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States try to ease property-tax rise

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The pressure is particularly intense in some of the nation's hottest real estate markets. Nevada, for one, last month signed into law the two-year cap on property taxes, which limits increases to 3 percent a year on single-family primary residences and 8 percent on commercial property and second homes.

Valued at $60 million

Behind the effort was a tax revolt started by the residents of Incline Village, a small community on Lake Tahoe, about 35 miles south of Reno. Property values, particularly along the lake, have risen at eye-popping speed. Over the past year, the median price of a home in Washoe County (which includes Reno) rose from the low $200,000 level to more than $270,000. Along the lakefront, prices are astronomical: One property is listed for sale at $60 million. Some residents are paying as much as $75,000 a year in property taxes.

"It's a closed development - there is no more developable land - so people can ask ridiculous prices and get it," says Ted Harris, chairman of the tax-revolt committee of the Village League to Save Incline Assets. "I'm retired and on fixed income, and I don't know if two or three years down the road, I can afford to live in my house."

Right after it was finished in 1989, the Harris house was assessed at about $400,000. Today, the assessor says it's worth $1.2 to $1.3 million. His property taxes have climbed from $2,200 per year in 1990 to $12,000 today.

Incline's predicament, combined with other warnings about people being forced out of their homes, helped precipitate the Nevada legislation. Now, an interim committee is studying a constitutional amendment to change the way property taxes are figured. Yet another Nevada legislator is introducing an amendment similar to California's Proposition 13. "This is all pretty exciting," says Mr. Harris. "And I may have been the spark that started this revolution."

In Maine, the spark has come from an unusual alliance: the Teachers Association and the Municipal Association, which represents municipalities. The alliance had one goal: to get the state to pay a larger share of the cost of education. If it could get that to happen, then property taxes could possibly come down.

This year, there will be scattered property-tax relief of between 3 to 5 percent as the state starts to pick up a larger share of education costs. "There has been some talk of a constitutional amendment, maybe going away from an ad valorem tax," says Michael Starn, communications director at the Municipal Association.

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