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What Are Our Recreation (“RFF”) And Beach (“BFF”) Facility Fees (According to Us)?

IVGID 101 Posted on by

In a nutshell, taxes. Not fees but taxes. And invalid ones no less! Nevertheless, let’s not go there…yet.

Let’s assume for purposes of argument the RFF/BFF are fees. What kind of fees? Certainly not the standby service charges nor fees for the mere “availability to access and use” District owned beaches and public recreation facilities staff and past/current Board members have disingenuously told us they are1. We assert they’re nothing less than plugs for the financial shortfall between budgeted revenues and intentional overspending assigned by staff to the District’s Community Services2 (insofar as the RFF is concerned) and Beach2 (insofar as the BFF is concerned) Funds, respectively3. In fact, it turns out the RFF/BFF don’t just plug the financial shortfall between budgeted revenues and intentional overspending. They actually generate more4. Meaning their primary purpose is to raise revenues “as contributions toward the cost of maintaining governmental functions” rather than “as a means of compensating…government for the cost of offering and regulating (a) special service, benefit, or privilege” furnished5. And they cannot be and are not legitimate “fees!”6

So what facts do we have to support these conclusions? Actually, those that come from a close examination of what staff and past/current Boards have literally told or demonstrated7 to us. For instance,

Consider that the RFF is assigned to the District’s Community Services Fund8. And the BFF is assigned to the District’s Beach Fund9. So let’s examine the District’s 2020-21 financial reporting for its Community Services and Beach Funds, respectively.

If one removes the RFF ($1,735,612), one sees that revenues from all other sources total $16,333,929. Now compare this combined revenue ($18,069,541) to actual expenses ($15,286,460). The difference ($2,783,081) is more than that necessary to merely pay for the financial shortfall. Yet rather than returning the excess to the owners of those whose parcels which were over assessed, the excess was simply transferred to the Community Services Fund’s net position or fund balance10. If one removes the BFF ($5,268,640), one sees that revenues from all other sources total $898,125. Now compare this combined revenue ($6,166,675) to actual expenses ($5,595,750). Again, the difference ($571,015) is more than that necessary to merely pay for financial shortfall. Yet rather than returning the excess to the owners of those parcels which were over assessed, this sum was simply transferred to the Beach Fund’s net position or fund balance10. Now listen to what staff/past Boards have actually told us the RFF/BFF represent:

“Each year, the District(‘s Board) establishes…annual Recreation…and Beach Facility Fee(s)…As part of the annual budget process, the Board…approve(s) a resolution”11 which at ¶6 adopts a Report For Collection on The County Tax Roll of Recreation Standby And Service Charges12. ¶II of that Report instructs that “the amount of moneys required for the (forthcoming) fiscal year…has been determined by th(e) Board to…(be necessary to financially) support debt, capital expenditures, and operations for the District’s various (public) recreation and beach facilities…(Which when) combined with (operational) service charges collected…for facility use and program activities (also known as user fees)…serve to (financially) support…operations of the District funded by (its) Community Services…and Beach Fund(s), respectively.”13

In other words, the financial shortfall14 between revenues (primarily operational “service charges collected…for facility use and program activities”) and intentional overspending. Moreover, let’s examine:

What ¶3 of That Resolution11 Tells Us The RFF/BFF Pay For: after application of operational “service charges collected…for facility use and program activities:”

The costs the District incurs for “acquisition, administration, operation, maintenance and improvement (to) the (District’s beaches and public) recreational facilities, including the improvements thereon, and of the servicing of bonds issued or to be issued (t)herefor.”

What ¶II of That Report12 Tells Us The RFF/BFF Pay For: after application of operational “service charges collected…for facility use and program activities:”

The costs the District incurs “for the proper servicing of said identified bonds and…the administration, operation, maintenance and improvement of (the District’s beach and public recreation) real properties, equipment and facilities.”

What Staff Told The Board And The Public The RFF/BFF Pay For at The Board‘s May 30, 2025 Meeting15: after application of operational “service charges collected…for facility use and program activities:”

“The revenues required…to (financially)support debt, capital expenditures, and operations for the District’s various recreation and beach facilities…(necessary to) sustain the operations funded by the Community Services…and Beach Fund(s).”

