MINUTES OF THE
SENATE COMMITTEE ON TRANSPORTATION
Sixty-seventh Session
April 8, 1993
The Senate Committee on Transportation was called to order by Chairman William R. O'Donnell, at 1:30 p.m., on Thursday, April 8, 1993, in Room 226 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator William R. O'Donnell, Chairman
Senator Lawrence E. Jacobsen, Vice Chairman
Senator Mark A. James
Senator Leonard V. Nevin
Senator Joseph M. Neal, Jr.
Senator Thomas J. Hickey
Senator Lori L. Brown
STAFF MEMBERS PRESENT:
Paul Mouritsen, Senior Research Analyst
Terri Jo Wittenberg, Committee Secretary
OTHERS PRESENT:
Robert L. Crowell, Attorney, Representing Grand Rent A Car System
Elliott Weinstein, Vice President, Avis Rent A Car System
Chuck Saunders, District Manager, Avis Rent A Car System
Pamela S. Miller, Lobbyist, Associated General Contractors
Bernie Kaufman, President, Nevada Car Rental Association and President, Abbey Rent-A-Car
Kevin O'Callaghan, General Manager, Budget Rent A Car of Las Vegas
Harvey Whittemore, Lobbyist, Alamo Rent A Car
Raymond L. Sparks, Chief, Registration Division, Nevada Department of Motor Vehicles and Public Safety (DMV)
Kimberly A. Bennion, Lobbyist, Nevada Division of the California State Automobile Association (CSAA)
Carol Valardo, Lobbyist, Nevada Taxpayers Association
Chairman O'Donnell opened the hearing on Assembly Bill (A.B.) 323.
A.B. 323: Imposes fee on short-term rental of passenger car.
Robert L. Crowell, Attorney, Representing Grand Rent A Car System, spoke in favor of A.B. 323. Mr. Crowell said the bill would allow the rental car companies to collect a fee of 6 percent of the rental contract, exclusive of taxes or other fees imposed by a government entity. He explained that 1 percent would go to the state highway fund and the remaining 5 percent would go to defray the cost of licensing fees incurred by rental companies. He said, in the event the 5 percent exceeds the actual amount of licensing fees incurred by rental car companies, any excess would also go to the state highway fund. He said the bill would not affect any airport fees. He added, according to the Legislative Counsel Bureau Fiscal Division, the fiscal impact would provide approximately $1.25 million to the state highway fund. He said the car rental companies estimate the 1 percent to total about $1.5 million.
Senator Hickey asked what would happen if there was a short-fall of these fees.
Mr. Crowell said the rental car companies would continue to pay the licensing and registration fees, just as they always have, so there would not be no short-fall to the state in licensing privilege taxes.
Elliott Weinstein, Vice President, Avis Rent A Car System.
testified in favor of A.B. 323. Mr. Weinstein said this bill would not change the current way the license plates are purchased.
Senator Neal asked if the 6 percent would be imposed on gasoline charges.
Mr. Weinstein said gasoline would be below the line and a person would not be charged on gasoline.
Chuck Saunders, District Manager, Avis Rent A Car System, read from prepared testimony (Exhibit C) in favor of A.B. 323.
Mr. Weinstein said the Nevada license plate costs are five times the national average and he said many other states have had a need to increase the costs of these fees and it has gotten to the point where the costs to the rental car companies has gone up 60 percent in Nevada. He asked for "a level playing field with other states." He said they were not asking to pay any less up front or to expose the state to any loss of revenue. He added that 12 other states had enacted this same type of legislation.
Mr. Weinstein said that one of the questions he gets asked is "Why don't you just raise your rates?" He said one of the most significant problems with that is that the majority of the business in the car rental industry is commercial contract business. He explained under these contracts, whether someone rents in Nevada or New York, they will pay the same charge and if one of those states have higher costs than another, the industry cannot pass on those costs.
Mr. Saunders added, the majority of his business is derived from the tourism industry.
Chairman O'Donnell said that Oregon had a registration fee of $20 but their property tax was much higher and that they have "traded" the registration fees for the higher property taxes. He said he thought that California and Utah did this as well. He said Nevada has decided to increase the licensing fees in lieu of the property tax or some other fee.
Senator James asked how the rental car company's customers would perceive the state of Nevada. He said he had gone to England and felt it was not a very good place to vacation especially if a person wanted to buy things because they have a 15 percent, value added, tax on everything. Senator James said the rental car companies were asking the state of Nevada to force them to charge a tax which they will collect. He added, when the tourist sees this tax they will think Nevada is not a very "tourist friendly" state.
