High court tax distribution case draws North Las Vegas interest

CARSON CITY – Nevada Supreme Court justices questioned Tuesday whether the city of Fernley waited too long to sue the state for shortchanging its residents in state taxes returned to their community.

The case is being followed closely by cities and counties throughout the state because some of them, particularly North Las Vegas, do not appear to receive a fair share of the state-distributed taxes.

“The (statute of limitations) law is pretty substantially against your client,” Justice James Hardesty told lawyer Josh Hicks, who represents Fernley.

Hardesty and other justices noted that Fernley, a city of about 19,000 people 35 miles east of Reno, waited 11 years after its incorporation in 2001 to file a legal challenge to the state’s consolidated or “C” tax formula of distributing six state taxes to local governments.

Under that formula, Fernley last year received $143,143 in state tax revenues. Fernley has 36 percent of Lyon County’s population, but it received about 1 percent of the county’s $14.8 million appropriation because of the C tax formula.

The case is important because a court decision could affect other counties and cities. Under the C tax formula, North Las Vegas received $37 million compared with Henderson’s $74 million in 2011. Henderson has a population of 264,000 and North Las Vegas, 223,000.

Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, has pledged to implement a better formula on the distribution of C taxes within the first 40 days of the legislative session, which starts Feb. 4.

She said a quick resolution was necessary because proposed budgets of local government must be submitted to the Taxation Department in April.

During interim hearings last summer, much of the discussion centered on the problems in Fernley and North Las Vegas. North Las Vegas officials said they intend to work with the Legislature on a solution but declined further comment Tuesday.

After Tuesday’s arguments, Fernley Mayor Leroy Goodman said he does not expect any legislative help based on his city’s inability to induce the Legislature to make changes made during the 2011 session.

“We have been that route,” Goodman said. “Marilyn Kirkpatrick was the chairman (of the Assembly Taxation Committee in 2011). It’s (the formula) ridiculous.”

But justices questioned whether the statute of limitations or the doctrine of “laches” bars Fernley from seeking a court solution. The doctrine holds that someone has given up his rights if he sits on them for too long without making a challenge to a perceived problem.

The court hearing Tuesday was not on the unfairness of the formula, but on a move by the Legislature and state to block Fernley from proceeding with its case in District Court in Carson City.

They seek an order to prevent the case from being heard. In documents filed with the case, legislative lawyers included the schedule of the 2013 Legislature and pointed out the issues may be dealt with during the session.

Hicks contended the tax distribution formula is so out of whack that it violates the Equal Protection Clause of the U.S. Constitution.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.