What Board Policies 6.2.0.3.0 And 6.2.0.4.0 Tell Staff And The Public The RFF/BFF Pay For: after application of operational “service charges collected…for facility use and program activities:”

The costs the District incurs “to (financially) support the Community Services (and)…Beach (Funds’)…facilities, venues, services, and programs.”

What Former Finance Director Paul Navazio Told The Board And The Public The RFF/BFF Pay For at The Board‘s May 26, 202216 And April 12, 202317 Meetings: after application of operational “service charges collected…for facility use and program activities:”

The “revenues required to (financially) support (District) debt, capital…and operations for the District’s various (public) recreation and Beach facilities.”

What Trustee Mick Homan Told The Board And The Public The RFF/BFF Pay For at The Board‘s May 29, 2024 Meeting18: after application of operational “service charges collected…for facility use and program activities:”

The costs necessary “to…cover our budgeted shortfall to avoid going insolvent.”

So Based Upon The District‘s Above–Repeated Admissions, what District expenses can you the reader conjure up which are not included within those necessary:

1. For “the acquisition, administration, operation, maintenance and improvement of…recreational facilities, including the improvements thereon?” Or,

2. For “the administration, operation, maintenance and improvement of said real properties, equipment and facilities?” Or,

3. “To (financially) support…Community Services facilities, venues, services, and programs,” and “the Beach…services, and programs,” respectively? Or,

4. “To (financially) support debt, capital expenditure and operations for the District’s various recreation and beach facilities?” Or,

5. For “the servicing of bonds issued or to be issued therefor?” Or,

6. “To…cover our budgeted shortfall to avoid going insolvent?”

We can’t. And assuming you can’t either, hopefully now you agree the RFF/BFF really represent nothing more than financial subsidies for the differences between budgeted revenues and intentional overspending assigned by staff to the District’s Community Services (insofar as the RFF is concerned) and Beach (insofar as the BFF is concerned) Funds, respectively. In other words, the RFF/BFF are expressly not “allocated directly to defray(ing) the costs (the District incurs) to furnish the (Recreation and Beach) Facilities” for which these “fees” are assessed19. Their primary purpose is to generate deficient revenue!

A Specific Example The RFF is Assessed to Cover The Financial Shortfall Between Revenues And Overspending Having Nothing to Do With Costs to Make The District‘s Public Recreation Facilities Available to Those Parcels Which Are Involuntarily Assessed – Unforeseen Expenses: Sometimes one’s actions speak louder than his/her words. And over the District’s history, its actions have spoken volumes! We can offer many, many dozens of examples whereby staff and past Boards have used the RFF and BFF, for purposes other than costs associated with making the District’s beaches and public recreation facilities merely “available” to be used by those assessed. However here let’s make it simple by simply identifying a handful.

But before we start, let’s share a “given” which we believe helps to put our argument into context. Given the RFF/BFF are commingled with other operating revenues in the District’s Community Services (insofar as the RFF is concerned) and Beach (insofar as the BFF is concerned) Funds, respectively20, and without the subsidy of the RFF/BFF staff budget to intentionally overspend in both of those funds, every expense in essence contributes to that overspending. Meaning it’s disingenuous for staff and past Boards to “cherry pick” which expenses are paid by “charges for services” revenue, and which are paid by the RFF/BFF. They’re all paid by the RFF/BFF because without this revenue source, there would be no funds available.

The District is authorized by NRS 318.225 to assess its own ad valorem taxes. Subject to equalization by the Department of Taxation so that the combined overlapping rate of all ad valorem taxes levied in that county on a property for that fiscal year do not exceed the maximum “total ad valorem tax levy for all public purposes (of)…$3.64 on each $100 of assessed valuation, or a lesser or greater amount fixed by the State Board of Examiners.”21 And ever since its creation it has assessed this tax. As the reader can see the District has done for 2025-2622. Beginning in 2011 the District had a portion of its property tax (receivables) offset (by the county) to settle a court ordered tax refund by Washoe County.”23 In August of 2011 Washoe County notified the District that in order to recover the District’s share of county real property tax refunds (due), the County would exercise unilateral offset of the District’s share of ad valorem taxes the County was collecting on the District’s behalf as collection agent24. Notwithstanding, the District’s “General Fund25 was able to…maintain…service levels (to)…meet this obligation…while the refund was completed.” How was this possible? By using proceeds of the RFF26. For 2012 a new “where your Rec Fee goes” expense category was created and published. Labeled “Reserves For Recreation.” Whereby the District reported this substitution for the loss of ad valorem tax revenue caused by the foregoing. And “over the course of four years the total offset was approximately $1,200,000.” Given this use of the RFF had nothing to do with the costs the District was budgeted to incur to make its public recreation facilities available for access and use by those parcels which were assessed, it represented nothing short of plugging the financial difference between budgeted revenues and new intentional overspending assigned to the District’s Community Services Fund.