Mr. Saunders said most customers are now used to paying fees for taxes for license plates and some states have add-on taxes to pay for many things, such as Arizona's tax to preserve major league baseball.
Senator James said this tax would be listed on the contract.
Mr. Weinstein gave some examples of others states' tax structures regarding rental car companies. He listed: Arizona which has a 13.5 percent, combined tax; Oklahoma has a 13.5 percent combined tax; New Mexico has a 10.813 percent combined tax; and the state of Washington has a 15.1 percent combined tax.
Senator James said these figures were sales tax plus the 6 percent which this bill allows.
Mr. Weinstein said that was correct.
Senator James asked if their current contracts include cost structures for current registration fees. He also asked why the committee should pass a piece of legislation which would allow the rental car companies to recoup the entire expense. He added, they would essentially be eliminating that part of their cost structure completely. He asked if it would not be more fair to bring the registration fees down to a point where the would be in line with the rest of the country, as an average.
Mr. Saunders said a number of companies analyze their cost to license their vehicles and some companies will fall short of collecting the full amount and some companies may collect the full amount.
Senator James said he thought the small companies, which operate just in Nevada, would have more of a need for this bill than the national companies.
Senator Nevin, responding to Senator James' remarks said, he did not think the added 6 percent would not hurt tourism at all. He said he did not know anybody who came to Nevada who calls first to check on the room tax and what other taxes are charged. He said they just come here to vacation, spend money and have a good time.
Senator Brown asked how national contracts get carried out in a state, like New York, which has much higher property taxes than Nevada.
Mr. Saunders said it was "tough" for him to answer why New York would do something versus Nevada policy.
Senator Brown said that in some states they may make money and in other states they may lose money and on the average, they may be okay.
Mr. Saunders said that was true.
Chairman O'Donnell asked how often the fleet of cars turns over.
Mr. Weinstein said that varies by company and that some turn over their cars twice a year.
Pamela S. Miller, Lobbyist, Associated General Contractors, spoke in favor of A.B. 323. She said they endorsed the bill because they see this as an opportunity to give an extra $1.5 million to the highway fund.
Bernie Kaufman, President, Nevada Car Rental Association and President, Abbey Rent-A-Car, testified in favor of A.B. 323. Mr. Kaufman said the bill would really help the small businesses. He said he could not compete with the large, national companies. He said these large companies could take the high costs and spread them out over the country. He added, when a person rents a car, the rental car companies is required to disclose any fees and taxes up front.
Mr. kaufman said the bill would allow them to "compete with the big guys" and he predicted that without this bill, some of the small companies might be forced out of business due to the escalating costs.
Chairman O'Donnell said that tourism is one of the most important entities this state has to offer. He asked if the bill was to be defeated, if there was a possibility the small companies would not be able to compete.
Mr. Kaufman said that was true. Mr. Kaufman added, the escalating cost of cars has made it more difficult for them to stay competitive.
Senator Brown asked if Mr. Kaufman had any national contracts.
Mr. Kaufman said they were a strictly, local company.
Senator Brown asked how long his company had been operating in Nevada.
Mr. Kaufman said that Abbey Rent-A-Car had been doing business in Nevada for about 15 years.
Kevin O'Callaghan, General Manager, Budget Rent A Car of Las Vegas, testified in favor of A.B. 323. Mr. O'Callaghan said his company was a locally owned and franchised company. Mr. O'Callaghan said he did honor a number of national contracts and he said the national contracts put a tremendous pressure on the local companies.
Senator Brown said she was hearing two conflicting arguments from the witnesses; she said one was that the national contracts were "killing" big companies which were nationwide and the other person was saying that the big companies could balance out these costs and the little companies could not be competitive.
Mr. O'Callaghan said the large companies can spread their costs all over the country and his small franchise has to absorb the costs locally.
Senator James said he did not think the car rental industry would support a 1 percent tax on their industry, yet the industry supports this bill. He added that he was elected because he is against taxes and now his first tax bill comes before him and an industry is coming forward and saying "tax us." He asked if the industry was sure they wanted this in the law because at some point they might not want to do this anymore and they will be required to do so. He said this bill discourages people from using the rental car industry.
Mr. O'Callaghan said the industry average is $60 for license plates and Nevada is $300. He again said they wanted to be on a "level playing field."
Harvey Whittemore, Lobbyist, Alamo Rent A Car, testified in favor of A.B. 323. Mr. Whittemore said if the total number of transactions in the state, is examined, the cost would come out to about 30 cents per person. He added, currently the licensing fees are included in the contract price and the person who will bear the burden of the costs is the person who is renting the car. He said this was a "pro-disclosure bill" in terms of what the true cost is of licensing the vehicle.
