MINUTES OF THE

      ASSEMBLY COMMITTEE ON TAXATION

 

      Sixty-seventh Session

      June 26, 1993

 

The Assembly Committee on Taxation was called to order by Chairman Robert E. Price, at 1:30 p.m., on Saturday, June 26, 1993, in Room 331 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

      Ms. Myrna T. Williams, Vice Chairman

      Mr. Rick C. Bennett

      Mr. Peter G. Ernaut

      Mr. Ken L. Haller                  

      Ms. Joan A. Lambert

      Mr. John W. Marvel

      Mr. Roy Neighbors                  

      Mr. John B. Regan

      Mr. Michael A. Schneider

      Mr. Larry L. Spitler               

 

STAFF MEMBERS PRESENT:

 

      Lorne Malkiewich, Legislative Counsel

      Kevin Welsh, Fiscal Analyst

 

OTHERS PRESENT:

 

      Sam McMullen, Washoe County

      Mary Walker, City of Carson City

      Howard Barrett, Nevada Taxpayers' Association

 

Following roll call, Chairman Price opened the hearing on SB 506.

 

SENATE BILL 506 -Makes various changes relating to supplemental city-county relief tax.

 

Opening testimony was offered by Sam McMullen, representing Washoe County.  Leaving the technical aspects of SB 506 in its first reprint to Lorne Malkiewich, Legislative Counsel, Mr. McMullen explained to the committee the bill related to and was part two of AB 104 of the 66th Session.  AB 104, he explained, was a resolution of Fair Share issues between Washoe County and Clark County.  A secondary set of issues were related to other exporting counties which were, in fact, still exporting completely to Washoe County.  The final outcome, Mr. McMullen said, was a phase-out of the export to Washoe County over a five-year period.  Specifically, those payments would be over during FY 1995/96. 

 

As a feature of AB 104 of the 66th session, there was an assumption made in respect to figures attributable to sales tax revenue for Churchill County which were overstated, Mr. McMullen pointed out.  This overstatement was not through the fault of any particular county, and not truly the fault of the Department of Taxation, except the Department's system allowed for the reporting of revenues on a form which had Churchill County's name at the top.  It had been difficult, therefore, to determine what the situation was, but these revenues were all credited to Churchill County. 

 

Because this happened, Mr. McMullen remarked, there was an inflated number for Churchill County which made it an exporting county; and this was added into the bill for the purpose of what was called the "Washoe adjustment" as an exporting county.  This had been subsequently determined to be incorrect with respect to the numbers.

 

Ultimately, Mr. McMullen pointed out, SB 506 was a correction of the Churchill County issue.  He said there would continue to be payments made to Washoe, but the question was how to find an acceptable way to evaluate the loss to Churchill County.  Mr. McMullen called on Mary Walker to come forward to help explain that aspect.

 

Mary Walker, representing the City of Carson City, submitted Exhibit C, a spread sheet drawn up to display "Scenario I, Churchill Error Adjustment."  Ms. Walker said they had tried to determine what the actual error caused as far as dollar losses to Churchill County.  Basically, the error had caused Churchill County tax collections to appear higher than they really were.  To try to correct this, Ms. Walker explained they had gone back to the original documentation presented by different county staff to the Legislature, and reworked the numbers as if they had the correct sales tax collection numbers.

 

Continuing, Ms. Walker indicated over the five-year period of the phase-in, the total loss to Churchill County was $588,000.  With this figure at hand, they had allocated the loss amongst the different counties as far as aiding Churchill in the effort.  Subsequently, the back-up documentation had been taken to all the counties involved as well as the Nevada Association of Counties, and a formula was developed which had been agreed upon by the counties.  Ms. Walker then went on to review Exhibit C.

 

Mrs. Williams was puzzled regarding the time elements.  She noted AB 104 had only been in effect for two years.  Why were they paying for five years? she asked.  Basically, Ms. Walker said, the revenues for Churchill County were too high when AB 104 was developed.  The proposal was for a five-year adjustment, of which they were presently in year two. 

 

With all this to take into consideration, Mrs. Williams wished to know how the property taxes in Washoe County could be reduced.  In response, Mr. McMullen remarked early in negotiations for SB 506 there had been some concern to retire these taxes as soon as possible.  Thus, a commitment was made to try and reduce, in advance, a portion of the property tax  relating to some of the payments made as a function of AB 104.

 

Mrs. Williams maintained she had made a commitment to Fair Share, but this meant fair share for everyone, including Churchill County and all the other rural counties.  She did not believe SB 506 was the way to do it.  She believed, in fact, there was inequitable treatment for all the other counties and special treatment for Washoe County.

 

Mr. McMullen answered they had tried to rectify the inequities and when everything was straightened out, he believed there should at least be parity within the two groups [Washoe and Clark counties].

