As demonstrated elsewhere, general improvement districts (“GIDs”) are limited purpose special districts. Therefore their powers are to be strictly construed and limited¹ to those provided by the Legislature² as explicitly conferred by their County Boards of Commissioners (“County Boards”) in GIDs’ initiating ordinances³ as supplemented, if at all, by: those “additional basic power(s expressly) granted⁴…pursuant to NRS 318.077;”⁵ “sections of this chapter (NRS 318) designated therein;”³ and, none other¹. Thus with the foregoing clearly understood, and

Introduction: As with the propriety of all governmental powers, we begin our analysis with the Nevada Constitution given it “is the ‘supreme law of the state which ‘control[s] over any conflicting statutory provisions.’”⁶ Nev. Const. Art. 8, Sec. 8 instructs that the Legislature shall provide for/restrict the powers of all general purpose governments. Since the Legislature has created the GID law⁷, and the Incline Village General Improvement District (“IVGID”) is a GID⁸, IVGID’s powers are recognized/restricted by NRS 318.

With that said NRS 318.100(1) instructs that GID “board(s) shall have each of the basic powers enumerated in…chapter (NRS 318 which are)…designated in the(ir District’s) organizational…and reorganizational proceedings…taken pursuant to NRS 318.077 and other provisions supplemental thereto in this chapter, or otherwise authorized by law.” Given GID Boards may levy ad valorem taxes⁹, the District clearly has the power to assign the ad valorem taxes it levies to its General Fund¹⁰, and to pay for the costs it assigns to that fund. However, that’s not the question we raise. Rather,

The Question Herein Raised: is whether the District’s RFF (“Recreation Facility Fees”) and/or BFF (“Beach Facility Fees”) and the water/sewer utility charges local property owners are compelled to pay¹¹/guaranty can legitimately be used to pay for acquisition/construction of a spiffy new administration building for staff¹²? For the reasons stated hereinafter, we say no!

The Particulars: Our senior staff are not content with their current digs on Southwood Blvd. Not being willing to use ad valorem and other taxes the District realizes each year to pay for a new administration building (they use these monies for higher wages), staff have looked for more creative funding sources. So as elsewhere discussed, staff have very intentionally begun to charge the District’s Utility, Community Services and Beach Funds more than the reasonable or necessary value of the central services they claim they furnish to these funds. In addition, staff have been improperly assigning investment income realized on excess fund balances (caused by levying excessive RFFs/BFFs) in the District’s Community Services and Beach Funds to the District’s General Fund. As a consequence of these techniques, staff have been successful in increasing the General Fund balance by $3,740,482 (431.6%) in seven (7) short years (since June 30, 2013)! Forget that this practice represents non-compliance with the District’s Policy No. 7.1.0¹³. The intent of this endeavor has been to quietly accumulate funds in the District’s General Fund to pay for a new administration building. And staff have been very successful. The problem is that this initiative has come at a cost. One which like all other District programs is borne by local property/dwelling unit owners. This discussion reveals the truth.

The District’s Limited Funding Sources: Because of their limited powers (see discussion above), one of the problems all GIDs face is their lack of adequate size and tax base to financially support the extensive services some (like IVGID) attempt to provide¹⁴. So GIDs are on the constant quest for revenue. Although one of the few straightforward revenue sources available to GIDs are ad valorem taxes¹⁵, they aren’t anywhere close to those a county is permitted to levy¹⁶. Given this revenue source is insufficient to pay for acquisition/construction of a new administration building, staff have nowhere else to look other than the District’s RFF/BFF and the water/sewer utility rates charged to every parcel/dwelling unit within the District’s boundaries! And this translates into: excess transfers into the District’s General Fund created from excess RFFs, BFFs, and utility rates; and, interest earned on over $20 million of Community Services, Beach and Utility Fund balances.