Senator James asked if the costs of licensing the vehicles were included.
Mr. Whittemore said:
With respect to a portion of the contracts, that's clearly the case senator. And if I mislead you I apologize. What I was talking about is with those contracts that are traditional, walk up to the counter, pay the price of the rental car charge, it has to be included because you are going to recover those costs associated with, either $49 a day. It's going to include your labor. It's going to include your capital investment. It's going to include your costs associated with acquiring the cars and providing the service. All of those things, and including licenses and fees. I was talking about that specific class of individual. What we're talking about is clearly that within the industry, there are those national contracts where you can't recoup it. And that's what we're talking about, leveling the playing field. What I was addressing was the senator's comments with respect to whether in fact this is properly disclosed or not. So again, if I mislead you I apologize.
Senator James said:
That's fine. I just wanted to make sure I understood that. The other thing you said was the 30 cents per person. I don't know how that works out. Let's say it's $49 a day and the average tourists comes for a weekend and rents a car for 2 days. That's $80 base and they have other charges. Let's say that's $90. Well, 6 percent of $90 is not 30 cents. It's going to be a substantial amount more than that showing up on there as an additional charge for that.
Mr. Whittemore replied:
Yes. What I was talking about was the portion that was remitted, senator, to the state, the excess.
Senator James said:
I understand that. You were talking about in terms of its effect on the tourist industry and then the other point there is that it's not just 30 cents. It's something more. I don't' imagine that the resort industry of this state, which you are familiar with, would be in support of adding additional room taxes. They usually oppose those because they don't want to have their room rates bumped up to a point where they're not competitive.
Mr. Whittemore said:
They are different. They are totally different and I would like to respond if I can. First of all, with respect to the 30 cent figure, I'll tell you what I'm talking about. I'm not talking about the total tax burden because I presume that the 5 percent is already being paid by the consumer, one way or the other in the total charges. I'm talking about the net impact to the consumer by the addition of the 1 percent fee which the testimony has suggested that it's $1.2 million, would be raised as a result of the 1 percent fee. Assume 17,000 cars, total fleet cars, times 12 months times 6 days gives you about $1.2 million and the total number of people who are renting cars generally are two or three. So divide the dollar by three and you come up with the 30 cent figure. Again, I was talking about the incremental difference in terms of the cost that was being paid to the state.
Chairman O'Donnell said the reason they cannot raise their rates is because they advertise on the national level.
Mr. Whittemore said that was correct. He added, the ideal solution would be for the rental cars companies to come in and ask for a reduction in the license fees and go down from the existing rate to a rate which is more appropriate to the other jurisdiction. He said this would solve the problem.
Raymond L. Sparks, Chief, Registration Division, Nevada Department of Motor Vehicles and Public Safety (DMV), spoke with regard to A.B. 323. Mr. Sparks said the DMV was supportive of this bill. He added, he did not have a position as to whether this was good or bad tax policy and said his interest was that the DMV would administer it and they felt they could administer it effectively.
Kimberly A. Bennion, Lobbyist, Nevada Division of the California State Automobile Association (CSAA), spoke in opposition to A.B. 323. Ms. Bennion said there were two things which have raised her suspicion level. One is when they talk about a "level playing field" because when they talk about this you "better hold onto your wallet." She said the other thing that has raised her level of suspicion is when big corporations and little businesses come in and request that the legislature increase their taxes. She said consumers have to watch their wallets when both of these things happen.
Ms. Bennion said CSAA is strongly opposed to the bill and they feel it is bad for their membership. She said they were particularly opposed to the return to the rental car companies. She said she was not opposed to the state getting the 1 percent for the highway fund. She added, they were opposed to the car rental companies getting the other 5 percent return.
Senator Neal asked what was wrong with the bill.
Ms. Bennion said this was a bill which was heard in California last year which was defeated. She said CSAA see this as an effort in several states to allow the rental car companies to recoup some licensing fees in states where they allege the fees are out of the mainstream.
Senator Nevin said the California legislation did not give any part of the fee back to the state.
Ms. Bennion that was true. She said the bill was running again this year and she was not sure whether there has been a "sacrifice" made to the state.
Senator Nevin said he was very concerned about the budget shortfalls and if he could get an extra $1.2 million in the highway fund, the bill warrants some serious "looking at."
Senator Jacobsen asked if there was any track record in any of the states which have passed this bill.
Ms. Bennion said she did not have the information because CSAA only operates in California and Nevada.
Senator James said he was not sure if he understood CSAA's argument. He said, "why shouldn't people who come to Nevada, and rent a car here, bear some measure of the burden we all share?"
Ms. Bennion deferred to the next speaker to answer that question.
