MINUTES OF THE
SENATE COMMITTEE ON TAXATION
Sixty-seventh Session
June 8, 1993
The Senate Committee on Taxation was called to order by Chairman Dean A. Rhoads, at 2:20 p.m., on Tuesday, June 8, 1993, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Dean A. Rhoads, Chairman
Senator Ann O'Connell, Vice Chairman
Senator Randolph J. Townsend
Senator Sue Lowden
Senator Bob Coffin
Senator Raymond C. Shaffer
Senator Ernest E. Adler
STAFF MEMBERS PRESENT:
Kevin Welsh, Deputy Fiscal Analyst
Billie Brinkman, Committee Secretary
OTHERS PRESENT:
Perry Comeaux, Executive Director, Nevada Department of Taxation
Bob Hadfield, Executive Director, Nevada Association of Counties
Marvin Leavitt, Lobbyist, City of Las Vegas
Janice Wright, Deputy Executive Director, Nevada Department of
Taxation
Howard E. Barrett, Research Director, Nevada Taxpayers Association
Tom Grady, Executive Director, Nevada League of Cities
Mary F. Santina, Executive Director, Retail Association of Nevada
D. Gerald Bing, President, Bing Construction Co. of Nevada
Kurt Weinrich, Director, Regional Transportation Commission
Stephanie Tyler, Lobbyist, Regional Transportation Commission
Michelle Gordon-Torres, Assistant to the Director, Regional
Transportation Commission
Tom Taelour, Finance Manager, Regional Transportation Commission
(RTC)
Chairman Rhoads opened the hearing on Senate Bill (S.B.) 486.
SENATE BILL 486: Makes changes in taxing sale and use of motorboats.
Perry Comeaux, Executive Director, Nevada Department of Taxation, explained S.B. 486 would provide, for sales tax purposes, similar treatment for motorboats as provided for used motor vehicles in Nevada Revised Statutes (NRS) Chapter 374. Mr. Comeaux pointed out that what would otherwise be an occasional sale between private parties of a motorboat, would become subject to the sales tax to the fullest extent, except for the 2 percent state rate. He further explained that S.B. 486 would provide identical treatment for motorboats as defined in NRS 488.035, the provision for used vehicles. He said the fiscal note prepared by the Department of Taxation shows an estimated revenue gain of $82,608 during the first year this measure is put into effect, and a gain of $132,159 in the second full year.
Senator O'Connell said an association had requested S.B. 486 because they thought this measure would provide for collecting revenue which had not been tapped.
Mr. Comeaux outlined language which he suggested should be added to S.B. 486 on page 1, section 3, line 11. After the word "wildlife" , as an agent of the Department of Taxation. He added the same language should be added on page 2, subsection 7, line 4, at the beginning of that line. In that same subsection 7, he recommended the following language be deleted on line 4 following "price" [as a value which is based on the depreciated value of the motorboat as determined] and be replaced with shall establish the sale price which is the greater of the purchase price of the motor boat as stated in the bill of sale or other proof of purchase price or the original price of the vehicle, depreciated....
Mr. Comeaux informed the committee that any cost of collecting this proposed tax would be borne by the Department of Wildlife because that agency will be collecting the tax on private party sales when the motorboat is registered. And, Mr. Comeaux said a cost for collecting the proposed tax had not been included in S.B. 486, nor had the Department of Wildlife been consulted concerning this measure.
Chairman Rhoads closed the hearing on S.B. 486 and opened the hearing on Senate Bill (S.B.) 501.
SENATE BILL 501: Directs state board of examiners to establish maximum tax rate for certain counties.
Bob Hadfield, Executive Director, Nevada Association of Counties, and Marvin Leavitt, Lobbyist, City of Las Vegas, came forward to talk on S.B. 501.
Senator O'Connell asked if this measure is needed and Chairman Rhoads said he did not believe it is. Mr. Hadfield said, "That is a matter of conjecture on my part." Mr. Hadfield continued:
I don't know if the Department of Taxation is going to
testify with a proposed solution to this bill today.