Excess Central Services Cost Transfers: Since the Board budgets to overspend in the District’s General Fund¹⁷, that over spending requires financial subsidy from somewhere. And that somewhere is central services cost transfers from the District’s Community Services, Beach and Utility Funds. Similarly because of Community Services Fund overspending¹⁸, the RFF local parcel/dwelling unit owners are compelled to pay is ultimately that subsidy¹⁹. And because of Beach Fund over spending²⁰, the BFF local parcel/dwelling unit owners with beach access are compelled to pay is ultimately that subsidy²¹.

And let’s not forget that a portion of the excess fund balance created in the District’s General Fund comes from Utility Fund transfers. Therefore funding for acquisition/construction of a new administration building will also come from the subsidy of unjust, unreasonable and excessive utility rates²² local parcel/dwelling unit owners are compelled to pay/guaranty.

Interest Earned on Community Services, Beach and Utility Fund Balances: Acquisition/construction of a new administration building will also be funded from interest earned on fund balances in the District’s Community Services, Beach and Utility Funds. According to Audit Committee member Cliff Dobler, “since 2019, the District has been holding in excess of $20 (million) in Cash, Cash Equivalents and Investments (‘CASH’) for (its) governmental funds most of which have been invested”²³ in various income producing vehicles. “Investment income of all funds for fiscal year 2019 was $563,325…based on the average CASH of $20.5 million held during the fiscal year. (In contrast) the average cash for the General Fund was only $3.9 million representing only 19% of total CASH(. Yet it) received $327,817 or 58% of the investment income. Properly allocating the investment income based on average CASH held during the year, only $107,168 should have been allocated to the General Fund. (Thus there was) an overstatement of approximately $220,647”²⁴ in the District’s General Fund. Actually, the overstatement was even more.

On June 30, 2019 there was over $31 million on deposit in the District’s various funds. Although the ending fund balance in the District’s General Fund was approximately twelve percent (12%) [$3,765,586 to be precise], the District reported that over fifty-five (55%) of investment interest ($327,815) had been assigned to the District’s General Fund²⁵. In an era of essentially zero interest rates, this would represent a return of nearly ten percent (10%). Impossible! The true explanation is simply that interest earned on balances in the District’s other funds was being assigned by staff to the District’s General Fund.

“Investment income for fiscal year 2020 was $482,109…based on the average CASH of $23.8 million held during the fiscal year. (In contrast) the average cash for the General Fund was only $5.1 million representing only 21% of total CASH(. Yet it) received $372,676 or 77% of the investment income. Properly allocating the investment income based on average CASH held during the…year, only $102,389 should have been allocated to the General Fund. (Thus there was) an overstatement of $270,287”²⁴ in the District’s General Fund. Again, the overstatement was more.

On June 30, 2020 the balances in the District’s various funds had increased to over $37 million. Although the ending fund balance in the District’s General Fund remained at a bit more than twelve percent (12%) [$4,630,149 to be precise], the District reported that nearly forty-nine (49%) of investment interest ($432,643) had been assigned to the District’s General Fund²⁶. Again an Impossibilty! The explanation is simply that interest earned on balances in the District’s other funds was again being assigned by staff to the District’s General Fund.

All told, a minimum of $490,934 in excess interest income was assigned by staff to the District’s General Fund. But wait; there’s more! According to Mr. Dobler the foregoing discussion “only addresses the past two fiscal years” of improper allocations. “But (similar) improper allocations have been going on since, at least, fiscal year 2015.”²³ This means that improper interest allocations to the District’s General Fund total a whole lot more than $500,000!

The District’s Justification: We believe there is none. However, if the reader would like to consider the Board’s/staff’s perceived justification and our response, you’re directed to our Staff’s/the Board’s Justification For Exceeding the Limited Powers the District May Permissibly Exercise discussion.

