MINUTES OF MEETING
ASSEMBLY COMMITTEE ON TAXATION
Sixty-seventh Session
May 6, 1993
The Assembly Committee on Taxation was called to order by Chairman Robert E. Price at 1:34 p.m., May 6, 1993, in Room 332 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda, Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Mr. Robert E. Price, Chairman
Mrs. Myrna T. Williams, Vice Chairman
Mr. Rick C. Bennett
Mr. Peter G. Ernaut
Mr. Ken L. Haller
Mrs. Joan A. Lambert
Mr. John W. Marvel
Mr. Roy Neighbors
Mr. John B. Regan
Mr. Michael A. Schneider
Mr. Larry L. Spitler
COMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Ted Zuend, Deputy Fiscal Analyst, Legislative Counsel Bureau
Lorne Malkiewich, Legislative Counsel
OTHERS PRESENT:
John Sherman, Management Analyst for Washoe County
Lieutenant Jim Nadeau, Assistant Commander, Washoe County Sheriff's Office
Barbara McKenzie, Legislative Coordinator for the City of Reno
Richard Kirkland, Chief, Reno Police Department
Paula Berkley, Walker River Paiute Tribe and Washoe Tribe of Nevada and California
Ray Sparks, Chief Registration Division, Department of Motor Vehicles and Public Safety
Anita Collins, Chairman, Walker River Paiute Tribe
Richard Millsap, sixth grade teacher, President of Nevada Education Association
Jim Pruss, Principal, Schurz Elementary School and Chairman, Mineral County School District Bond and Facilities Committee
Jim Bradstreet, Superintendent, Mineral County School District
Donna Glaser, Mineral County Trustee
Paul Kroh, Colt Service Center, Battle Mountain
Kirk French, Birney Brothers
Dave Ramsdell, Battle Mountain Shell dealer
Perry Comeaux, Executive Director, Nevada Department of Taxation
Viola Kennison (Carries Eaglefeather), Taxation Director, Walker River Paiute Tribe
Tom Grady, Executive Director, Nevada League of Cities
Michelle Bero, Nevada Association of Counties
Ann Mahoney, owner, Circle M Gas, Yerington
Steve Mahoney, owner, Circle M Gas, Yerington
Lindsey Manning, Tribal Chairman, Shoshone Paiute Tribe, Duck Valley Indian Reservation
Paul Snooks, Chairman, Battle Mountain Band Council
Ed Douglas, owner, Truck Inn, Fernley
Chairman Price announced the room had been changed in order to avoid a conflict with the teleconferenced SIIS hearing to be held in Room 119. He said the hearing on AB 458 would commence following testimony on the first two agenda items.
Chairman Priced called for testimony on AB 395. The bill explanation for AB 395 is attached as EXHIBIT C.
Assembly Bill 395 - Establishes maximum rate of ad valorem tax levied for support of jail for Washoe County and cities of Reno and Sparks. (BDR S-875)
John Sherman, Management Analyst for Washoe County, prefaced his prepared remarks, which are attached as EXHIBIT D, by saying the bill needed an amendment on line 10 to change the "not to exceed" rate to 7.74 cents per hundred. He stated the original language reflected an oversight.
In answer to a question from Mr. Marvel, Chairman Price stated the current Washoe County tax rate was $1.248, with a total combined rate of $2.43.
Answering Mr. Spitler, Mr. Sherman stated if this bill did not pass, it would initiate a set of dynamics which would put the jail's administration in a precarious position. Those dynamics played federal court requirements off against the state statutes and laws which made certain acts crimes. Various overlaps in Washoe County's jurisdictional structure, together with state and federal authorities, meant arrest powers were straining the capacity of Washoe County's jail. He noted the ability of the area to fund growth had not kept up with the demand for adhering to the constitutional requirements for the jail. If AB 395 did not pass, other services such as parks, libraries, fire services, et cetera, would be compromised for the benefit of the jail.
Mr. Sherman responded to a second question from Mr. Spitler by estimating passage of AB 395 would generate approximately $200,000 per year for operation of the jail. If it did not pass, $200,000 would have to be taken from other budgets. He did not know specifically which budgets would be cut or by how much.
Lieutenant Jim Nadeau, Assistant Commander, Washoe County Sheriff's Office, answered a question posed by Mr. Regan. He explained the Sheriff's office was currently working with the Department of Human Resources trying to deal with the mentally incapacitated inmates, to work out a program whereby those inmates would be cared for by mental health, not the jails. Implementation of such a program would free up more space at the jail.
Mr. Regan inquired what the capacity of the Washoe County jail was. Mr. Sherman responded the theoretical capacity was 559. The current population was over 700 and, although the jail had been double-bunked, there were inmates sleeping on the floor. He also pointed out the county had leveraged some federal institute of justice dollars and built an additional lower security misdemeanor facility which housed work release inmates who only stayed in jail at night. The real test of the true maximum capacity of the jail would be determined when an inmate brought suit against Washoe County and succeeded at the federal level. He felt such would happen sooner or later. He added this bill only provided funding for operations and maintenance for the existing facilities which was the pressing problem.
