through the Consolidated Tax Program, less administrative fees. 4. Liquor Tax: Various rates and licenses. 50cents per gallon of collections on over 22% alcohol allocated for distribution to eligible local governments through the Consolidated Tax Program. 5. Motor Vehicle Privilege Tax: 6. Real Property Transfer Tax (RPTT) A city can receive intergovernmental transfers from the state government. (NRS ). To be eligible the city must have received some distribution before July 1, 1998 (NRS ). If a local government is created after July 1, 1998 and that body provides police protection and either fire protection, construction, maintenance, and road repair, or parks and creation, then the new local government can request to the executive director of the Nevada tax commission to receive intergovernmental transfers (NRS ) The city council may also request funds from the county commissioners for roads (NRS ). 3. Licenses, Permits, and Franchise Fees Cities may collect revenue through licenses, permits, and franchise fees. Examples include business licenses, liquor licenses, gaming licenses, and building permits. If a city offers a franchise to a particular business to provide a service for the city, e.g., concessions at the airport, then the city will also collect a franchise fee for giving that business the right to do business at the city airport. 4. Charges for services Cities may charge for the use of city property. Examples of charges in this area include fees collected at a golf course, swimming pool, cemetery, or civic center.

19 5. Proprietary Funds/Enterprise Districts Cities may establish enterprise districts. These operate in a manner similar to private businesses. The cost of providing the goods or services is covered primarily through user charges. Examples of enterprise funds include water works, sewer, solid waste disposal, and electricity. 6. Fines/Forfeitures Fines imposed by the municipal court, as well, as bail bond fee, are revenue for cities. 7. Grants Cities may also receive grants. Grants may be available from the state and/or the federal government. Typically, grant money must be spent according to the specific terms of the grant proposal and the city must match all or part of the grant funds with its own money. As a budget item, grants are usually included as intergovernmental revenues. 8. Capital Revenues Capital revenues include the sale of bonds and interest earned on city money. The city may borrow money; however, except for the procurement of water supplies, the city cannot have outstanding bonds exceeding 30% of the total assess valuation of the taxable property of the city. It cannot have warrants, certificates, scrip or other debt, except bonded indebtedness, in excess of 20% of assessed valuation (NRS ). There are several statutes regarding bonding including NRS Chapters 268, 271, and 350. (Povolny, 1981) G. Municipal Expenditures The following are budget expense categories typical to cities in Nevada (City Budgets of Elko, Lovelock, Carlin, and Yerington) 1. General Government Functions: Administration, Clerk, Personnel, Information Systems, Finance, Insurance, Planning, Zoning 2. Municipal Court 3. Public Safety: Dispatch, Police, Fire 4. Public Works: Streets, Engineering, Fleet Maintenance, Building Department, Facilities Maintenance, 5. Health Function: Animal Shelter, Other Health, Cemetery 6. Community Services 7. Airport 8. Recreation 9. Capital Construction 10. Debt Service 11. Water Service 12. Sewer 13. Landfill

20 V. Budget Comparisons for Incorporated Cities and Unincorporated Towns Selected budget items from four incorporated cities and four unincorporated towns of comparable populations have been included. Revenues and expenditures from their FY budgets have been included. Money transfers in and out of funds with surpluses and deficits were not included in these figures. Consequently, the some of the budgets show the communities operating with revenues exceeding expenditures. Information on enterprise funds, or proprietary funds as they are also referred, was included when it was available. The assessed property values, tax rates, and populations of the communities are provided for additional comparisons. A. The City of Carlin and the Town of Minden The City of Carlin and the Town of Minden are two communities of similar size. Carlin s population is estimated to be 2680 and Minden s population is approximately As a city, Carlin received more money from the Consolidated Tax Distribution (CTD) ($864,903) than does than did the Town of Minden ($254,239). Carlin s share of the CTD was also a much larger percentage of its budget (49%) than was Minden s share (13%). Despite these differences, Carlin and Minden had budgets of similar size, $1,779, 459 and $1,910,755 respectively. Minden did not receive as much in CTD, but it did take in more revenue in property tax ($419,757) than did Carlin ($243,904). Minden also collected more revenue through proprietary funds for the services it provides. For example, Minden collected $476,484 for providing water while Carlin collected only $182,912. Minden collected $380,602 in trash fees while Carlin collected only $62,022 for its garbage utility. Carlin and Minden had similar expenditures, $2,172,750 and $2,130,827 respectively. Carlin splits its largest budget expenditures between expenses for its Proprietary Funds (30%), Public Safety (23%) General Government (20%) and Public Works (18%). Minden s biggest budget expenditure is for General Government (45%) followed by expenses for its Proprietary Funds (32%) and Community Support (20%). Only the residents of these communities can know for certain if their local governments are meeting their needs. This comparison provides an excellent example of how two communities of similar size can have budgets of comparable amounts yet have markedly different sources of revenue and choose very different uses for those revenues.

