This fact sheet is the second of five separate University of Nevada Cooperative Extension fact sheets exploring different local economic development funding tools in Nevada. This second fact sheet explores the related impact and legal aspects of the use of Tax Increment Areas (TIAs) in the State of Nevada.
Nevada Revised Statutes (NRS) 278C “Tax Increment Areas” contains the legal structure of TIAs and other related state regulations on the purpose, the creation and the activities of local TIAs in Nevada.
Table 1 presents the total number of local TIAs and the combined total amount of revenue generated from all TIAs in each county in Nevada according to the individual county treasurer in each county located throughout the State of Nevada for FY 2011 and FY 2012. Despite several attempts to aquire the data, data on existing TIAs for Chruchill, Esmeralda, Lyon, Mineral, Nye, Pershing and White Pine counties was not avaible.
Source: Individual County Treasurer Offices, State of Nevada
Based on available data, in FY 2010 and FY 2011, there were only six total TIAs in operation statewide, with five of those six TIAs in Clark County and one of those six TIAs in Washoe County. Statewide, the combined amount of revenue generated from all six TIAs declined from approximately $14.2 million in FY 2010 to approximately $9.1 million in FY 2011, a net decline of approximately $5.0 million or 35.6 percent.
The provisions in NRS 278C “Tax Increment Areas” establish the authority for local county and municipal governments to use tax increment financing for the primary purpose of financing specific types of infrastructure projects that are determined to be critical to attracting new economic development projects to a community. Both redevelopment (NRS 279) and Tax Increment Areas (TIAs, NRS 278C) rely on the use of tax increment financing. However, whereas NRS 278C provides direct authority to the governing body only, while acting on its own behalf, to adopt an ordinance creating a TIA, NRS 279 requires the local governing body to first establish a redevelopment agency. With TIAs, the local county or municipal government is directly responsible for all policy and administrative decisions pertaining to the TIA, but under NRS 279, a redevelopment agency is directly responsible for all policy and administrative decisions pertaining to the redevelopment district.
The authorizing local governing board does not have to make any findings of blight to establish a TIA. NRS 278C only requires that the local governing board finds that the establishment of a TIA to fund a specific type of infrastructure as permitted in the statute is necessary and that the authorization of a TIA be primarily associated with undeveloped land where basic infrastructure improvements will make that undeveloped land within the TIA more attractive to new business development.
Before the governing board of a county or municipality considers whether or not to create a TIA, NRS 278C.150 prohibits a county or municipality from creating a TIA in any area that is already defined as the following:
Only a proper procedural order, adopted by the governing board of the creating county or municipality, can create a TIA. NRS 278C.160 outlines the steps and procedures a governing board must follow in order to create a TIA:
NRS 278C.140 defines the specific infrastructure projects that may be funded using tax increment financing as part of a TIA, including:
Like the use of tax increment financing for redevelopment, the single most important power of a TIA is the ability to collect incremental property tax revenues from the designated Tax Increment Area and use those revenues to fund the various infrastructure projects listed above in NRS 278C.140. Figure 1 below provides a basic illustration of how tax increment financing works.
In the year in which the TIA is established, a “base” level of property tax revenues or assessed value is created. All property tax revenues collected from the TIA in this area (Area 2 in Figure 1) over the lifetime of the Tax Increment Area are distributed normally to the state, the county, the municipality, the local school district and any other jurisdiction that normally receives property tax revenues from any property located within the TIA.
All property tax revenues that are generated from properties in the TIA in excess of this base level (Area 1 in Figure 1) are distributed, with a few exceptions, only to the TIA. This demonstrates the principle that a Tax Increment Area is not a new tax. The TIA only receives property tax revenues from the designated Tax Increment Area only if the property tax base of the TIA grows over time.
NRS 278C.250 outlines all the specific provisions related to determining the base level of assessed value (and subsequent property tax revenues) for a Tax Increment Area, including the division and disposition of property tax revenues levied for the benefit of the state, county, city, school district and other jurisdictions that would normally receive property tax revenue from properties located within the TIA. Although NRS 278C.250 is a relatively long statute, the State of Nevada Legislative Counsel Bureau, Fiscal Analysis Division (2009) provided a short four-point summary of the chapter and section:
redevelopment district regardless of existing levels of indebtedness. A local governing board of a TaxAlthough counties and municipalities have been slow to adopt and create Tax Increment Areas, TIAs can be a powerful financing tool for economic development purposes. Proper understanding of its legal structure and the use of tax increment financing is vital to properly discharging and understanding the powers of a local Tax Increment Area.Increment Area may only receive those incremental property tax revenues needed to satisfy existing levels of indebtedness. Any incremental property tax revenues collected by the local governing board of the TIA that are not used to satisfy existing levels of indebtedness must be returned to the state or other impacted jurisdictions including any impacted county government, municipal government or local school district.
State of Nevada. 2012. Nevada Revised Statutes Chapter 278C – Tax Increment Areas. NRS Site.
State of Nevada Legislative Counsel Bureau, Fiscal Analysis Division. 2009. Report on Tax Abatements, Tax Exemptions, Tax Incentives for Economic Development and Tax Increment Financing in Nevada. Carson City, NV.
Extension's Communication Team
Steinmann, F., 2013, Funding Economic Development in Nevada: Tax Increment Areas, Extension | University of Nevada, Reno, FS-13-30
An EEO/AA Institution. Copyright ©
2024, University of Nevada Cooperative Extension.
A partnership of Nevada counties; University of Nevada, Reno; and the U.S. Department of Agriculture