CARSON CITY – A delay in federal payments to Nevada’s counties is not anticipated to cause any financial problems for the cash-strapped local governments, officials said in interviews last week.

Nevada and other western states were notified last Wednesday that Payment in Lieu of Taxes funds from the U.S. Department of Interior for fiscal year 2010 will be delayed until July, a move that was criticized by Rep. Dean Heller, R-Nev.

The payments to Nevada’s 17 counties, meant to provide compensation to offset the amount of land controlled by the federal government and thus not contributing to the tax base, are an important source of funds to the counties, said Jeff Fontaine, executive director of the Nevada Association of Counties.

“The most important thing is they get the money and they get the full amount appropriated,” he said.

Fontaine said he has not yet heard of concerns from any of the state’s 17 counties that the delay in the payment from June to July will cause any cash flow concerns.

Churchill County Commissioner Norm Frey said the delay is not expected to be an issue. The payment is expected by July 16, he said. The county received just over $2 million in payments in fiscal year 2009.

“If it is a couple of weeks delay it is not going to create any problems for us at this time,” he said. “We should be in pretty good shape.”

But the county has other financial problems, including sales tax revenues that are expected to be $2 million lower than projected by the end of this fiscal year, Frey said.

Assemblyman Pete Goicoechea, R-Eureka, said he does not believe the delay will be an issue for the counties, as long as the payment coming next month is the full amount. U.S. Sen. Harry Reid, D-Nev., worked to get full funding for the payments, and any delay raises concerns about whether the full amount will be provided, he said.

If a county was relying on the payment to make it through the 2010 fiscal year that ends June 30 it could cause a problem, but Goicoechea said that would be an example of bad budgeting practices.

Fontaine said the payments can be substantial to rural counties with limited revenues. Humboldt County received $1.6 million in payments in 2009, Lyon, just over $2 million, Mineral County, $728,000, and Nye County almost $2.9 million.

While the delay should be only a minor convenience, it comes on top of another financial hit to several Nevada counties that have been receiving royalties from the Department of Interior on the sale and lease of BLM lands for geothermal development, Fontaine said.

In what he said was described by the agency as an oversight, the payments that have been made since 2005 are instead going to the U.S. treasury, he said. Nevada’s Congressional delegation is attempting to restore the funding through legislation but it has not yet happened, he said.

Despite the change, some payments had already been made to counties and now the Interior Department is demanding repayment of those funds by the end of the year, Fontaine said.

Payments were being made to 31 counties in six states, with Nevada having five of the top 10, he said.

“For some of the counties it is a huge amount of money,” Fontaine said.

Frey said Churchill is one of those counties getting a repayment notice, having been asked by the Interior Department to return $180,000.

“It was paid to us and we figured it was committed,” he said.

The royalty payment is worth about $4 million annually to Churchill County.

Frey said the county has seven operating plants in the county now.

Heller and several colleagues have asked that the royalties be restored in the tax extenders bill now under consideration.

“Some of our Western counties have as little as 2 percent taxable land base, and geothermal revenue sharing provides a funding stream that allows communities to fund vital services such as law enforcement, emergency health care and search and rescue,” the lawmakers said in their letter. “During these difficult economic times, the retention of this amendment in the final version of the bill is vital.”

Frey said the royalty payments, established in 2005 with the help of then Rep. Jim Gibbons, R-Nev., have totaled about $40 million and have helped the counties through tough times.

Goicoechea said he is concerned that the size of the federal deficit could mean a new and growing effort to eliminate programs and revenues to the counties.

“I’m afraid this is just the start,” he said. “I’m very concerned in the end they are going to have to take a lot of this money back.”

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Audio clips

NACO Ex. Direct. Jeff Fontaine on delay not expected to be a problem:

061810Fontaine :34 something about that.”

Assemblyman Goicoechea on concerns about delay:

061810Goicoechea1 :26 to be for.”

Goicoechea on potential loss of federal funds:

061810Goicoechea2 :8 $13 trillion dollars.”

Churchill Commssioner Frey on value of geothermal payments to counties:

061810Frey :26 like that, so.”