Moreover, Those Who Pay/Guaranty Payment of the RFF/BFF and the Utility Charges the District Assesses Are Already Paying For a New Administration Building Through the Ad Valorem Taxes They Are Compelled to Pay: If you’re a property owner, take a look at your county ad valorem tax bill. There you will see that you pay IVGID its own separate ad valorem tax. For 2021-22 the District has budgeted to receive nearly $2 million in ad valorem taxes from local parcel owners²⁷ just like you. And in addition, the District has budgeted to receive an additional $1,640,534 in consolidated taxes²⁸ (“C-Taxes”). Look where the District assigns the revenues it receives from both of these taxes²⁸. That’s right the District’s General Fund. Since the District’s General Fund is supposed to be used to pay for governmental services which benefit the general public as a whole (see discussion below), and staff have been building up an excess fund balance in the District’s General Fund to pay for a new administration building (see discussion above), aren’t local property owners already paying more than their fair share for a new administration building assuming arguendo, one is actually required? So why is the District disingenuously charging local parcel/dwelling units multiple times for the same facility?

The RFF/BFF and the Utility Rates Local Parcels/Dwelling Units Will be Compelled to Pay/Guaranty For a New Administration Building Are Impermissible Local and Special Taxes: Providing a building to house the District’s administrative staff arguably benefits all residents, inhabitants, visitors, property owners, businesses, and real properties (including those not assessed the RFF/BFF) in our community. Therefore “the (subject fees)…levied…(by IVGID can)not survive scrutiny under the first prong of (the)…Medeiros²⁸ test because the (facilities and services provided)…directly benefit…the public-at-large — (and) not (just) th(os)e…who pay the” fees. This makes use of the RFF/BFF and the utility rates local parcels/dwelling units involuntarily pay/guaranty for a new administration building impermissible special taxes because they are nothing more than “incidental to (their) true purpose—to raise revenue to finance construction benefitting the (District) at large…When it appears…that revenue is its main objective…the enactment is a revenue measure.” And where as here it is a revenue measure, it “is an impermissible local and special tax.”²⁹

NRS 205.300(1): In order to demonstrate that staff’s tactics are impermissible, one needs to understand, in part, the representations the District makes in support of its involuntary assessment of the RFF, BFF and utility rates local property owners are compelled to pay/guaranty. To staff it doesn’t matter how the District receives its money. Nor does it matter to them on what the money is supposed to be spent. Since it all gets deposited into a single account³⁰, as far as staff are concerned, the money is available to be spent. And spent it is!

But given the District represents (as elsewhere discussed) that: the RFF pays for the (mere) availability to access and use the public’s recreation facilities; and, the District’s water rates pay for the just and reasonable³¹ costs it incurs for the water services it furnishes; here we see both have been used to pay for services the District has no power to furnish. Therefore we submit that using the RFF and the water rates the District charges for fuels management services is a violation of NRS 205.300(1)³². So where exactly do staff get off using funds collected for completely other purposes to pay for a spiffy new administration building?

Conclusion: For the reasons stated, we believe it would be/is a misuse of NRS 318.197(1) [the power to fix rates, tolls and charges] to use the RFF/BFF and the utility rates the District involuntarily assesses to fund acquisition/construction of a new administration building.