Mrs. Williams asked why this issue had not gone before the voters rather than surface in AB 395. Mr. Sherman stated that was a good question. After a brief discussion, Chairman Price asked, if passed, would the measure have to go before the Washoe County Board of County Commissioners and be subject to its open meeting process in order to be enacted. Mr. Sherman confirmed it would. AB 395 would only authorized the board to go forward with the hearings on fixing the tax rate which would generate the incremental increase in tax.
No one spoke in opposition to AB 395.
MR. REGAN MOVED TO AMEND AND DO PASS.
MR. SCHNEIDER SECONDED THE MOTION.
THE MOTION PASSED WITH MR. NEIGHBORS, MR. SPITLER, MR. ERNAUT AND MRS. LAMBERT VOTING NAY.
Mrs. Williams noted she would hope this method would not be used in the future. The county should go directly to the voters on taxation issues.
Mr. Ernaut commented he agreed with Mrs. Williams' views. He added the subject assessment had originally gone to the voters as a bond measure which specifically stated it would be a decreasing burden on the taxpayers. He felt the voters should have made this decision.
SENATE BILL 267 -Repeals prospective expiration of certain provisions allowing creation of taxing district for additional police protection or for maintenance of improvements. (BDR S-1786)
The bill explanation for SB 267 is attached as EXHIBIT E.
Barbara McKenzie, Legislative Coordinator for the City of Reno, together with Chief Richard Kirkland, Reno Police Department, were present to speak in support of SB 267. Ms. McKenzie's written remarks are attached as EXHIBIT F. She added to her prepared comments, this bill passed the Senate unanimously.
Chief Kirkland added he supported the bill. He stated the bill was the result of an agreement between the downtown property owners and the City of Reno. The property owners had agreed to fund up to fourteen officers, their equipment and attendant costs, including the increase in those costs in the future. He stated the Police Department had wanted to provide those services but it was not feasible within existing budget constraints. He explained the department's budget had been decreasing by approximately $2 million per year while costs for providing the same level of services had increased by almost $1.8 million per year. He saw this as an excellent partnership opportunity to provide additional services in the downtown area.
No one spoke in opposition to SB 267.
MR. MARVEL MOVED DO PASS.
MR. REGAN SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
ASSEMBLY BILL 458 - Provides exemption for Indian reservations and Indian colonies from imposition of certain taxes on motor vehicle fuel and special fuel under certain circumstances. (BDR 32-290)
Lorne Malkiewich, Legislative Counsel, was first to speak regarding the constitutionality of the measure. A position paper, from which he spoke, written by Risa Berger, Deputy Legislative Counsel, is attached as EXHIBIT H. Concluding his prepared remarks, Mr. Malkiewich answered a question from Mr. Spitler. He explained the bill was necessary in light of tribal right of sovereignty, because if the bill did not pass and subsequently the tribe wanted to impose a tax on the sale of petroleum products, such a tax would have to be on top of the regular taxes required by the state. Such action would result in a competitive disadvantage to the tribe. This bill would provide an exemption from the state tax, so long as the tribe charged an equal or greater tax.
Mr. Spitler asked if there was any other example where a fuel tax had been used to support anything other than the highway fund. Mr. Malkiewich replied there were a few exemptions, such as using the amount of tax raised through the sale of fuels for boats for boating facilities. Also, fees in excess of registration for license plates were used for other specified programs other than the general highway fund. However, he did not feel Article 9, Section 5 of the Nevada Constitution applied in this instance because in creating the exemption, the tax would become a tribal tax (revenue). It would be similar to a tax imposed by any other governmental entity (Canada or Japan); Nevada would have no power to dictate for what it might be used.
Mr. Malkiewich did not know, off hand, which other states might exempt fuels sold on tribal lands from taxation, but he would research the matter and report back to Mr. Spitler.
Answering a question from Mrs. Lambert, Mr. Malkiewich stated the tribes currently received a credit against gas taxes owed for tax amounts which represented taxes charged on exempted fuel sales to tribal members. In the event this bill passed, the tribes would be collecting whatever level of tax they levied from both tribal members and nonmembers.
Mr. Neighbors asked if the bill was passed and the proposed school was built by the Walker River Indian Tribe in Schurz, would the school be a private or a public school. Mr. Malkiewich stated the state would not be able to restrict the use of the tax monies by the tribe. He added, when there were competing state and tribal interests, often agreements had been reached relative to the use of the monies. However, his opinion was that specific, binding language, which provided for such uses within the bill itself, was unconstitutional. The tribe would not be precluded, in Mr. Malkiewich's opinion, from deeding the completed school over to Mineral County School District.
Mr. Marvel asked if, since the bill could not be structured specifically to provide funds for construction of the Schurz school in Mineral County, on passage the bill would apply to the entire state. Mr. Malkiewich stated it would apply throughout the state as a whole and would not restrict the use of the revenues. However, if the money was used for other purposes, the 1995 legislature could repeal the exemption, he added.