I can tell you that all of the taxing entities had their meeting in White Pine County last night and nobody backed down on the tax rate. So they have gone through the local mechanism required by law where the entities that are a part of the overlapping rate have gotten together and the goal there is to get down to the $3.64. That did not happen. That information comes to me by way of the county clerk of White Pine County who I phoned to get current on that. Which means that the entities will proceed to the next step which is the Nevada Tax Commission. In essence, I can't speak for what the Nevada Tax Commission is going to do. Quite obviously, I am here to protect the operating rates, as I see it, of local government because I don't know what latitude the tax commission has and I am terribly concerned that if they solve the problem, will it be a 2-year solution or will the local government operating rates have to be reduced to support voter-approved public debt and will be crippled by it. This is the whole reason why I was before you with Senate Bill 326, because we were trying to deal with this issue prospectively, but I can represent to you that the information I have received is that the suggestion is the tax commission tell the school district to buy down the city rate and the unincorporated city rate. To my knowlege that hasn't been done ever since 1981. When I was involved in tax rate disputes with the $5 rate, it was uncommon for school districts to give up rates, so there are a few issues that I would like to have discussed before the committee, if for nothing else, so that everybody understands what some of our questions are and concerns about that process. I think it is necessary to discuss it, senator.
Senator O'Connell said she knows that the Senate Committee on Taxation has the power to subpoena people, and that she believes somewhere along the line, there is malfeasance in what White Pine County has done. Senator O'Connell said she would like to know who, after the General Obligation Bond Commission reviews the issue, receives that report. She said as soon as the issue had been reviewed, a "big red flag" should have been sent up. Senator O'Connell asked again who received the report and then what action was taken afterward.
Mr. Hadfield said he could not shed any light on the process. He noted apparently there were a lot of extraordinary factors at play when all this took place. Mr. Hadfield explained:
It appears to me that there was at least some concern about overlapping rates.......... None of us have ever been through the process under the new tax law to know whether or not the 75 cent school operating rate is subject to reduction, or if there is a lawsuit about these things, does voter-approved debt take precedence over everything? Or does the state of Nevada tax rate stay whole in this process? I don't know. My concern is, and the only reason for S.B. 501 is to have something, if you will, in the wings in the event that we find ourselves, while you are still in session anyway, where we get to a point where there may be a situation where somebody says they can't reduce the rate because of this. Or somebody decides they shouldn't reduce school supplies because of voter-approved debt. I don't know and I'm not qualified to speak to exactly what happened, I'm just terribly concerned about the overlapping that is taking place, the magnitude of that and wanting, obviously, to hold the local governments harmless from any of that because it is their operating rate that is on the line here.
Senator O'Connell wanted to know why that issue went to the ballot to begin with.
Senator Coffin said some concern had been expressed on Senate Bill (S.B.) 506 heard in the Senate Committee on Finance.
SENATE BILL 506: Makes various changes relating to supplemental city-county relief tax.
He said this measure could force eight or nine small counties to raise the property tax without a vote of the people, if they need the money. And, he added, that could put the tax rate up to the $3.64 cap or well over that rate.
Mr. Hadfield said that is why there is a whole series of options for revenue as it is recognized there would be counties in that position because there are five counties at the $3.64 cap presently.
Discussion ensued on S.B. 506.
Senator Adler said he has some real concerns about White Pine County. He said he believes that if S.B. 506 is passed and S.B. 501 does not pass, that White Pine County could be in a serious financial situation. And he added, he does not think this situation was done intentionally by White Pine County. He said most counties do not anticipate there will be a decline in assessed valuation.
Marvin Leavitt, Lobbyist, City of Las Vegas, explained there would be a tax rate problem in White Pine County whether there was a decline in the assessed valuation or not. He said the information, as he read it, from the report of the Bond Commission, was clearly available to White Pine County officials if there was a problem.
Discussion ensued.
Mr. Leavitt explained that S.B. 501 "provides a technical methodology done by the Board of Examiners which is provided for in the current law, by which the tax rate provided here, and a county which has been `bonds approved' in 1992 by the voters, which require a county wide rate for the repayment, and then provides methodology by which the Department of Taxation can determine if that county is indeed going to go over the normal $3.64 rate."
Mr. Leavitt continued comments, and explained a "buy down" rate.
Senator O'Connell commented she thought the Board of Examiners is being allowed to review and set property taxes which is normally the function of the Nevada Tax Commission. She said the property tax will go up and it is the people who are the losers.
Mr. Leavitt commented the current law provides that the Board of Examiners is the body associated with setting the rates. So when S.B. 501 was drafted, the same language was used. He said it would be more appropriate to change the basic law so that the Nevada Tax Commission is the agency which deals with the ad valorem tax levy. He added the existing law gives the Board of Examiners the responsibility of setting that tax levy, therefore, the Board of Examiners is the reference in S.B. 501.