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1. See A.G.O. No. 63-61, p. 102, at p. 103 (August 12, 1963).
2. See NRS 318.116.
3. See NRS 318.055(4)(b).
4. See NRS 318.055(4)(a).
5. NRS 318.077 allows a GID “board (to) elect to add basic powers not provided in its formation, in which event the board shall cause proceedings to be had by the board of county commissioners similar, as nearly as may be, to those provided for the formation of the district, and with like effect.”
6. See Thomas v. Nev. Yellow Cab Corp., 130 Nev. Adv. Op. 52, 327 P.3d 518, 521 (2014).
7. See NRS 318.010.
8. NRS 318.015(1) instructs that “each district organized pursuant to the provisions of this chapter shall be a body corporate and politic…quasi-municipal corporation” and general improvement district. 
9. See NRS 318.225 which states GID “board(s) shall have power and authority to levy and collect general (ad valorem) taxes on and against all taxable property within the district.”
10. NRS 354.534 instructs that a local government’s General Fund shall be “used to (financially) account for all financial resources except those required to be accounted for in another fund.” There is no other fund which mandates ad valorem taxes be reported in any other fund.
11. ¶1.0 of Policy No. 16.1.1 mandates that unless expressly exempted (see ¶4.0 of Policy No. 16.1.1), all “qualifying real properties (in the)…District will (be) charge(d) the prescribed Recreation Fee, and if applicable, the Beach Fee.” ¶14.05 of the District’s sewer ordinance and ¶9.06 of the District’s water ordinance both mandate that “the Owner of any building…structure…or…premise…shall be…responsible for payment” of charges for public sewer and water services furnished by the District.”
12. When one budgets to overspend and rely upon a financial subsidy like the RFF/BFF to cover the shortfall, it’s disingenuous to “cherry pick” what overspending is being subsidized. The fact of the matter is that every expenditure contributes to that overspending!
13. Policy No. 7.1.0 which addresses the “appropriate level of fund balance:” “NAC 354.650 requires a budgeted fund balance of 4%, based on the actual expenditures of the General Fund’s previous fiscal year;” and, “the Government Finance Officers Association (‘GFOA’) recommends…that general-purpose governments [given IVGID is not a general-purpose government but rather, a limited purpose special district (see discussion above), the District really requires less than what the GFOA recommends], regardless of size, maintain Unassigned Fund Balance in their General Fund of no less than five (5%) to fifteen percent (15%) of regular General Fund operating revenues. Given the District’s 2020-21 General Fund expenditures totaled $4,521,650 (see Schedule B-10, at page 9 of the 2022 Budget), and a General Fund balance of $4,897,052 (see Schedule B-9, at page 8 of the 2022 Budget), the unassigned fund balance represents nearly 108% of expenditures; over 27 times NAC 354.650(1) requirements! And given the District has budgeted 2021-22 General Fund operating revenues at $3,850,140, and a General Fund balance of $4,897,052 (see Schedule B-10, at page 9 of the 2022 Budget), the unassigned fund balance represents 127% of regular operating revenues; nearly 8.5-25.5 times GFOA recommendation!
14. See ¶II, at page 9 of Legislative Commission of the Legislative Counsel Bureau, State of Nevada (“LCB”), Bulletin No. 77-11, Creation, Financing and Governance of General Improvement Districts, September 1976 (LCB Bulletin 77-11).
15. See NRS 318.225 which states “the board shall have power and authority to levy and collect general (ad valorem) taxes on and against all taxable property within the district, (and) such levy and collection (shall)…be made…in conjunction with the county and its officers as set forth in this chapter.”
16. Each fiscal year the Nevada Department of Taxation’s (“NDOT’s”) Local Government Services Division publishes its equalization of property tax rates for all local Nevada governments which levy an ad valorem tax (those rates are certified by the Nevada Tax Commission) given NRS 361.453(1) caps the maximum statewide tax rate at 3.64% per $100 of assessed valuation, This publication is commonly known as the “Redbook.” If the reader examines page B-10 the NDOT’s latest (2021-22) Redbook he/she will find that the tax rates for both Washoe County and IVGID. Washoe County’s is 1.3917% per $100 of assessed valuation, and IVGID’s is 0.1328%. In other words, the county’s tax rate is nearly 10,5% times IVGID’s!
17. Take a look at the District’s latest (2021-22) Budget. At Schedule B-9, page 8 it reports $4,788,553 of estimated actual year ending June 30, 2021 revenues. At Schedule B-10, page 9 it reports $4,521,650 of estimated actual year ending June 30, 2021 expenditures. But $1,471,440 of revenues come from “central service cost allocation(s).” And as elsewhere explained, this allocation is really a financial subsidy to the General Fund which comes from the RFF, BFF and the utility rates and charges local parcel owners are compelled to pay/guaranty. When this subsidy is deducted from revenues, we see that for 2020-21 the District actually overspent $1,204,537! When you budget to overspend, it’s disingenuous to “cherry pick” any single source and assign payment. It’s every expenditure! And so here the Board has budgeted to overspend for State legislative advocacy services.