In answer to a question posed by Chairman Price, Mr. Malkiewich explained the legislature's ability to repeal this measure in 1995 affected the tribe's ability to bond the project. It would be very dangerous to base bonding on revenue streams which would be generated, inasmuch as there was no provision within the bill to pledge the faith of the state of Nevada to support the bond issue. The exemption could be taken away as easily as it was initiated. He also stated if the money was available in the general fund, funds could be allocated to either repair or replace the school at Schurz.
Discussion followed and Mr. Malkiewich responded to questioning by stating there would be no necessity to change the Nevada Constitution, Article 9, Section 5; the tribe would be responsible for making fuel tax refunds directly to truckers for taxes paid on fuels used outside the state. Also, the need for the bill was precipitated because the sovereign tribal lands were encased within the state's boundaries.
Mr. Neighbors commented he was very distressed there was no representative of the Department of Transportation present.
Next to address the committee was Paula Berkley, lobbyist for the Walker River Paiute Tribe and the Washoe Tribe of Nevada and California. Ms. Berkley opened her remarks by stating passage of this bill would allow the state to waive its interest in the collection of fuel taxes on the reservation lands. It would result in the tribes becoming the full taxing authority, similar to the state law relative to sales and cigarette taxes. It would require the tribe to charge equal or greater taxes on goods than were currently charged by the state. She added the tribes' collective experience with the Department of Taxation had always been positive and there was no reason to believe they would not continue to comply.
Ms. Berkley also explained the circumstances under which diesel fuel refunds were granted and how the tribe would go about working out a system with DMV to make those refunds to interstate truckers pursuant to the International Fuel Tax Agreement (IFTA) guidelines. They had tried to get DMV to work on a solution during the interim; however, DMV had stated they would not meet with them until after the bill was passed. She further explained there should be little difficulty making sure the tribes properly rebated taxes to truckers. If they did not do so, they would lose truckers' business.
She elaborated saying she had originally asked to have language included in the bill to specify uses for the taxes generated. But, she said, the bill drafter had declined to include the language for concern over constitutionality of such language.
In answer to a question from Mr. Marvel, Ms. Berkley stated they had originally worked up figures for the fiscal impact statement and then worked on them further with the Department of Taxation and DMV. Based on a $250,000 per year revenue stream, those revenues would be used for the basis of a 30-year bond issue. She had positively compared such a scenario with Dr. Paslov's office. One of the difficulties pointed out by Ms. Berkley was money was very difficult to obtain, even when full cash equivalents were put up for collateral. When the truck stop was built, for instance, the financing monies came from New Mexico because they could not be obtained through Nevada banks. The capital investment forecasted for the school was $3.5 million. At the beginning phase of the plan for the school, the estimated cost had been approximately $2.6 million.
Ms. Berkley submitted an information package containing background information, graphs, charts and testimony which is attached as EXHIBIT I. EXHIBIT I was referred to during various phases of testimony which followed.
Ray Sparks, Chief of the Registration Division, Department of Motor Vehicles and Public Safety, came into the meeting and testified as to the Motor Carrier Bureau's special fuel tax (primarily diesel fuel) collection procedures. He explained the tax was due on special fuels purchased and consumed in the state of Nevada. He verified Ms. Berkley's comments regarding usage, elaborating some twenty states were members of IFTA. The motor carriers affected within those states filed reports with their respective base states; then the base state remitted the proper collections to other member states through which such carrier travelled. He did not feel it would be difficult to work out a method by which the tribes could participate in those rebate procedures. Mr. Sparks did not believe Canada or Mexico were currently members of IFTA, But, regardless of whether or not an entity was a member, the taxation methodology was still the same. If a trucker was based in a state which was not a member of IFTA, he would apply directly to the appropriate state for his refund or remit tax due directly to the applicable state.
Anita Collins, Chairman of the Walker River Paiute Tribe, stated she had been working toward construction of a new school at Schurz during both her terms as Chairman. Construction of the school had been the Council's number one priority. The children who attended the school were in imminent danger due to the deteriorated physical structure, proximity to the railway which handled live explosives daily, the local high-hazard dam, the lack of fire protection, and the threat of hazardous materials transported on Highways 95 and 95A which intersect in the middle of the reservation. She presented for the committee a series of large color photographs illustrating her points. The school population was growing by about 20 percent per year which only added to the already critical crowding. She elaborated with background information on each danger posed at the school site.
Ms. Collins said the tribe had sought federal Bureau of Indian Affairs money (which was not available unless the school was made an "Indian school"), other public and private-source monies without success. The school bond issue had failed on the ballot in Mineral County three years ago. Other problems which faced the tribe were a lack of adequate housing, high unemployment, and lack of a property tax base. She was also concerned the plans being made now would be inadequate for what would be needed in twenty years.