Mr. Hadfield explained there is a highly unusual situation being discussed and he believes that S.B. 501 would clearly establish guidance so that such a situation cannot happen again. He remarked a long debate could be held on how or why this situation came about, but his concern is that "it did happen." And that he wanted to make sure that the operating rate of the county or city is not the only solution to a problem now being faced in White Pine County. Mr. Hadfield added he is fearful that some group may consider litigation because it is new territory. He asked should that occur, is there another mechanism in place which could solve the existing problem, or will it be the county that will pay the price, and "it is not the county's bond issue." He stressed that NACO is not disputing the need for school facilities anywhere in the state. He boiled it all down by simply saying the debt cannot be served at the expense of the operating rates of local government.
Chairman Rhoads said he would like to asked all the involved entities to attend a work session on S.B. 501 the following week, and requested Kevin Welsh, Deputy Fiscal Analyst, to see that all appropriate parties are notified.
Discussion ensued.
Janice Wright, Deputy Executor, Department of Taxation, came forward to inform the committee she had been in conversation with all the White Pine County entities involved. She said if the subject problem could not be solved within the participants, there is a provision in the Nevada Revised Statutes (NRS) 361.455, which provides that the Nevada Tax Commission hold a meeting on June 25 to reach a determination as to how the tax rate should be apportioned. She said she had explained to all the parties that under the current statutes the $3.64 cap is the limitation. She stressed that once the cap is released, a problem is created. Ms. Wright indicated it appeared that the White Pine County School District had taken the action with full knowledge that they would be exceeding the $3.64 cap. She said she had discussed with the Board of School Trustees and the Superindent of Schools of White Pine County some ways to solve the dilemma and she outlined those plans for the committee.
Ms. Wright explained there is a provision in NRS 350.0051 which deals with the General Obligation Bond Commission. She said that statute states that the members of the Bond Commission, who are made up of representatives of the county commissioners, school board of trustees and others, have to look at any proposal which is to go to a vote of the people to determine if there will be an impact on any future levies necessary by any of the government entities within a particular county. Ms. Wright said every local government cannot operate independently because they are all a part of the same county and same taxpayer base and it is important they all work together.
Ms. Wright said it appears one entity was informed there was no available revenue in the tax rate to pay for a bond issue, but that entity sold the bonds in March at a "BAA" rating which indicates there is some risk. Ms. Wright said the Nevada Taxation Department had full knowledge of this activity and had informed the school board they could not issue the bonds. Ms. Wright indicated the reply was basically, "Sure we can because there is a statute that says the Nevada Tax Commission cannot touch our operating rate." She said she explained the operating rate was 75 cents. She said the Nevada Taxation Department is aware that White Pine County nor the city of Ely should bear the brunt of this situation. She said the information is ready for presentation to the Nevada Tax Commission at the meeting on June 25, a date set by statute.
Ms. Wright said she had received numerous phone calls from angry citizens of White Pine County stating they had not been informed the bond issue would cause the tax rate to exceed the $3.64 cap. She said the school district told her the taxpayers had been well-informed. She said there appears to be a lack of communication between the school district officials and the county taxpayers.
Discussion ensued on the question as it appeared on the ballot.
Howard E. Barrett, Research Director, Nevada Taxpayers Association, came forward in opposition to S.B. 501, stating they believe it is a bailout for irresponsible action at the expense of the taxpayers. Mr. Barrett referred to a handout, "7. Effect On Tax Rate" (Exhibit C).
Tom Grady, Executive Director, Nevada League of Cities, came forward to reiterate comments made by Mr. Hadfield.
Chairman Rhoads closed the hearing on S.B. 501 and opened the hearing on Senate Bill (S.B.) 502.
SENATE BILL 502: Requires department of taxation, under specified circumstances, to provide credit or refund to retailer who has paid taxes on property sold by him but who has been unable to collect sales price.
Mary F. Santina, Executive Director, Retail Association of Nevada, explained S.B. 502 reaffirms the partnership between the state and the retail trade industry in Nevada. She indicated this measure should solve the problem of the time-line from the time a sale by a retailer is finalized and when the money is actually collected. This measure provides that sales tax is due and payable when collected so that when a bad debt is paid, then the retailer must submit the sales tax.