18. See Schedules B-12 at page 17 and B-13 at page 18 of the 2019-20 Budget. For instance, the District’s Community Services Fund was budgeted to incur $27,197,671 of expenditures (see Schedule B-13, at page 18 of the 2019-20 Budget). Yet revenues were only budgeted to total $16,815,665 (see Schedule B-12, at page 17 of the 2019-20 Budget).
19. For 2019-20: $561,800 of transfers from other funds (see Schedule B-12, at page 17 of the 2019-20 Budget); $4,037,091 of draw downs from the Community Services Fund balance (see Schedules B-12, at page 17 and B-13, at page 18 of the 2019-20 Budget); $5,783,115 of RFFs (see Schedule B-12, at page 17 of the 2019-20 Budget); and, the excess balance in the District’s Community Services Fund created from past excess RFFs
20. See Schedule B-14 at page 19 of the 2019-20 Budget. For instance the District’s Beach Fund was budgeted to incur $3,105,629 of expenditures (see Schedule B-14, at page 19). Yet revenues were only budgeted to total $1,511,300 (see Schedule B-14, at page 19).
21. For 2019-20: $625,729 of draw downs from the Beach Fund balance (see Schedule B-14, at page 19 of the 2019-20 Budget); $968,500 of BFFs²⁰; and, the excess balance in the District’s Beach Fund created from past excess BFFs.
22. NRS 704.040(1) instructs that “charges made for any (utility) service rendered or to be rendered, or for any service in connection therewith or incidental thereto, must be just and reasonable.” Just and reasonable utility rates are defined as those which are “simply high enough to produce revenue sufficient to bear all costs of maintenance…operation…interest charges on bonds and…accumulation of a surplus…sufficient to (service) all outstanding bonds” [see Springfield Gas & Electric Co. v. City of Springfield (1920) 292 Ill. 236, 126 N.E. 739, 744 (affirmed at 257 U.S. 66, 42 S.Ct. 24) – this case has been cited as authority for the proposition stated in Nevada by the Office of Attorney General (“OAG”) at A.G.O. No. 53-231 (February 9, 1953)]. Since here the District has a monopoly on the water and sewer services it furnishes, its only justification for going into the utility business is that public welfare will be subserved (Springfield Gas, supra, at 126 N.E. 748), profits are impermissible [See Clean Water Coalition v. The M Resort, LLC. (2011) 127 Nev. 301, 255 P.3d 247, 256; City of Madera v. Black (1919) 181 Cal. 306, 314, 184 P. 397]. We submit that the central services costs staff assign to the District’s Utility Fund are excessive. And because they are excessive, not only are the utility rates the District charges its customers unjust and unreasonable, but the excess portion represents an impermissible local and special tax (see discussion below).
23. See page 129 of the packet of materials prepared by staff in anticipation of the Audit Committee’s August 10 2021 meeting (“the 8/10/2021 Audit Committee packet“).
24. See page 130 of the 8/10/2021 Audit Committee packet.”
25. See pages 27-30 of the District’s 2019 Comprehensive Annual Financial Report (“the 2019 CAFR“).
26. See pages 25-28 of the District’s 2020 Comprehensive Annual Financial Report (“the 2020 CAFR“).
27. See Schedule B-9, at page 8 of the 2021-22 Budget.
28. See State v. Medeiros (1999) 89 Hawaii 361, 370, 973 P.2d 736, 745.
29. See Clean Water Coalition, supra, at 255 P.3d 257-258.
30. That’s right. The District maintains but a single checking account. But for investments in income producing vehicles like certificates of deposit, day-to-day revenues and expenses are made into/out of a single checking account. Those transactions are reported in various accounting funds through a chart of accounts legend which assigns unique identification names and numbers to each transaction. Summaries can then be prepared using one or more software sorting programs.
31. See NRS 704.040(1) which instructs “the charges made for any (utility) service rendered or to be rendered, or for any service in connection therewith or incidental thereto, must be just and reasonable.”
32. Which states that “any bailee of any money, goods or property…with whom any money, property or effects have been deposited or entrusted, who uses or appropriates the money, property or effects or any part thereof in any manner or for any other purpose than that for which they were deposited or entrusted, is guilty of embezzlement, and shall be punished in the manner prescribed by law for the stealing or larceny of property of the kind and name of the money, goods, property or effects so taken, converted, stolen, used or appropriated.”