Carol Valardo, Lobbyist, Nevada Taxpayers Association, spoke in opposition to A.B. 323. Ms. Valardo said this bill would tax milage charges which can go as high as 15 cents per mile, in addition to the rental charge. She also wanted to know if the committee intended to have the collision damage waiver charges taxed.
Ms. Valardo asked why there was a fiscal note on local government. She said she did not know what the fiscal note could be. She said it showed no fiscal note on the state. She said it would require personnel and staff time to audit these records.
Ms. Valardo said this bill was a tax. She said this would add up to an 11 percent tax on a car rental charge.
Senator Nevin asked the rental car representatives to come up and answer the question as to whether milage and collision damage waivers would be charged the 6 percent.
Chairman O'Donnell asked if there was normally a fiscal note on a revenue enhancement measure.
Ms. Valardo said, yes, for purposes of collection because this revenue is not, in theory going to DMV. She said there is a cost to DMV. She said usually both will be shown, the revenue coming in and whether there is an offset.
Senator Hickey asked if there was a database in place within the DMV to track this 6 percent fee.
Mr. Sparks said there would be an additional task imposed upon the DMV to perform the audits. He added, that since they license the car rental agencies, they do have the database in place to take on the additional task of auditing the 6 percent fee.
Chairman O'Donnell asked if he thought the revenue enhanced would outweigh the costs involved in auditing.
Mr. Sparks said the revenue substantially outweighed the costs to the DMV.
Mr. Kaufman said the 6 percent would follow along with the sales tax, so anything that is sales-taxable would be subject to the 6 percent fee. He added, this would not include gasoline charges or collision damage waiver charges.
Chairman O'Donnell asked if the milage would be subject to the 6 percent.
Mr. Whittemore said the milage would be excluded since this is not a sales taxable item.
Chairman O'Donnell closed the hearing on A.B. 323 and opened the work session on Senate Bill (S.B.) 193.
S.B. 193: Allows department of motor vehicles and public safety to establish more flexible requirements for reinstatement of drivers' licenses.
It was determined that this bill was still in subcommittee with Senator Nevin.
Senator Nevin said this bill would probably be ready for committee at the next hearing.
Chairman O'Donnell closed the work session on S.B. 193 and opened the work session on S.B. 262.
S.B. 262: Revises fees charged for special license plate issued to holder of license for amateur radio station.
Chairman O'Donnell asked MR. Sparks if the DMV could put these license plates under the category which includes civil air patrol plates.
Mr. Sparks said this would not be a problem.
Chairman O'Donnell closed the work session on S.B. 262
SENATOR NEVIN MOVED TO DO PASS S.B. 262.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Chairman O'Donnell opened the work session on A.B. 57.
A.B. 57: Clarifies procedure for obtaining involuntary samples of blood from certain persons suspected of driving under influence of controlled substance or alcohol.
The committee discussed the bill.
Chairman O'Donnell closed the work session on A.B. 57.
SENATOR NEVIN MOVED TO DO PASS A.B. 57.
SENATOR HICKEY SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Chairman O'Donnell opened the work session on S.B. 235.
S.B. 235: Provides definition for accessory roads and clarifies rights of users of such roads.
The committee discussed the fact that there was a fiscal impact involved in the bill and it should be re-referred to the Senate Committee on Finance.
Chairman O'Donnell closed the work session on S.B. 235.
SENATOR NEVIN MOVED TO AMEND AND RE-REFER S.B. 235 TO THE SENATE COMMITTEE ON FINANCE.
SENATOR BROWN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Chairman O'Donnell opened the work session on S.B. 236.
S.B. 236: Makes certain changes relating to minor county roads.
The committee discussed the bill and Senator Brown explained the amendment.
Chairman O'Donnell closed the work session on S.B. 236.
SENATOR BROWN MOVED TO AMEND AND DO PASS S.B. 236.
SENATOR JAMES SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
Chairman O'Donnell opened the work session on A.B. 156.
A.B. 156: Authorizes department of motor vehicles and public safety to issue permit to operate unregistered vehicle to short-term lessor of vehicle.
The committee discussed the bill and the amendment.
Chairman O'Donnell closed the work session on A.B. 156.
SENATOR NEVIN MOVED TO AMEND AND DO PASS S.B. 156.
SENATOR HICKEY SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
There being no further business before the committee, Chairman O'Donnell adjourned the meeting at 4:10 p.m.
RESPECTFULLY SUBMITTED:
Terri Jo Wittenberg,
Committee Secretary
APPROVED BY:
Senator William R. O'Donnell, Chairman
DATE:
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Senate Committee on Transportation
April 8, 1993
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