Ms. Collins said when the truck stop was built as a tribal investment, the tribe had gone to First National Bank of Albuquerque for financing based on a Bureau of Indian Affairs Loan. No bank in Nevada would fund the program. First National Bank of Albuquerque had financed tribal projects for others. She gave an overview of the success and operations of the truck stop. She added this measure had been brought before the 1991 session of the legislature, but it had been introduced late in the session. This session they had been more organized and had garnered support from the governor, the state superintendent of schools, the Nevada State Education Association, the Mineral County School District, the Mineral County School Bond Committee and the Intertribal Council of Nevada. She added there had been widespread community and public support. She knew of no other school in the country in as desperate circumstances as the school at Schurz.
Ms. Collins explained the tribal council had exhausted all other options. This bill was the most cost effective alternative, unless the legislature passed AB 453 (currently in Ways and Means). AB 453 proposed to allocate $3.5 million from the general fund for school construction. However, she said, no one would admit to her AB 453 would be set for hearing this session. If nothing happened this session, the only other option left would be to litigate because the tribe and the school district had the responsibility to provide the children with a safe facility.
In closing, Ms. Collins stated the tribe and the community had worked at pulling the community together for the benefit of their children and to support the construction of a new elementary school. There was a disparity in the ability to fund school construction, especially in rural areas. New schools could not be built without a substantial increase in taxes. She said this bill and their tribal action plan would create a solid partnership between the tribe, the county and the state. She reminded everyone this was not just an "Indian problem," non-Indian children also attended the school at Schurz. She urged support for a quality school for all of Mineral County.
Mr. Neighbors complimented Ms. Collins on her presentation. He added passage of the $3.5 million appropriation under AB 453 (which he had sponsored) for the school would cost everyone in the state about 45 cents per year until the bond was retired. He hoped he could amend AB 453 to incorporate the $3.5 million allocation into the state bonding program.
Discussion followed relative to what would happen in the event this bill was passed, then repealed two years later, and how the profits from the project would be allocated. Ms. Collins told the committee she believed the success or failure of the truck stop depended on whether or not it provided good service and good food, not to whom the taxes were paid.
Ms. Berkley addressed the concern truck stops, like the one in Mineral County, would proliferate and create an unfair market situation. She stated gasoline stations were a high-risk, high-overhead business and did not equate to cigarette sales in a smoke shop. She read into the record a statement from the Governor's Office in support of AB 458 which is attached as EXHIBIT J.
Mr. Spitler asked if the operational expenses for the school at Schurz were paid for by Mineral County. Ms. Berkley replied the county did pay those costs. He asked if the county was willing to continue to provide those types of services if a larger facility was constructed, and would it be necessary to have a guaranty this bill would not be repealed in order to obtain bonding for the project.
Ms. Collins stated the school board had been very supportive over the past five years. The board as well as members of the community had been very supportive of putting the bond issue on the ballot. She also felt there would have to be some assurance the law would not be repealed in order to obtain bonding.
Ms. Berkley added there had been only three bond issues passed in Mineral County in the past 40 years. Ms. Collins stated they not only worked well with Mineral County but they also received services from the fire department (whose equipment was well below standard), highway patrol, and justice of the peace. Some of those service offices were housed in tribal buildings.
Mr. Spitler asserted replacing the school at Schurz was a noble cause. However, he indicated if the bill passed, he was concerned with what other services would be transferred to the responsibility of the tribe which were currently provided by the county. He remarked he felt somehow, at some level, those responsible for providing services for the youngsters at the school were not doing so.
Ms. Collins said such a situation bothered her, too. In the twenty-plus years since the roads had been turned over to the county, she knew of no work which had been done on reservation roads.
Richard Millsap, sixth grade teacher and President of Nevada State Education Association, testified the association felt the tribal council had found a viable option for dealing with a critical problem. He felt when America made a promise to provide its children with an excellent, free public education, it did not exclude certain groups of children; it was for all.
Mr. Millsap said the Schurz school situation was unique and desperate. He added Lincoln County had the oldest school which was still in use; but it was a much better school structurally. He said he had never had to appear at the state level before to solicit funds to construct a school. He asked for support of the bill.
In answer to a question from Mr. Neighbors, Mr. Pruss, Principal of Schurz Elementary School and Chairman of the Mineral County School District Bond and Facilities Committee, explained the previously presented bond issue had been for $6 million. The bond issue, if passed, would have funded the new elementary school at Schurz, a new school in Hawthorne and other facility renovations. He added the reason the bond issue was not resubmitted to a vote of the Mineral County residents was the economy had deteriorated so significantly the board did not believe it would pass. He stated the only bonds which had passed in the county were one for a fire house, one for school improvements in 1972, and one for senior facilities.
Mr. Pruss said the position of many of the residents in the county was, because of what had happened in the past, the federal government would eventually come in and handle the situation. There had been federal 815 fund money spent previously to build schools in the area. The recent contacts with the U. S. Department of Education revealed there was no money available anywhere for which Mineral County could hope to qualify. And, if it did qualify, it would significantly increase the cost of operating those improvements because of added federal regulations.