A Specific Example The BFF is Assessed to Cover The Financial Shortfall Between Revenues And Overspending Having Nothing to Do With Costs to Make The District‘s Beach Facilities Available to Those Parcels With Beach Access Which Are Involuntarily Assessed – Legal Defense Fund: Notwithstanding the District’s mantra of “one division – one team,” according to ¶2.2 of Policy No. 16.1.1 and ¶72 of Ordinance No. 7, access to and use of the District’s beaches are restricted to parcel owners whose parcels were located within the District on June 1, 1968. Given the process to merge Crystal Bay into IVGID was not initiated until August 11, 199427, those residents are not entitled to beach access.

In 2007 two Crystal Bay residents (Frank Wright and Steve Kroll) sued the District over their non-access to its beaches. On May 14, 2007 when the Board adopted the BFF for fiscal year 2007-08, it voted to assess local parcel owners with beach access a $25/parcel fee to create a “beach access legal defense fund.”28 Given this use of the BFF had nothing to do with the costs the District was budgeted to incur to make its beach facilities available for access and use by those parcels which were assessed, it represented nothing short of plugging the financial difference between budgeted revenues and new intentional overspending assigned to the District’s Beach Fund.

And to further demonstrate that this levy was really a disingenuous revenue measure, after assessing local parcel owners the District made claim to its insurance carrier the the Pool Pact29 for a legal defense (which was accepted), and paid a $5,000 deductible. Did the District share these facts with the public? Did it refund this unnecessary levy to those parcel owners whose properties were involuntarily assessed? The answers are no and no.

Examples The RFF/BFF Are Assessed More Than Necessary to Cover The Financial Shortfall Between Revenues And Overspending Having Nothing to Do With Costs to Make The District‘s Public Recreation And Beach Facilities Available to Those Parcels Which Are Involuntarily Assessed – Fund Balance Creep:

“In…fund financial statements, fund balance(s) for governmental funds are reported in classifications that comprise a hierarchy based primarily on how amounts can be spent. These include: ‘non-spendable’ which are not expected to be converted to cash, such as inventory or prepaid items; ‘restricted’ by conditions of law, regulation, grants or contract(s) with external parties; ‘committed’ which arise from acts of the District’s Board; ‘assigned’ which reflect an intent by management of the District; or, ‘unassigned’ which is the residual amount.”30

Here staff’s manipulation of the District’s Community Services and Beach Fund balances have increased markedly. Remember, our staff are incapable of operating, maintaining, and providing for capital at District beach and public recreation facilities based only upon the revenues they are able to actually generate. That’s why we have the RFF/BFF which as demonstrated above, act as financial subsidies to cover the shortfall. So how can there be anything left over to add onto fund balance? Unless the RFF/BFF total more than just the amount of the subsidy. Which is exactly what they represent!

On July 1, 2015 the fund balance in the District’s Community Services (recreation) Fund was reported at $5,357,75531. At the same time the fund balance in the District’s Beach Fund was reported at $1,107,78632. Six (6) years later, on July 1, 2021, the fund balance in the District’s Community Services Fund was reported at $15,890,93233. And at the same time, the fund balance in the District’s Beach Fund was reported at $4,332,48527. That’s a nearly three-hundred percent (300%) increase in Community Services Fund balance [which equates to a nearly fifty percent (50%) per year increase for six (6) consecutive years]. And a nearly four-hundred percent (400%) increase in Beach Fund balance [which equates to a more than sixty-five percent (65%) per year increase for six (6) consecutive years]! How could the fund balances in both of these funds increase so dramatically in such a short amount of time absent massive operational profits (which we’ve demonstrated were not generated) or excessive RFF/BFF subsidies? Given the RFF/BFF have totaled far more than the costs the District requires to make its beach and public recreation facilities available for access and use by those parcels which are assessed, they represent nothing short of another type of revenue generating mechanism.