21 City of Carlin Selected Budget Items, Population 2680 Assessed Value $ 20,816,391 Property Tax Rate Revenues Percentage Property Taxes $ 243,904 14% Licenses and Permits $ 53,007 3% Intergovernmental Resources $ 939,362 53% Consolidated Tax Distribution $ 864,903 49% County Gaming License $ 9,278 1% MV Fuel Tax $ 62,861 4% Real Property Transfer Tax $ 1, % Grants $ 1, % Charges for Services $ 21,339 1% Water Utility $ 182,912 10% Garbage Utility $ 62,022 3% Sewer Utility $ 169,863 10% Street Light Fees $ 14,797 1% Fines and Forfeits $ 34,451 2% Miscellaneous $ 57,802 3% Total Revenues $ 1,779, % Expenditures General Government $ 435,650 20% Public Safety $ 499,102 23% Public Works $ 395,733 18% Health $ 34,949 2% Culture and Recreation $ 72,242 3% Community Support $ 60,741 3% Utility Expenses Incl. Depreciation $ 642,717 30% Debt Service $ 31,616 1% Total Expenditures $ 2,172, % Excess of Revenues Over (Under) Expenditures $ (393,291) Population Source: Nevada Department of Taxation Annual Report, Fiscal Assessed Value: Nevada Department of Taxation Property Tax Rates for Nevada Local Governments, Property Tax Rate: Nevada Department of Taxation Property Tax Rates for Nevada Local Governments, Budget Figures: City of Carlin Budget,

22 Town of Minden Selected Budget Items, Population 2400 Assessed Value 93,874,364 Property Tax Rate Revenues Percentage Property Tax $ 419,757 22% Intergovernmental Revenue $ 486,029 25% Consolidated Tax Distribution $ 254,239 13% County Gaming License $ 58,613 3% Distribution from County $ 22,794 1% Community Development Block Grant $ 150,383 8% Charges for Services $ 17,332 1% Miscellaneous Revenue $ 130,551 7% Proprietary Fund: Trash Fees $ 380,602 20% Proprietary Fund: Water $ 476,484 25% Total Revenues $ 1,910, % Expenditures General Government $ 949,971 45% Culture and Recreation $ 82,730 4% Community Support $ 415,826 20% Proprietary Fund: Trash Operating Expenses $ 280,983 13% Proprietary Fund: Water Operating Expenses $ 401,317 19% Total Expenditures $ 2,130, % Revenues Over (Under) Expenditures $ (220,072) Population Source: Nevada Department of Taxation Annual Report, Fiscal Assessed Value: Nevada Department of Taxation Property Tax Rates for Nevada Local Governments, Property Tax Rate: Nevada Department of Taxation Property Tax Rates for Nevada Local Governments, Budget Figures: Town of Minden Budget,

23 B. The City of Lovelock and the Town of Gardnerville The City of Lovelock and the Town of Gardnerville are similar in size, 2880 and 2780 respectively. Their budgets are also similar in size. Lovelock s revenues were $1,270,128 while Gardnerville s revenues were $1,051,392. The sources of those revenues are considerably different. Lovelock received 26% of its budget ($333,243) from the CTD while Gardnerville received 18% of its budget ($191,243) from the CTD. Gardnerville collected considerably more in Property Tax ($232,754 or 22% of its revenues) than did Lovelock ($102,997 or 8% of its revenues). Gardnerville also collected more in Proprietary Fund fees ($532,849 or 51% of its revenues) than did Lovelock ($328,250 or 26% of its revenues). Proprietary Fund expenditures were sizable for both Lovelock and Gardnerville (31% and 39% respectively). Lovelock spent another 31% of its budget on Public Safety and 22% on General Government. Gardnerville spent 41% of its budget on Public Works and 18% on General Government. The comparison of Lovelock and Gardnerville is another example of how two communities can have different sources of revenues and similar uses for those funds. Both communities spent the majority of their revenues on expenditures for General Government and their Proprietary Funds. The biggest difference is that Lovelock spent 31% of its budget on Public Safety and only 8% for Public Works. Gardnerville spent 41% of its budget on Public Works and made no classification for expenditures for Public Safety. Only the residents of these two communities can decide if these are appropriate sources and uses for their local government funds.