Mrs. Williams asked if Mineral County did not qualify because it had tried to fund both schools. Mr. Pruss responded by saying part of the problem resulted from some of the county's residents feeling since the Indians "don't pay taxes," the county should not spend the money on the new school. Mrs. Williams pursued her question by asking if, when Mr. Pruss contacted the U. S. Dept of Education recently, he had sought funding for just the Schurz school or for both schools. He replied he had inquired about funding for the Schurz school and as to whether other funds were available in other categories. The answer had been: there was no money available, either way. He stated the Department of Education's ranking for need addressed the number of students benefitted rather than the condition of the facility.
Mr. Pruss submitted additional written testimony which is attached as EXHIBIT K.
Jim Bradstreet, Superintendent of Mineral County School District spoke next. He read from his prepared testimony which is attached as EXHIBIT K. He digressed during his testimony to state he had come from New York and had been in Mineral County only for eight months. However, he added in the twenty-five years he had worked in the school system in New York, he had never been called on to address the legislature nor had he met a governor or legislator. He had done all those things recently and it was all new to him.
Mr. Spitler asked Mr. Bradstreet what his plan was in the event the school in Schurz was condemned. Mr. Bradstreet replied, in the event the school was condemned, the school district would have to find room within existing facilities which might mean double sessions, partial school days or using gymnasiums, cafeterias or outdoor playgrounds as instructional areas. Eventually, the district would have to build a school.
Mr. Spitler asked if the school board had made the school at Schurz its number one priority. Mr. Bradstreet answered he could not say it had with certainty, in just those terms. Mr. Spitler followed asking if the money was available today in Mineral County, would the Schurz school facility be constructed first. Mr. Bradstreet said it would be. He added he felt the school board would concur.
Mr. Spitler asked what and where the other school building on the bond issue was. Mr. Bradstreet informed him it was a kindergarten through second or third grade, primary facility, in Hawthorne. Mr. Spitler asked Mr. Bradstreet if this bill passed, and the school at Schurz was financed by the proceeds, did he believe he could sell a bond issue to the citizens of Mineral County to build the other school. Mr. Bradstreet said he thought so. Mr. Spitler interjected he found the stated situation highly discriminatory because the obligation to the children at Schurz should not rest in what some people perceived the Indians were doing. He also felt it was incomprehensible, in this day and age, anyone would take a discriminatory stand in how schools would be funded. He added the children at the Schurz school were just as entitled to safety and education as any other children in the state.
Mr. Bradstreet stated he did not disagree with Mr. Spitler. Two points were key, he thought. Two bond issues had failed and he had been informed at least part of the reason for those failures was the reluctance on the part of the voters to fund school construction on reservation land. Additionally, funding the total $8.5 million bond would put the county at its taxing limit for the next 30 years, regardless of where they were built.
Mr. Spitler asked if some debt would not be retired during the next 30 years. Mr. Bradstreet answered by stating there was no bonded indebtedness currently and therefore none would be retiring. Chairman Price confirmed Mr. Bradstreet's comments.
In discussing the bonding amount used with Mrs. Williams, Mr. Bradstreet stated the construction of the school at Schurz should have been done years ago. He agreed with her, it should have been pursued on its own, perhaps. However, he was presently trying to deal with what he had faced upon his arrival.
Mrs. Williams stated she was offended as a Nevadan and American by the idea that if the Schurz school had not been on the bond issue, the bond would have passed.
It being 3:30 p.m., Chairman Price advised those present the meeting would continue although many of the members had other meetings to attend. And, if necessary, those left would sit as a subcommittee to continue to hear testimony on the bill. Chairman Price also recognized the students from the Schurz school who were present in the audience. He thanked them for attending the meeting.
Chairman Price also informed those present he would begin accepting testimony alternately from supporters and opponents, since many people had travelled from out of the area and he wanted to accommodate both sides of the issue as fairly as possible.
Mr. Neighbors commented, unless he had misunderstood the previous remarks from Governor Miller, Governor Miller felt passage of this bill was the best way to finance this school. Mr. Neighbors pointed out, if no other fueling stations opened up, the fiscal impact was estimated at $750,000 per year. Whereas, a $3.5 million construction project could be funded over twenty years for $325,000 per year; less than half of what would be lost annually in gas tax revenue. He stated he did not feel passage of the bill was fiscally responsible.
Donna Glaser, Mineral County Trustee for the past nine years, stated she felt she could elucidate points Mr. Bradstreet had been uncertain of since he was new to the district. She explained the Schurz school was not put on the ballot by itself for a very good reason. There were only 300 voters in the Schurz area, whereas there were over 2,500 in Hawthorne, Luning and Mina. Had the bond issue included only the Schurz school, but affected all the taxpayers and voters in all the county, it could never have been passed.
Ms. Glaser said both schools were needed but the Schurz school was the most urgent, according to the Mineral County School Board of Trustees and the UNR study. She added the hardest part of the bond issue was the apparent racial prejudice factor in Hawthorne. She added it seemed to be very hard for the voters to rise above their prejudices to see the school was urgently needed for children. She made an impassioned plea for a solution to the problem now because the economic situation in Mineral County was becoming critical. She believed passage of a bond at this time was out of the question and this was the last ditch effort.