Perry Comeaux, Executive Director, Nevada Department of Taxation, explained a fiscal note had been prepared on S.B. 502. He said it is estimated that the first full year this provision is in effect, there would be a $2.6 million effect on all sales tax revenues.
Ms. Santina said some other states do have bad debt collection allowances and that a list is available through the Retail Association offices.
Mr. Barrett came forward in support of S.B. 502. He indicated a retailer should not have to pay sales tax on income which has not been received.
D. Gerald Bing, President, Bing Construction Co. of Nevada, came forward in opposition to S.B. 502. He read two letters into the record (Exhibit D) which he had previously mailed to each committee member, as well as Chambers of Commerce in the area. Mr. Bing explained the Combined Sales and Use Tax Return (Exhibit E) which he had distributed to the committee.
And then Mr. Bing gave a summation of a Brief (Exhibit F. The original is on file in the Research Library) which had been filed in the Supreme Court of Nevada.
Chairman Rhoads complemented Mr. Bing on his presentation.
Discussion followed.
Chairman Rhoads closed the hearing on S.B. 502.
Chairman Rhoads opened the work session with Senate Bill (S.B.) 39.
SENATE BILL 39: Requires regional transportation commision in certain counties to develop transportation plans and programs in compliance with federal law.
At this point, Chairman Rhoads entertained a motion from the committee for a bill draft request "to allow the legislature to have a study where we can build our own budget."
SENATOR TOWNSEND MOVED FOR A BILL DRAFT REQUEST BY THE COMMITTEE TO ALLOW THE LEGISLATURE TO HAVE A STUDY SO THAT THE LEGISLATURE COULD PREPARE ITS OWN BUDGET.
SENATOR COFFIN SECONDED THE MOTION.
THE MOTION PASSED UNANIMOUSLY.
Kurt Weinrich, Director, Regional Transportation Commission, Las Vegas, came forward to present proposed amendments for S.B. 39 (Exhibit G) and said he supports S.B. 39 with the suggested amendments.
Discussed followed.
Chairman Rhoads announced the committee would not take action on S.B. 39 until a fiscal note could be prepared, including the proposed amendments.
Stephanie Tyler, Lobbyist, Regional Transportation Commission, Washoe County, commented that on page 2, line 44, was controversial and it had been deleted with the proposed amendments.
Michelle Gordon-Torres, Assistant to the Director, Regional Transportation Commission, Washoe County, came forward in support of the proposed amendments to S.B. 39.
Chairman Rhoads closed the hearing on S.B. 39 and opened the hearing on Assembly Bill (A.B.) 103.
ASSEMBLY BILL 103: Authorizes counties to increase rate of tax imposed for public mass transportation and construction of public roads upon approval by registered voters of county.
Ms. Tyler gave a brief overview of A.B. 103 for the benefit of the committee and summarized the amendments contained in the first reprint.
Ms. Gordon-Torres explained the handout, Adopted FY 1994-1998, Short Range Transit Plan Recommendations (Exhibit H).
Ms. Tyler informed the committee that A.B. 103 has been approved by the cities of Reno and Sparks, as well as Washoe County. She added that Clark County has no objection to the measure.
Tom Taelour, Finance Manager, Regional Transportation Commission, (RTC), offered to answer questions.
Mr. Weinrich reiterated that Clark County does not have an objection to A.B. 103 nor the amendments which are proposed. He said Bruce Woodbury, Chairman, Clark County Commissioners, had asked him to make clear to the committee that the Clark County RTC has no intention of exercising the provisions to go to the voters for an increase in the sales tax should this measure be approved.
Mr. Comeaux came forward with a technical recommendation for an amendment to be added to A.B. 103. He said at the end of the bill, perhaps the following language could be added: The contract will only be exempt if it dosen't contain an escalation clause.
Chairman Rhoads entertained a motion on A.B. 103.
SENATOR COFFIN MOVED TO AMEND AND DO PASS A.B. 103.
THERE WAS NOT A SECOND TO THE MOTION.
THE MOTION DIED DUE TO A LACK OF A SECOND TO THE MOTION.
(SENATORS ADLER AND SHAFFER WERE NOT PRESENT FOR THE MOTION.)
*****
There being no further business to come before the committee, the meeting was adjourned at 4 p.m.
RESPECTFULLY SUBMITTED:
Billie Brinkman,
Committee Secretary
APPROVED BY:
Senator Dean A. Rhoads, Chairman
DATE:
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Senate Committee on Taxation
June 8, 1993
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