Okay. If Not Fees, Then What? In all of the examples noted above, the RFF/BFF represent the additional revenue necessary to plug the difference between budgeted revenues and intentional overspending, and more, virtually systemwide. In contrast to recovering the reasonable costs the District incurs to furnish recreation and beach facilities, or more pointedly, the mere “availability” to those facilities34. Given “an exaction of monies for the purpose of generating revenue is a tax,”35 and here the RFF/BFF are clearly assessed to generate revenue, Clean Water Coalition36 instructs that where “those criteria fit the charge, it is a” tax37!

At their core “taxes are imposed for…general governmental…revenue purposes, while fees cover the cost of providing a service…While some may equate a tax to any government action that results in costs of any kind…courts have been careful to distinguish between different forms of government-collection exactions. (And) the key difference between these different assessments, according to laws and interpretive rules used in nearly every state, is their purpose…Therefore, to determine whether a charge is a tax, one must look at its primary purpose.”38

But there’s another reason why the RFF/BFF are taxes rather than fees. And it has to do with

The Distinction Between Exchange And Exchange–Like Versus Nonexchange Transactions: In our discussion of this topic under our What Exactly is a Fee discussion, we concluded that the RFF/BFF are the product of GASB Statement No. 33 class 3 nonexchange transactions. In other words, those which are:

“Imposed nonexchange revenues…result(ing) from assessments imposed on nongovernmental entities, including individuals, other than assessments on exchange transactions (for example, property taxes and fines).”

Moreover, it turns out the District actually agrees with this conclusion39 where it addresses “Punch Card Utilization:”

“Under District Ordinance 7, parcel owners may obtain up to five Picture Passes and/or Punch Cards, with the latter ‘valued’ at 1/5th of the annual Facility Fee assessed on each parcel. As a non-exchange transaction, the revenue collected from…annual Facility Fees are reflected as…General Revenue(s) in the Statement of Activities.”

Because monetary exactions the product of nonexchange transactions are by-and-large taxes rather than fees40, independent of our other arguments, both the District and we conclude the RFF/BFF are taxes.

Moreover, Invalid Taxes: NRS 361.445 is quite clear in instructing that

“The only basis for property taxation by any…district in (a) county…shall be…the assessment made by the county assessor and…the Department (of Taxation), as equalized according to law.”

In other words, the District’s NRS 318.225 ad valorem taxes41. But given the RFF/BFF are not the product of “assessment(s) made by the county assessor and…the Department (of Taxation), as equalized according to law,” nor are they ad valorem42, they are taxes. And invalid ones no less given they don’t comply with the limitations of NRS 318.225.

So there you go. The RFF/BFF don’t really represent any type of “fee,” let alone the “standby and service charges…for the availability of use of the (public’s) recreational facilities” staff and past Boards represent/have represented43! And now you know.