 

Adding to the information, Lorne Malkiewich, Legal Counsel for the Legislative Counsel Bureau, came forward.  Mr. Malkiewich reviewed the bill section by section.

 

Mr. Schneider questioned the language on page 3, line 24, regarding the Santini-Burton Act and its applicability.  Mr. Malkiewich responded that language related to determining basic ad valorem revenue; and this ad valorem review, as defined in subsection 5, was a 1981 number.  Adjustments had to be made to this.  It was what was called a second-tier SCCRT distribution, Mr. Malkiewich pointed out.  The initial distribution was what he had been discussing, i.e., how much each county received, whether they were a rural guarantee county or whether they received a percentage.  The second-tier distribution to all local governments within the county was governed by the 1980-1981 ad valorem revenues for the county.  In computing basic ad valorem revenue, the remaining subsections increased, decreased, included or excluded certain provisions, and this was one of those provisions.  It merely spoke to the assessed value of a fire protection district and transfers from private to public ownership.

 

Referring to page 4, Section 1.3, Chairman Price asked for an explanation.  Mr. Malkiewich said Sections 1.3 and 1.6 amended AB 104 from the 66th session and adjusted the adjustments.

 

Mrs. Williams questioned why Eureka County was designated a rural guarantee county.  In response, Mr. Malkiewich referred to page 1, line 7, where existing language showed Eureka as a rural guarantee county.  By way of explanation, Mr. Malkiewich said Eureka had generated more sales tax revenue than they had received, thus, they had grown out of the rural guarantee status.

 

Mr. McMullen observed there had been immense cooperation, fair treatment and sensitivity between the counties in addressing the issue and the problems.  He commended all the parties who had labored to reach a fair and equitable adjustment.

 

Bjorne Selinder, Churchill County Manager, echoed the sentiments expressed by Mr. McMullen in respect to the cooperation shown in trying to resolve the issue, and he expressed his appreciation for their efforts.

 

      ASSEMBLYMAN MARVEL MOVED TO DO PASS SB 506.

 

      ASSEMBLYMAN ERNAUT SECONDED THE MOTION.

 

      THE MOTION CARRIED UNANIMOUSLY BY THOSE PRESENT.

 

SENATE BILL 550 -Provides exemptions from increases in certain taxes for labor and materials used for construction contracts executed before increase is adopted.

 

Chairman Price refreshed the committee members' memories by recalling the Taxation Committee had passed a bill during the 1991 session to address the problems arising when a contract had already been bid and let before the new business tax levy was enacted.  The bill would have allowed an exemption to those jobs for the duration of the construction project.  This bill, however, had been vetoed by the Governor.  Assisting in the explanation, Mr. Malkiewich said SB 550 often referred to July 1, 1991 which related to certain taxes approved by the 1991 Legislature and did what the Chairman had indicated.  Mr. Malkiewich then reviewed and explained SB 550 section by section.

 

In response to Mr. Marvel's question, Mr. Malkiewich said he was not certain whether the Governor had any objection to AB 550.

 

      ASSEMBLYMAN ERNAUT MOVED TO DO PASS AB 550.

 

      ASSEMBLYMAN MARVEL SECONDED THE MOTION.

 

Mrs. Williams asked if there was any objection shown to the bill when it was heard in the Senate.  Kevin Welsh, Fiscal Analyst, replied there was no real opposition, however, there had been some discussion of an amendment which would exclude those binding bids with acceleration clauses.  However, there was no one from the Administration who objected to the bill, he said.

 

Representing the Nevada Taxpayers' Association, Howard Barrett pointed out AB 550 was a bill his organization had worked on and supported.  He did allow they would support the amendment mentioned by Mr. Welsh which would exclude from the exemption those contracts which already had an escalation clause based upon the increase in taxes.  He ascertained this had been discussed with the Senate.  Mr. Barrett did not know why the Senate had not adopted the amendment, but he did not believe it was an intentional omission.

 

Mr. Marvel asked how many contractors would be affected by the bill.  In response, Mr. Barrett said he did not believe it was a very large number, but the whole issue was a matter of fairness.  Mr. Welsh also recalled this was not a very large number.  The bill would not have a fiscal effect because it did not make it exempt from existing taxes -- it made it exempt from the new taxes which came on after a bid.

 

      THE MOTION TO DO PASS AB 550 CARRIED UNANIMOUSLY BY THOSE PRESENT.

 

There being no further business, the meeting was adjourned at 2:06 p.m.

 

                                          RESPECTFULLY SUBMITTED:

 

 

                                                                 

                                          Iris Bellinger

                                          Committee Secretary

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Assembly Committee on Taxation

Date:  June 26, 1993

Page:  1