In response to a question from Chairman Price, Ms. Glaser said she was currently on the school board. She explained she lived in Schurz and worked in Hawthorne.
Chairman Price explained, prior to 1979 or 1981 the school boards had the ability to vote for ad valorem increases and forward the request for increase to the county commissioners who were authorized to increase taxes. The options available to the legislature were unlimited: It could allow for exceeding the tax cap or mandate bussing children from Hawthorne to the school at Schurz. He agreed with Ms. Glaser there was at least the appearance of prejudice on the part of the county and it was sad this issue had to be discussed at all.
Paul Kroh, Colt Service Center, Battle Mountain, was first to speak in opposition to the bill. His prepared testimony (and a letter from him to Governor Miller) is attached as EXHIBIT M. At the conclusion of his remarks he covered the tax amounts which he had paid to the county and state. He felt the negative fiscal impact, for many reasons, would be severely detrimental to the governmental entities' revenues.
Mr. Kroh expanded the transportation industry was not just one business activity. It was fuel, food, lodging, security, parking and rest stop services.
He added this bill addressed an issue of fairness. What was being addressed here was a Mineral County responsibility. He said Lander County was already over its tax rate cap and they needed a jail, schools and other facilities such as a hospital. Lander County was faced with raising over $10 million in the next two years. However, he did not believe they could raise the money through bonding because the county was already at its cap. The recent $4 million bond issue for the jail had been turned down three to one. He remarked all counties had the responsibility to take care of their own citizens. He said, "We've done an excellent job in Lander County in solving some of the problems that Mineral County hasn't solved...'cause we educate our Indians up there. We bring them into our community. I have a lot of Indians that work for me. The county takes care of the tribes up there".
Mr. Kroh said there were many taxes, which were substantial costs, paid by truck stops currently which would not be applicable to the facilities owned by Indians. It was his opinion the Indians would have a twenty-seven cent margin and there would be no way to keep them from using such a margin as an unfair competitive advantage. A general discussion on cost versus margin followed.
Mr. Kroh asked Chairman Price to include in the record a position letter from Roger Smith, Morton's Flying J Travel Plaza in North Las Vegas. Mr. Smith's letter is attached as EXHIBIT N.
Chairman Price told Mr. Kroh he had had a survey of gasoline prices done across the state and surveyed prices ranged from $1.11 in Reno to $1.59 in Battle Mountain.
Mr. Kroh stated he felt there were other solutions available. He commented he felt Mr. Neighbor's idea, as represented in AB 453, was a possibility, if Mineral County did not want to address its responsibilities. However, he felt the state's handling of the construction bond for the school would set a bad precedent because it allowed counties to cop out. Since many of the rural counties had severe economic problems he wondered what the future would bring. He hoped a solution would not be had simply by placing the burden on the back of a single industry, an industry which supplied a great amount of revenue to the state and county governments and which brought in federal matching funds to support the highways.
Mr. Kroh pointed out four years ago the legislature passed a bill to prohibit ARCO from taking advantage of other dealers in the state by pricing below cost. He concluded this proposed law would cause far more problems for rural Nevada economies than could be forecasted.
Mr. Kroh introduced Ed Douglas, Truck Inn; Kirk French, Birney Brothers; Dave Ramsdell, Shell dealer in Battle Mountain; and, Steve and Ann Mahoney of Yerington.
Paula Berkley rebutted some of the suppositions made by Mr. Kroh. She said tax was tax and if existing stations had not put any other stations out of business yet or had not become outlaws yet, they probably would not do so in the future. She said it would be illogical to believe the tribes would misuse the taxes generated by this exemption because it would lead directly to losing the exemption in 1995. She stated there was, in Nevada, an historical record between the tribes and the Department of Taxation, which demonstrated the tribes' compliance with the law to date.
Ms. Berkley read from a statement entitled If you pass this bill the Tribe will not levy the tax and put other stations out of business like in New York - Unfair Competition. She also read from paragraphs 5, 9, 10, 12, and 16 of a Resolution issued by the Lander County Board of County Commissioners, dated March, 1993, wherein the U. S. government was named as being responsible for "the unlawful, parasitical conduct of Indian Country retailers." The statement and resolution are attached collectively as EXHIBIT O. Ms. Berkley stated she felt the mind-set represented in the resolution was disgraceful.
Chairman Price announced he would take testimony from Perry Comeaux, Executive Director of the Nevada Department of Taxation, who had come from another hearing, regarding the department's historical experience relative to the agreement which existed between the State of Nevada and the Indian tribes in the state.
Perry Comeaux stated the state had, for a number of years, taken the position if the tribal governments adopted tax ordinances on cigarette sales at a rate equal to or greater than the state rate, the state would not impose the state cigarette tax on those same transactions. In 1989, he said the legislature passed laws which provided the same kind of treatment for sales tax. He stated what the department required was the tribal government to enact ordinances which imposed the tax and then file a copy with the department. He added the department had followed up with agreements with various tribes setting forth the details of the understandings, including things like the specific cigarette pricing strategy being at a level which was equal to the cost of the cigarettes plus the full amount of the tax.