  1. See our What Staff And Past/Current Trustees Tell/Have Told Us The RFF/BFF Are discussion.
  2. For a closer examination of this fund, the reader is referred to our Understanding The District’s Funds Structure discussion.
  3. Exactly what staff and past Boards have told us (see our What Are Our RFF/BFF According to Staff/Past Boards discussion).
  4. That’s right. A slush fund available to be used for future unidentified, unbudgeted, unappropriated pet projects!
  5. See Emerson College v. City of Boston, 391 Mass. 415, 424, 462 N.E.2d 1098 (1984).
  6. See Executive Aircraft Consulting, Inc. v. City of Newton, 252 Kan. 421, 427, 845 P.2d 57 (1993).
  7. Because sometimes actions speak louder than words.
  8. See page 131 of the packet of materials prepared by staff in anticipation of the Board’s May 26, 2022 meeting (“the 5/26/2022 Board packet“).
  9. See page 172 of the 5/26/2022 Board packet.
  10. Fund balance represents “the residual difference between assets and other inflows and liabilities and other outflows…for budget purposes” (see the District’s “Accounting Glossary“).
  11. An example of that resolution is the one adopted for FY 2025-26; Resolution No. 1917. Which can be viewed at pages 142-145 of the packet of materials prepared by staff in anticipation of the Board’s May 30, 2025 meeting (“the 5/30/2025 Board packet“).
  12. An example of the Report adopted for FY 2025-26 appears at pages 146-151 of the 5/30/2025 Board packet.
  13. See ¶V at page 149 of the 5/30/2025 Board packet.
  14. Meaning that by definition, the RFF/BFF are financial subsidies intended to generate revenue.
  15. See pages 152-154 of the 5/30/2025 Board packet.
  16. See pages 224-225 of the packet of materials prepared by staff in anticipation of the Board’s May 26, 2022 meeting (“the 5/26/2022 Board packet“).
  17. See pages 999-1000 of the packet of materials prepared by staff in anticipation of the Board’s April 12, 2023 meeting (“the 4/12/2023 Board packet“).
  18. See page 164 of the packet of materials prepared by staff in anticipation of the Board’s June 26, 2024 meeting (“the 6/26/2024 Board packet“)].
  19. See Emerson College, supra, at 39 Mass. 424.
  20. See pages 12 and 14 of the District’s 2025-26 Budget for confirmation of this fact.
  21. See NRS 361.453(1).
  22. See page 3 of the District’s 2025-26 Budget.
  23. See page 5 of the 2017 Comprehensive Annual Financial Report (“CAFR”) [“the 2017 CAFR“].
  24. See ¶V of the Report For Collection on The County Tax Roll of Recreation Standby And Service Charges pursuant to NRS 318.201(1) [press this link to examine the Board’s 2025-26 version of that Report] which states “the Board has, by resolution, elected and determined to have such charges for the forthcoming fiscal year collected on the general tax roll of the County of Washoe for said year, on which general District taxes are collected, in the same manner, by the same persons and at the same time, together with and not separately from its general District taxes. The District has agreed to pay the Washoe County Treasurer an annual fee of $1,000 for the processing of these fees” as collection agent.
  25. The Fund where the District’s property taxes are assigned (see page 7 of the District’s 2025-26 Budget).
  26. See page 87 of the 2017 CAFR.
  27. See IVGID Resolution No. 1651.
  28. See IVGID Resolution No. 1779.
  29. The District maintains the equivalent of a liability insurance policy through the Nevada Public Agency Insurance Pool Pact (“the Pool Pact“).
  30. See ¶P at page 42 of the District’s 2016 CAFR (“the 2016 CAFR“).
  31. See page 29 of the 2016 CAFR.
  32. See page 30 of the 2016 CAFR.
  33. See page 63 of the District’s 2022 CAFR (“the 2022 CAFR“).
  34. See our discussion of the What Staff And Past Boards Have Told Us The RFF/BFF Represent.
  35. See Clean Water Coalition v. M Resort, LLC., 127 Nev. 301, 314, 255 P.3d 247 (2011).
  36. Supra, at 127 Nev. 317.
  37. See State v. Medeiros, 89 Haw. 361, 973 P.2d 736, 742-745 (1999); Douglas Co. Contractors v. Douglas Co., 112 Nev. 1452, 1457, 929 P.2d 253, 256 (1996); State ex rel. City of Reno v. Boyd, 27 Nev. 249, 256, 74 P. 654, 655 (1903); 71 Am. Jur. 2d  §13, State and Local Taxation (2001).
  38. Go to https://taxfoundation.org/blog/how-money-used-federal-and-state-cases-distinguishing-taxes-and-fees/#:~:text=Taxes%20Are%20Imposed%20for%20Revenue,Cost%20of%20Providing%20a%20Service.
  39. See Note 1(T) to the District’s FY 2024 Annual Comprehensive Financial Report (“ACFR”).
  40. See International Public Sector Accounting Standard (“IPSAS“) No. 23, Revenue From Non-Exchange Transactions.
  41. An ad valorem tax is a tax based on the assessed value of an item, such as real estate or personal property” (go to https://www.investopedia.com/terms/a/advaloremtax.asp).
  42. The RFF/BFF are the same regardless of a parcel’s/dwelling unit’s assessed valuation (see Policy 16.1.1.1.0 which instructs “the Incline Village General Improvement District will charge the prescribed Recreation Fee, and if applicable the Beach Fee, to all qualifying real properties.”
  43. See our Are The RFF/BFF The Standby Service Charges Staff And The Board Represent discussion.

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