Officials in the Reno, Nev., area settled a one-year squabble over property tax distributions just in time for the city’s redevelopment agency to make its $1.5 million bond payment due Sept. 1.
The agency went into technical default on a bond issue in August 2011 and had to cash out its surety from National Public Finance Guarantee Corp. to make last year’s payment when property tax assessments took a huge dip in 2011.
The RDA will now be able to make its bond payments through 2018 thanks to the property tax settlement negotiated between Reno, Washoe County and the Washoe County School District. The agreement returns $5.5 million in property tax to the city’s redevelopment agency.
City and county officials voted to approve the agreement in separate meetings last week. The state’s board of equalization is expected to approve the deal within the next few weeks, which would also result in the state returning about $275,000 to the redevelopment agency, said Robert Chisel, Reno’s finance director.
The settlement agreement returns property tax revenue to the RDA that it should have been receiving all along, Reno city officials said, citing a 1987 state statute they unearthed last year when they were searching for funds to make $2.9 million in bond payments due in four installments from Sept. 1, 2011, to Sept. 1, 2012.
A drop in assessed value since 2009 resulted in only $837,000 available to the agency to pay the $2.9 million in bond debt. This is down from $4.4 million in fiscal 2009 and $2.5 million in fiscal 2010, according to June 30, 2011, budget documents.
Last fall, Standard & Poor’s lowered its underlying rating to CC from BB on $36.5 million of Reno Redevelopment Agency senior-lien Series 2007A taxable and 2007B tax-increment bonds; and to CC from BB-plus on the agency’s Series 1998F superior-lien tax increment bonds.
The dispute arose when Reno officials asked the state attorney general’s office for an opinion on the 1987 statute, and the Washoe County district attorney’s office rendered a vastly different opinion.
The statute requires the taxing authorities to pay the redevelopment agency any amount it was receiving before July 1, 1987 to repay indebtedness.
The attorney general’s office interpreted this to mean that the RDA should have been receiving $2.7 million a year over the past 25 years, which would have resulted in $64 million being returned to the agency. The district attorney’s office opined that the county had to help the RDA when it encounters problems paying its debt, but did not owe the agency additional money for the previous 25 years.
Under the settlement, the parties agreed that they should just make up the difference between what the RDA received in its tax increment up to $2.7 million. The treasurer’s office also had failed to include government buildings in the assessment, according to the settlement.
Under the settlement, Washoe County pays $2.2 million, Reno pays $1.5 million, the Washoe County School District pays $1.5 million and Nevada pays $274,443.
Although officials were able to reach an agreement without going to court, they plan to seek a judicial review from a district court judge.
As different people take office, “we don’t want to come back five years from now, or two years from now, and have a different interpretation,” Chisel said. “We want to say based on all these attorneys and their applications of the statues — we are all agreeing to this. We want the court to bless it.”