Mr. Comeaux stated to the department's knowledge there had been no systematic pricing violations contrary to those agreements. He noted special coupon offers had not been considered by the department as a violation of those agreements. It was felt those practices were routine marketing strategies.
He stated although the department's dealings with the tribal governments had not always been perfectly smooth they had always been satisfactory. They had worked together quite well.
In answer to a question from Mrs. Lambert, Mr. Comeaux stated it was conceivable the Indian tribes could market their cigarettes at the cost-plus-tax level without adding a profit factor, without being forced to add in a factor for overhead costs. He did not know if they had actually done so. In the event they chose to operate their business out of the proceeds from those taxes, the department could not prevent it.
In answer to a question posed by Mrs. Williams, Mr. Comeaux stated the fiscal note attached was for the entire state as the tribal stations existed currently.
Mr. Comeaux told Mr. Spitler he did not know the governor's position on the bill. The only question the department had received from the Governor's office concerned administering the program if the bill was passed and the department's past experience with the tribes as to other tax collection matters. He had never discussed whether or not this bill was the best way to address the Schurz school funding problem.
A brief discussion of potential future fiscal impact followed with no resolutions offered. Ted Zuend stated the prepared fiscal note represented the minimum impact.
Viola Kennison (Carries Eaglefeather), Taxation Director of the Walker River Paiute Tribe, addressed the possibility of proliferation of tribal-owned stations throughout the state relative to interstate diesel business. She had completed a survey of the tribes in Nevada to see what their intentions were as to increasing in size or adding new stations. Four of those surveyed had responded it was their current intention to build gas or diesel stations. Those were demonstrated on a chart included in previous EXHIBIT I and were: Duck Valley Indian Reservation (increase of one gas and one diesel pump in a primarily agricultural community), Southport Indian Reservation (build one station to provide for their rural community), Duck Water Indian Reservation (increase of one gas pump to provide for their rural community), and Ely Indian Colony (add two to three gasoline pumps as an addition to their smoke shop facility).
Ms. Kennison stated those increases in services were projected to begin over the next three to five years whether or not this measure passed. Additionally, the tribe in Las Vegas indicated they did not intend to build a diesel facility due to the negative information gathered on a feasibility study. She added the Washoe Tribe and the Reno-Sparks Colony had no definite plans to build.
Ms. Kennison stated reservations and reservation businesses were different. The inability to find adequate financing for enterprises on reservations was the second leading factor in the suppression of economic development on reservations. Feasibility studies were also required to develop gas/diesel stations and those studies were costly and took a long period of time to research. There were also high start-up costs and it was a high-risk business which most tribes could not afford to enter. She also stated the trust-land status came up as a deterrent to development as it brought with it increased federal regulation and inherent costs. As well, the lack of an experienced work force on the reservation was a serious drawback to economic development.
Ms. Kennison noted the deteriorated or nonexistent infrastructure on reservation lands was also a major stumbling block to development. The expertise still did not exist within most tribes to generate agreements which were beneficial to their economies and best interests. Therefore, it was difficult to combine with outside companies to do business on the reservation.
In the event this bill did not pass, if the tribe tried to tax itself to provide for improvements and services, it would experience double taxation, Ms. Kennison added.
There was a brief discussion about the possibility of adding petroleum products to the smoke shop on South Virginia in Reno. Ms. Berkley stated there were no plans currently pending to enlarge or add to the facility. She referred to the color chart in EXHIBIT I to clarify the market share potential in the event the bill was passed.
In response to the allegation in a letter from the Mineral County Commissioners cited by Mr. Neighbors, which stated the 4-Seasons Station was undercutting gas prices by approximately 19 cents per gallon, Ms. Kennison stated she had done a survey on April 19, 1993 and the results of that survey were represented in EXHIBIT I also. She explained all the stations in the Fallon, Yerington, Schurz and Hawthorne rural area basically bought gas from the same distributors and were free to set their own sales prices to establish desired profit margins. The mean price of unleaded, as determined in a phone survey on May 5th, was established at $1.24 (see EXHIBIT I) whereas the 4-Seasons pumps at Schurz were currently priced at $1.239.
Discussion followed.
Tom Grady, Executive Director, Nevada League of Cities, stated he would make his presentation in concert with Michelle Bero, Nevada Association of Counties. Mr. Grady's and Ms. Bero's prepared testimonies are attached as EXHIBITS P and Q, respectively. In addition, Ms. Bero read from NACO's position letter of April 1, 1993, which is attached as EXHIBIT R. Also attached is EXHIBIT S, a copy of a Resolution Opposing any Cession of Fuel Tax to Indian Tribes or Colonies from the City of Lovelock, dated April 20, 1993.
In summary, Mr. Grady stated their position was not in opposition to the Schurz school but was a matter of tax policy, as it eroded local tax bases pursuant to constitutional provisions regarding application of tax revenues. He added he would be happy to cooperate with the tribal councils and the legislature to work out a solution.
Ms. Bero reiterated Mr. Grady's remarks, saying NACO's opposition was to the tax policy issue, not the need for the school in Schurz. Ms. Bero added, "When we found out about the (Lander County) resolution, we put the chairman, Ray Williams, into contact with Paula Berkley. We did not particularly care for the tone of that resolution either. The commissioners agreed to reconsider their language. They had at their earliest convenience, placed an agenda item to reconsider and change the wording of that resolution. They are, at this time, in a commission meeting and they will be changing the wording. I do not have the actual words. As soon as I have a copy, I will bring it to the committee".
In response to a question from Mr. Spitler, Mr. Grady stated there was no official committee working on alternatives to adoption of AB 458. Mr. Grady added he would try to meet with representatives of the tribal council and others, including Mr. Neighbors, within the week.
Ms. Berkley wondered where the League of Cities and NACO had been for the past twenty-five years while the school had been in a condemnable condition. She said the tribe and Mineral County had studied this issue to death. If the county had done what it was supposed to, she remarked, they would have schools and roads in good repair. She wondered where the funds were going to come from if not this bill. She observed NACO, the petroleum association, Lander County, all kept telling the committee it would result in unfair competition. She said those comments were based on fear, not facts. Even if the tribes tripled their current impact on the highway fund, it would not equal a one percent share.
Ann and Steve Mahoney, owners Circle M Gas in Yerington, submitted a chart entitled Projected Annual State Gas Tax Lost which is attached and marked EXHIBIT T. Mrs. Mahoney explained they had begun business in 1976 with a three-pump gas station. They had upgraded the underground tanks at the insistence of EPA a few years ago at a total cost of approximately $500,000, including remodeling. They had to borrow those funds and it had been a tremendous burden to assume. She felt passage of AB 458 would undermine the market. It would also create an unfair disadvantage for non-tribal merchants because profit margins in the sale of petroleum products was minimal.
In conclusion Mrs. Mahoney stated she supported the building of the school at Schurz. However, she did not feel it should be done on the backs of retail petroleum dealers.
Mr. Steve Mahoney reiterated Mrs. Mahoney's general comments. Mr. Mahoney said the amount of potential revenue from this bill which would benefit the tribes was far in excess of what was needed for the school. He felt trying to solve the school financing problem by passing this bill was akin to applying a tourniquet to the neck of a person with a broken leg. He stated the potential for excess profits through use of the gas tax funds could lead directly to increased market share for the tribal stations. He felt AB 458 represented bad legislation because of the volume of money which could be generated as compared to the lack of control over where those funds were spent.
At this juncture, Chairman Price announced, following the next witnesses, the meeting would be continued to 1:15 p.m., May 11. At that time the meeting would reconvene and the bills originally scheduled would be rescheduled to a later date.
Lindsey Manning, Tribal Chairman of the Shoshone Paiute Tribes, Duck Valley Indian Reservation in northeastern Nevada, thanked the committee for the opportunity to testify. He explained the tribe at Duck Valley had just entered into the realm of taxation, the tax codes and ordinances. He said they were researching the feasibility of building a general store which might have gas pumps. He stated he was not acting in an official capacity because the tribe had yet to do an official resolution regarding the project. However, he supported the efforts of other tribes present. He said he was present at the meeting in order to learn more about the legislative process.
Paul Snooks, Chairman of the Battle Mountain Band Council, spoke in support of AB 458. If the bill was passed, he stated the monies generated would be used for their educational programs because of the severe cuts in state and federal budgets. He said they might also use some of the funds for health care and daily-care services for their elders and the disabled. He also submitted a position paper which is attached as EXHIBIT U.
Ed Douglas, owner of the Truck Inn in Fernley, suggested he might have a solution for the Indians' financing problem for the Schurz school. "I would voluntarily put on top of our fuel tax, if we could pass something like this, ... to go to the Indians. In other words: If we voluntarily contributed one penny I would feel a lot safer." He explained his truck stop collected $883,000 a year fuel tax for the state of Nevada. The I-80 corridor collected approximately $15 million per year in tax. For every increased penny of fuel tax, approximately $1.4 million in tax revenue would be raised for the state. He talked about the current condition of the highway fund and how passage of AB 458 would negatively impact and exacerbate the problem. He did see there would be difficulty in assessing such increase because of the constitutional provision for gas taxes being used exclusively for highway projects.
Mr. Douglas added the situation was critical. He felt construction and maintenance on the state's highways could be permanently damaged by passage of AB 458. He was also worried about predatory pricing tactics because very small price differences made a tremendous difference in the fuel market.
There being no further business to come before committee, the meeting was adjourned at 5:00 p.m.
RESPECTFULLY SUBMITTED:
LINDA CHANDLER LAW
Committee Secretary
??
Assembly Committee on Taxation
Thursday
May 6, 1993
Page: 1